European Union: European Commission consults on listing conditions on EU public markets
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The European Commission has published a public and targeted consultation with the aim of obtaining feedback on how to make public capital markets more attractive to EU companies and facilitate access to capital for SMEs. The deadline for comments is the 11the of February 2022, allowing stakeholders to give their views on how the EU legal system could be improved.
This consultation was triggered by the fact that the EU’s capital market is underdeveloped compared to other major jurisdictions, citing “EU companies rely less on capital markets for debt and equity financing than their counterparts in other major jurisdictions around the world, with a negative impact on economic growth and macroeconomic resilience“For this reason, the Commission’s new Capital Markets Union (CMU) has attempted to ensure that businesses, especially small and medium-sized enterprises (SMEs), can access appropriate financing, especially in the markets public.
The targeted consultation aims to collect views on the experience of stakeholders with the current rules and how those rules should adapt, as well as to gather feedback on the overall functioning of the regulatory framework.
Previous surveys have shown that public listing in the EU is too cumbersome and costly, especially for SMEs. The consultation asks why there is this lack of attractiveness in EU public markets, ranging from excessive compliance costs to the liquidity of securities law. CMU’s new action plan identified that SMEs do not see listing in the EU as an easy and affordable method of financing, especially due to heavy administrative burdens, high listing and compliance costs when ‘they try to access public markets. Not only is the initial registration expensive, the costs continue to add up after a business is registered, including, but not limited to, compliance and regulatory requirements / fees. Stakeholders were invited to express their views on the main sources of these problems and their thoughts on how to resolve them.
The entry into force of the Prospectus Regulation (2017/1129) was followed by the SME Listing Act and the Crowdfunding Regulation; however, this regime is still considered cumbersome and does not attract companies (especially SMEs) to public market listing. The establishment and approval of the prospectus is “costly, complex and time-consuming and that a targeted but ambitious simplification of prospectus rules could significantly reduce compliance costs for businesses and reduce barriers to operating public procurement markets“.
Consequently, the consultation details specific elements of the prospectus and how the resulting charges could be reduced without harming the protection and transparency of investors. It collected data such as:
- Amounts paid for different types of prospectuses
- Amount paid for the preparation of the prospectus
- What specific sections of the prospectus are cumbersome and costly to write
- Should other exemptions be added to the prospectus to increase the offers that do not require the drawing of a?
- How the flyer should be streamlined and made more efficient with suggestions such as page limits.
It then details specific elements of the prospectus, gathering information on (1) prospectus summaries, (2) incorporation by reference and (3) standard prospectuses for non-equity securities. He further questioned whether the prospectus should only be provided in electronic form and only in English, and whether the prospectus should be made available closer to the offer (eg 3 working days before). It then deals with prospectuses for SMEs that may choose to draw up an EU growth prospectus for securities offerings to the public, provided that they do not have securities admitted to trading on a market. regulated. Although this prospectus is lighter than the standard, the comments indicate that there has not been a substantial reduction in the length of the document. It also notes that the liability regime discourages entering the public market because it could lead to administrative and even criminal sanctions depending on national law, with the calibration of such measures.
The consultation also examines the Market Abuse Regulation (596/2014 – “MAR”), with the aim of establishing the costs and charges arising from the MAR and whether the minimum amount of managers’ transactions could be increased without harming market integrity.
In short, the consultation also aims to collect data on:
- Insider Lists
- Market survey
- Administrative and criminal penalties
- Liquidity contracts
and other improvements to MAR.
The consultation also covers some aspects of MiFID II, more specifically, the registration of segments of an MFT as an SME growth market, dual listing. and coverage of SME equity research.
The consultation also examines other possible areas for improvement, to ensure that all possible aspects that deter the use of the public market are addressed and improved. It is in the interests of stakeholders to express themselves on this consultation in the hope of achieving a simpler and less costly system without diminishing investor protection and transparency.
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