‘Will the Prospectus Regulation work for smaller companies?’ co-hosted by the Association for Financial Markets in Europe (AFME), EuropeanIssuers, the Federation of European Accountants (FEE) and the Federation of European Securities Exchanges (FESE) on Tuesday, 29 November 2016
Julia Verlaine, Journalist, Wall Street Journal
Tilman Lueder, Head of Securities Markets Unit, DG FISMA, European Commission
Dr Kay Swinburne, Member of the European Parliament
Ronan Dunne, Senior Policy Officer, ESMA
Richard Middleton, Managing Director, AFME
Tim Ward, Board Member and Chair of Prospectus Working Group, EuropeanIssuers; Chief Executive, Quoted Companies Alliance
Piem Hemschoote, Partner in Standard Assurance Services, EY
Henrik Husman, President, Nasdaq Helsinki
Proposed by the European Commission in November 2015, the Prospectus Regulation aims to alleviate the burden for companies while providing meaningful information for investors. Many of the policymakers and industry representatives at the Invest Week debate expressed frustration with the dilution of ambitious initial objectives in the first opportunity from the Capital Markets Union (CMU) initiative during the final level 1 negotiations expected to end by the end of 2016.
Thresholds - the Commission says its key objective is to exempt offers below €10 million from any form of prospectus.
EU growth prospectus - introduced for SMEs and companies listed on future SME Growth Markets, and possibly some others venues, issuing securities below €20 million.
Wholesale market – debate on whether to keep the exemption for debt securities of at least €100,000 denominations.
Benefits of the Commission’s proposed new prospectus rules include retaining flexibility (allowing companies to choose the listing venue and follow local rules), noted Tilman Lueder of the European Commission. Dr Swinburne, MEP, said the European Parliament was in accord with many of the Commission’s goals for the new prospectus, which she believes should make it easier for smaller companies to raise capital across the EU. However, Dr. Swinburne disliked hurdles being placed in the way during negotiations, such as language requirements in each Member State, adding: ‘I fear that national regimes are dominating and we won’t get a seamless European system for capital flows.’ This was echoed by Ronan Dunne, ESMA, who said that a prospectus should be an informative tools for investors and other stakeholders rather than a liability shield, and Tim Ward, EuropeanIssuers, who felt that this sixth revision of the prospectus rules was ‘close to a missed opportunity’. Tim Ward explained that looking at US, EuropeanIssuers asked for an exemption from producing a prospectus for offers below € 50 million, while now the struggle is to keep it at 10 million as certain MEPs and Member States are trying to lower it to 5 million.
Richard Middleton of AFME recommended to take into consideration all Member States within the EU28. Many “High Potential Economies” (or EU11) within Europe could largely benefit from a well constructed Prospectus Regulation especially while setting level 2 requirements. Piet Hemschoote of EY, representing FEE, felt much could be done to shorten prospectuses by placing a significant amount of the information online instead. ‘It should be more concise, investor-oriented and business-focused,’ he said, adding that materiality should be considered for all the disclosures. Henrik Hursman, Nasdaq, highlighted strong growth of smaller company’ listings in Scandinavia This is due to the simple listing requirements on First North, i.e. the workable ‘company description’ document, the key role of the advisors and a fast-track approval by the listing venue. This was echoed by Tilman Lueder who applauded the exchange’s efforts.