In 2020, the Shareholder Rights Directive II (SRD II) was introduced across EU member states. Building on the original Shareholder Rights Directive (SRD I) from 2007, it introduced binding requirements across five areas: shareholder identification, the facilitation of shareholder rights, the transmission of information through intermediaries, transparency of proxy advisors, and director remuneration.
In some member states, the disclosure process for shareholders has historically been voluntary, with issuers having no legal recourse to finding out who owns them. At the same time, investor communication has grown increasingly complex and cumbersome, often due to the number of custodians a communication goes through before it eventually reaches the end investor. Investors increasingly wanted a say in how the companies they invest in are managed. And those companies wanted to build closer connections with their shareholders, to better understand their needs and concerns, and act accordingly.
The first and second directives were a step in the right direction but were not without their challenges. As the European Commission has just closed their public consultation and call for evidence to evaluate and potentially overhaul SRD, we wanted to share our perspective and review.
Related resource: for a deeper look at how SRD II shapes corporate action notice requirements and disclosure timelines for intermediaries, see our article on SRD corporate action notices.
Five unforeseen challenges of shareholder identification and proxy voting under SRD II
Over five years after implementation, the market has learnt that meeting the letter of SRD II and meeting its spirit are two different things. Five challenges, in particular, were not fully anticipated at the outset.
Shareholder disclosure challenges
1. Implementation varies by jurisdiction
SRD II is applied differently across EEA member states, based on their own national company law. The definition of “shareholder” varies by jurisdiction: some markets recognise the end investor as the shareholder, while others treat the name on the register, typically a nominee account, as the legal shareholder. The spirit of SRD II is clearly to identify the underlying beneficial owner, but the current framework still leaves room for inconsistent interpretation.
Moreover, disclosure thresholds are not consistent. Some markets require identification only above a 0.5% holding threshold. Others permit identification of any shareholder with a single share.
Some markets extend the scope of SRD II beyond equities incorporated in an EEA member state. For cross-border holdings, where an issuer is incorporated in one country but listed in another, the uncertainty about which rules apply adds significant operational complexity.
2. Every request needs validation, delaying the response
Not all disclosure requests come through a trusted source. At the outset, it was assumed that issuers would initiate requests through the issuer’s CSD as first Intermediary, who in turn, would disseminate through the custody chain enabling straight-through processing (STP). However, many requests are sent directly to intermediaries, bypassing the standard custody chain, shifting the burden of validation onto each intermediary individually.
Without proper checks, there is a real risk of sharing sensitive client data in response to unauthorised or unauthenticated requests. Good quality “security reference data” and regulatory compliance expertise are both critical to validate requests correctly. For issuers using automated platforms, the ability to authenticate requests at source removes this risk entirely. However, this is not the case for many in the region.
3. Inconsistent data format requirements
SRD II mandates ISO 20022 messaging via SWIFT, but many intermediaries still rely on ISO 15022, requiring costly upgrades. Some issuer CSDs use alternative channels, including SWIFT Closed User Groups or FileAct, rather than the standard pathway. Legacy local platforms in certain markets require additional fields beyond what SRD II’s Level 2 Text specifies, resulting in fragmented infrastructure and inconsistent implementation across the chain.
This is one of the clearest areas where the regulation has not yet delivered on its promise of standardisation. Until ISO 20022 adoption is near-universal across the custody chain, fragmentation will persist.
Proxy voting and shareholder engagement challenges
4. Cross-border voting participation remains low
Regarding voting, the differences around record dates, power of attorney (PoA), and certificate of holding requirements by market add delays and hinder participation, with studies showing that less than 50% of retail investors were able to vote at foreign AGMs.
5. Legacy systems cannot keep up with transmission requirements
SRD II sets strict deadlines, but the systems behind those deadlines in many firms were not built for the pace of response required. It also sets the requirements for how meeting notices and voting instructions should be transmitted.
The reality is that many CSDs have still not implemented ISO 20022 messaging for proxy voting events, meaning meeting notices in some markets are still transmitted through legacy batch channels. Votes arrive late in many markets where batch processing still exists and post-meeting vote confirmations are still not universally available, meaning investors cannot always verify that their vote was counted.
As Jonathan Smalley, COO and co-founder of Proxymity notes, “It is pretty common for all sorts of reasons for custody clients to use a range of providers, but this can present a challenge for day-to-day management and oversight as well as introduce operational complexity where proprietary systems are in use or providers have deviations or variance in service levels.”
Related resource: for more on how connected infrastructure addresses these challenges, see our piece on achieving good corporate governance with centralised, real-time connectivity.
The SRD II reform consultation: what market participants are telling the European Commission
SRD II improved transparency and shareholder rights in meaningful ways but the market’s experience since 2020 has made one thing clear: fragmentation still exists across member states and therefore remains a significant obstacle, and the framework as currently structured cannot fully deliver on its objectives without further harmonisation.
