Strasbourg, 15/03/2002 (Agence Europe) - The European Parliament has eased the information obligations for companies quoted on the stock exchange, with the adoption on Thursday of the report on "prospectuses" by British Liberal Chris Huhne. It was voted by 302 votes to 93 and 46 abstentions. The directive under discussion will make it compulsory for companies to present a prospectus allowing a financial assessment of securities during stock exchange issuance or a public bid. Proposed by the Commission in the context of the action plan for financial services, the text will in practice create a single passport for all issues on European stock markets.
The rapporteur considers that the Parliament's vote "establishes a better balance between the protection of investors and the reduction of capital cost for companies". The European Commissioner for Financial Services, Frits Bolkestein, expressed great concern during the debate regarding the main amendments adopted by the MEPs. He felt that, despite the lessons that should be drawn from the recent Enron affair, they could "weaken the fundamentals of current EU legislation".
An amendment adopted by 266 votes in favour, 166 against and 13 abstentions would allow the Member States that so wish to grant exemption from the information obligation for companies quoted only in their States of residence with capitalisation below EUR 350 million. This "amount seems high, but many companies that meet the definition of small and medium sized enterprise will be covered by this threshold", the rapporteur assured during the debate. He cited the example of the British Technology group which employs 182 but represents capitalisation of EUR 1.6 billion. In practice, the amendment should allow the United Kingdom to keep its simplified prospectus system for the SME market, the AIM (Advanced Investment Market) in London. According to Commissioner Bolkestein, the amendment will allow "over 75% of companies listed in the EU" to raise capital without publishing a prospectus. The Commissioner, on the other hand, pointed out that he could accept most amendments that aim to exclude Eurobonds exchanged between professional investors, while refusing the issuance threshold of EUR 50,000 in fixed bonds by the Parliament, that he considers too low.
The Parliament also eased the obligations to update information, by making optional the compulsory daily update of registration documents submitted to the relevant authority, if the company does not intend to introduce new issues or bids. It also allows SMEs to restrict themselves to presenting their annual report. British Conservative Theresa Villiers, considers the EP has thus done away with these "futile and costly measures". "We could contemplate exempting SMEs, but we shall certainly stay firm as regards big companies, not least because 300 of our biggest companies listed in the US already comply with this obligation", said Frits Bolkestein.
In a third series of amendments, the Parliament leaves companies the choice of regulatory authority to which they must submit their documents, while the Commission made it compulsory for them to address the authority of their State of residence. "By allowing issuers to choose between the regulation authorities (…) we can guarantee that cooperation (between the regulation authorities) will work and we shall gradually set in place a single authority throughout the EU", commented the rapporteur, Chris Huhne, during the debate. In practice, this freedom of choice will allow firms to continue addressing Luxembourg or London for sophisticated financial products. The Socialists did not manage to block these amendments. It is not desirable to promote the lowest regulatory tenderer by allowing the issuer to choose the supervisory authority, said Pervenche Béres and Luxembourg Robert Goebbels in an amendment presented au nom du PSE and rejected by the majority. They went on to say that competition must exist between markets that are private firms but not between regulatory authorities in order to maintain a high level of control on information appearing in a prospectus. The only real difference (between the Member States) is based on the taxation system, they recalled. Refusing "bricolage" between national systems, Commissioner Bolkestein pointed out that the Commission cannot agree with the free choice of the regulator (which could lead to a race to the bottom), but would be ready to consider some flexibility for issuers of debt securities and of third countries.