Enforcement of Issuer Disclosure

As part of its mission to supervise securities markets, the CSSF is responsible for the control of financial information published by issuers of securities listed on a regulated market. This activity, generally referred to as enforcement, aims to ensure compliance of financial information with the applicable reporting framework.

The controls carried out by the CSSF mainly concern the periodic financial reports of issuers (annual and half-yearly financial statements) with regard to their compliance with IFRS, GAAP equivalent to IFRS, Lux GAAP or other European GAAP.

The CSSF also monitors issuers’ compliance with the principles of the ESMA’s Guidelines on Alternative Performance Measures when using performance measures outside the financial statements (e.g., in management reports, some press releases or prospectuses).

Another mission of the CSSF in relation to the enforcement of Issuer Disclosure covers the control of sustainability reporting published by issuers.

This concerns the monitoring of compliance with the reporting requirements set out in the Non-Financial Reporting Directive (Directive 2014/95/EU of 22 October 2014, as transposed by the Law of 23 July 2016) and by article 8 of the Taxonomy Regulation (Regulation (EU) 2020/852 of 18 June 2020) for large issuers.

The CSSF fulfils its enforcement diligences in accordance with the Transparency Law conferring upon the CSSF the power to control periodic information published by issuers of securities governed by said law. Enforcement is a control ex post of the reports published by issuers.

The powers and penalties available to the CSSF as regards enforcement are set out in Articles 22, 25 and 26 of the Transparency Law.

Beyond the legal and regulatory requirements, the examination of issuers’ financial information and sustainability reporting contributes to the investors’ protection and confidence in the financial markets.

The enforcement process set up by the CSSF is compliant with ESMA guidelines and specifies the implemented selection methods and examination types as well as the characteristics of the decisions available to the CSSF.

The enforcement process begins with the selection of the issuers which will be examined in the context of enforcement. The selection model applied is based on a mixed model whereby a risk-based approach is combined with a sampling and rotation approach. The risk-based approach adopted by the CSSF considers the risk of misstatements and the possible impact of such a misstatement on the financial markets.

In the context of its examination process, the CSSF identifies the most efficient way to enforce Issuer Disclosure. The examination programme, defined every year for the selected issuers, includes:

• unlimited scope examinations: evaluation of the entire content of the financial information and/or the sustainability reporting of an issuer in order to identify issues/areas that need further analysis and subsequent assessment of whether the information is compliant with the relevant reporting framework;
• focussed scope examinations: evaluation of pre-defined issues in the financial information and/or the sustainability reporting of an issuer and assessment of whether the information is compliant with the relevant reporting framework in respect of those issues;
• thematic examinations: review of the practices followed by a sample of issuers concerning specific issues; and
• follow-up examinations, during which the CSSF ensures that the decisions taken in relation to misstatements identified during previous examinations were taken into account by the concerned issuers.

These examinations usually include direct and repeated contacts (meetings, exchange of mails and conference calls) with representatives of the issuer and/or its external auditor in order to analyse the most sensitive problems and issues and obtain information, documents and other objective evidence required to perform the examination. Some examinations may also lead to on-site inspections of the concerned issuers.

Following the examinations described above, the CSSF may conclude that a specific accounting treatment does not comply with the relevant financial reporting framework. The CSSF must then determine whether the misstatement is a material or immaterial departure from the financial reporting framework and if any relevant enforcement decisions should be taken accordingly. In case of a material misstatement, the CSSF may take one of the following measures, as laid down in Article 22 of the Transparency Law:

• require a reissuance of the regulated information;
• require a corrective note; or
• require a correction in future regulated information with restatement of the comparatives, where relevant.

The CSSF notifies its decisions to the issuer appropriately, namely in the form of injunctions, recommendations and follow-up measures of the corrections or improvements of financial information proposed by the issuer itself.

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