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ARUG II (German: Gesetz zur Umsetzung der zweiten Aktionärsrechterichtlinie – English: Act Implementing the Shareholders’ Rights Directive) is a German law that translates SRD II into national law. Its regulations have been in force since the beginning of the 2021 business year.

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As a basic principle “Comply or explain“ describes a mechanism that is used to manage compliance with provisions that are not legally binding.

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A central securities depository (CSD) is a specialized financial organisation holding securities.
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The goal and purpose of an issue generally is to expand the basis of financing – the issuer pursues an increase in capital or stock market value. Financial experts distinguish between two types of issues with regard to the type of capital or issue object: share issues and bond issues.

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Internationally emerging standardised message format for the financial sector

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The requirements of the GDPR (European Data Protection Regulation), which came into force in May 2016, had to be implemented by companies and banks in all member states of the European Union in 2018. The aim of the GDPR is to protect the personal data of EU citizens through consistent rules. In addition, business is to be simplified by these uniform rules. The GDPR has a particular impact on banks, as they constantly manage a large amount of personal data of their customers.

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Investor relations (IR for short) refers to the maintenance of contacts and relationships on the part of listed companies with relevant shareholders, financial analysts and financial media. IR work includes all measures and strategies that a company implements with the aim of reaching relevant capital market participants. While the publication of certain information is mandatory for listed companies, many other investor relations measures are voluntary. Investor relations work is often intended to achieve goals such as influencing investment decisions.

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As its name suggests, the Know Your Shareholder (KYC) principle is designed to ensure that companies, banks and other institutions identify their customers and verify especially new customers, but also existing customers. The purpose of the KYC principle is to combat white-collar crime and other criminal offences. Proper identification and verification of customers are required by law in many areas. While the principle applies in many areas across a wide range of industries, it is particularly relevant to the financial sector.

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Since the Second Shareholder’s Rights Directive (SRD II) went into effect, issuers have been compelled to identify their investors so that those investors can exercise their rights. By passing on requests, intermediaries must assist in this process. The Market Standards for Shareholder Identification provide instructions and guidelines for complying with SRD II in everyday-business.

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In the context of the financial market, a nominee is a bank or other company that acts as the owner of securities while the beneficial owners are unknown. Nominee accounts are the most common means of safe keeping. They are especially popular with investment management companies who use them to secure the assets they were instructed to manage by investors. The initial anonymity of nominee accounts raises certain challenges, but as they lower costs and improve trading performance, they remain popular.

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Proxy or voting advisors give shareholders advice on how to vote at the general meetings of the companies they hold shares in. They also often represent institutional shareholders at general meetings. Proxy advisors are mostly utilised by institutional advisors as they hold shares in too many companies and acquiring all information needed to make educated voting decisions would be too cost-intensive. Because of this, proxy advisors have enormous influence on decision-making processes with far-reaching consequences.

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Related-party transactions can be a variety of business agreements ranging from loan agreements and leases to service agreements and sales. In most cases related parties are shareholder groups, subsidiaries, or business affiliates.

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Roadshows are meetings between a company and financial analysts, fund managers and (potential) investors at various locations that are held as part of investor relations work. The focus of these meetings is on presenting the company to attract as many new investors as possible or to build a stronger confidence with existing investors. Roadshows are among the most relevant and effective investor relations measures.

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The concept of “say-on-pay” provides shareholders with a vote on directors’ remuneration during the general meeting at listed companies.

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A shareholder ID gives emitters an insight into the overall shareholder structure. This knowledge of a public company’s shareholder composition can be used for investor relations work. Under SRD II, it is also mandatory for listed companies to identify their shareholders to enable the beneficial owners to exercise their rights. Solid knowledge about the shareholder ID, structure and composition also brings many benefits for the companies themselves.

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Shareholders have the right to vote on certain decisions at the general meetings of listed companies in which they hold an interest. Whether and to what extent this right exists depends on several factors. It is worth exercising the right to vote in a listed company because the votes at the AGM determine, among other things, the overall return on the shareholders’ share investment.

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Data processing is considered straight through processing (STP) if it is carried out without detours, i.e. without human interaction, manual activities or media discontinuities. The goal of straight through processing is to reduce the time required for the respective processes and to minimise error-prone manual interventions. Areas of application include general payment processes, e-commerce, cryptocurrencies and stock markets.

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SWIFT messages are data formats defined by the Society for Worldwide Interbank Financial Telecommunication (=SWIFT) and apply to the financial services system. A distinction can be made between the old MT format and the new MX format. With the help of the different message types, data from the areas of payment transactions, foreign trade financing, treasury and securities trading can be communicated.

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In the EU, all institutional investors and asset managers are obliged to report how their engagement policy was implemented. The report must include voting activity and be publicly disclosed annually. Because the EU legislator found institutional investors and asset managers to not be sufficiently transparent about their investment strategies and engagement policies, SRD II imposes new transparency requirements.

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