Brussels, 09/06/2016 (Agence Europe) - The member states have given their support to the principal elements of the proposed Regulation of the Commission modifying the prospectuses that European businesses wishing to raise capital on the markets must publish to provide potential investors with information.
This brings the general approach agreed upon on Wednesday 8 June at Permanent Representative level broadly into line with the Commission's proposal as regards the format and summary content of the prospectus, the universal registration document and the minimum regime for secondary issuances. The states also adopted the exemption providing that it is no longer necessary to create prospectuses for issuances of less than €500,000. The states will be at liberty to set a higher threshold of up to €10 million but, unlike the Commission's proposal, this option will not be limited to purely national issuances.
When contacted by EUROPE, the association of European listed companies, European Issuers, said that the threshold of €500,000 was not ambitious enough and far too low, given the size of the offers in many countries. As regards the fact that the member states will have the leeway to define a higher threshold, the listed companies would like to see this set at €20 million. The Council kept in place the exemption for issuances targeting fewer than 150 legal or natural persons other than qualified investors for each member state. European Issuers wanted to see that figure raised to 500.
The council also fleshed out the details on the 'lighter' version of the scheme for businesses whose stock capitalisation threshold is below €200 million. The minimum information regime consists of a specific registration document and a note regarding the securities. The states opened this regime up to offerors of securities issued by SMEs. In both versions of the text of the Regulation, the European Securities and Markets Authority (ESMA) will be responsible for defining the guidelines for SMEs and the Commission for adopting the delegated acts specifying limited information to be included in the framework of this minimum information regime and the form of prospectuses authorised.
The Council has also reintroduced the prospectus exemption for issuances of securities other than capital of at least €100,000. The Commission had withdrawn these exemptions as it felt they harmed liquidity on the markets. European Issuers is hailing this point as a victory.
As regards risk factors, the Council's text stipulates that issuers may disclose their assessment of the likelihood that a risk will materialise and classify these risk factors on the basis of a qualitative scale measuring the level of the negative impact (low, medium or high). Although the Commission's text provided for these risk factors to be divided into no more than three categories on the basis of their estimated relative importance, the Council's text refers to a limited number of categories on the basis of the nature of the risk factors.
The listed companies have criticism for these rules. “We welcome that the Council's proposal provides more flexibility than the Commission or the Parliament in the disclosure of the risk factors. Nevertheless, we are opposed to the introduction of a requirement to allocate risk factors according to their materiality and probability of occurrence”. This would be an unprecedented requirement and would not comply with international practices, according to the association, pointing out that risks change and move on very quickly.
Businesses which frequently have recourse to the capital markets will be able to draw up and annually update a sort of reference prospectus ('universal registration document'). As in the Commission's text, the national supervisor will be able to approve this document within five working days rather than 10.
Third-country issuers wishing to offer securities in the EU must appoint a representative in a member state. Under the Commission's text, this representative and the issuer would both be responsible for making sure that the prospectus complied with the Regulation. In the Council's text, the representative is responsible for neither the content of the prospectus nor its compliance.
The Commission furthermore gave the competent authority of the member state of origin powers to verify that promotional activities concerning an issuance comply with the principles of this Regulation. The Council, on the other hand, gives this power to the authorities of the member state in which the promotional activities are carried out. (Original version in French by Elodie Lamer)