The European Commission recognised this in February 2026, when it launched a formal public consultation and call for evidence on a potential review and overhaul of the directive. The consultation closed on 6 May 2026. The findings are expected to feed into a potential legislative proposal, referred to in the market as SRD III.
A number of significant market participants submitted formal responses before the deadline, including the UN Principles for Responsible Investment, Eurosif, and the Institutional Investors Group on Climate Change.
Related resource: Proxymity’s complete response to the consultation.
The consultation focused on many areas and exposed several needs in the market:
Shareholder identification
A single, EU-wide definition of shareholder
The market wants the ambiguity resolved once and for all. A common definition, anchored to the beneficial owner, should apply across the entire directive, not just for identification purposes. Without it, the same request yields different results depending on the jurisdiction involved.
Removing cost and access barriers to identifying shareholders
The market is demanding the removal of disproportionate processing fees. For instance, in Germany, while this is limited to €300 per response, it is still too high and prevents issuers from exercising their rights, especially across borders.
The market is also demanding more transparency, especially regarding costs charged by intermediaries for identification requests.
Proxy voting and shareholder engagement
Clear, consistent rules for digital general meetings
The market wants a hybrid-first framework with minimum EU-wide standards that protect shareholder rights regardless of meeting format, giving companies and investors certainty in a digital environment.
Mandatory ISO 20022 implementation
Encouragement has not been enough. The market wants the commission to mandate ISO 20022 as the standard for all shareholder communications, enabling STP and eliminating the manual interventions that slow the chain.
While migration is an extensive effort, Dean Little recommends a “buy now, build later” approach; i.e integrating with compliant providers can help ease the transition more efficiently, without a heavy cost burden.
Interoperability and standardised proxy costs across markets
The market is calling for increased interoperability across market infrastructures, the implementation of standardised protocols, harmonised timelines, and reduced costs for proxy voting.
According to research by Better Finance, costs can go up to €250, owing to heavy fees by the last intermediary in the chain, as stated by over 60% of the investors surveyed. Currently, voting services can cost thousands of euros per market depending on the intermediary chain involved, a cost structure the market wants addressed as part of the reform.
The message to the commission is consistent: harmonisation, standardisation, and enforcement are the conditions for SRD III to deliver what SRD II could not.
What good looks like: real-time, connected infrastructure for both pillars
Participants managing SRD II compliance most effectively have invested in infrastructure that handles both shareholder identification and proxy voting as continuous, automated processes, rather than treating them as separate obligations managed through different systems.
For proxy voting: real-time connectivity between issuers and investors, from meeting announcement through to vote confirmation, with no manual intervention at each step in the chain.
Solutions like Proxymity Vote Connect enables this for issuers and intermediaries across more than 105 markets, transmitting meeting notices and voting instructions in real time, providing confirmed vote receipts, and giving both sides of the chain genuine visibility into the process. For issuers, that means understanding how shares are being voted as it happens, not after the meeting closes. For intermediaries, it means meeting SRD II’s transmission obligations without the manual effort that makes compliance costly.
For shareholder identification: a platform that can distribute disclosure requests through the custody chain, authenticate responses, and return reconciled beneficial owner data within minutes rather than days through an automated workflow.
Proxymity Shareholder Insights provides issuers with a real-time view of their beneficial owner base, with initial reports available within minutes of a request being distributed.
Related resource: for issuers wanting to understand how real-time shareholder data transforms investor relations more broadly, our piece on digital shareholder analysis covers the practical impact in depth.
For intermediaries, Proxymity Shareholder Disclosure automates authentication, processes requests in multiple messaging formats, and forwards requests to downstream intermediaries in real time, removing the requirement for full ISO 20022 migration as a precondition for compliance.
Nigel Little, head of Commercial at Proxymity says, “SRD II has strengthened transparency and shareholder rights across the EU, but inconsistent implementation between member states continues to limit what the directive can achieve. At Proxymity, we see every day the difference that connected, real-time infrastructure makes for issuers and intermediaries navigating these obligations and we believe the reform process is an opportunity to embed that standard across the market.”
SRD III: an opportunity to unlock real connectivity
We’re getting closer to having a standardised model for share ownership transparency throughout Europe, but we’re not quite there yet, as evidenced by the market. Morningstar’s research showed that the largest European asset managers have consistently supported over 95% of ESG resolutions over half a decade.
Europe has the stewardship culture and sophisticated market participants that could benefit from a digital ecosystem. However, until the needs of the market are met in the next revision of the directive, that ambition can’t be achieved. Participants can get ahead of whatever comes next by investing now in real-time, connected infrastructure, so that compliance is built into how they operate, not bolted on when a new directive takes effect.
Get in touch with our team to explore what audit-ready, real-time connectivity looks like in practice.
This article was originally published by Proximity here.