A4-0168/96

Resolution on the communication from the Commission reporting on the feasibility of the creation of a European Capital Market for smaller entrepreneurially managed growing companies (COM(95)0498 - C4-0486/95)

The European Parliament,

- having regard to the communication from the Commission reporting on the feasibility of the creation of a European Capital Market for smaller entrepreneurially managed growing companies (COM(95)0498 - C4-0486/95),

- having regard to the communication from the Commission of 10 November 1993 'on the financial problems experienced by small and medium-sized companies¨ (COM(93)0528),

- having regard to the communication from the Commission concerning the improvement of the fiscal environment of SMEs (COM(94)0206 - C4-0021/94) ((OJ C 187, 9.7.1994, p. 5.)) and its own resolution of 24 October 1994 on this subject ((OJ C 323, 21.11.1994, p. 16.)),

- having regard to the report of the Committee on Economic and Monetary Affairs and Industrial Policy and the opinions of the Committee on Research, Technological Development and Energy, the Committee on External Economic Relations and the Committee on Legal Affairs and Citizens' Rights (A4- 0168/96),

A. whereas unacceptable and unprecedentedly high levels of unemployment continue to prevail in most parts of the European Union, imperilling its socio-economic fabric,

B. whereas there is widespread agreement that it is in the small and medium- sized enterprise sector, and in particular amongst smaller entrepreneurially managed growing companies, that future growth and job creation is to be produced,

C. whereas, in order to grow and create employment, enterprises must have access to long-term finance; whereas small enterprises in many cases encounter difficulties gaining access to, and paying for, external funds, and whereas equity capital is more desirable because it is long-term capital and allows the enterprise to retain its independence,

D. whereas the fragmentation of the European market for smaller company equity capital into many relatively small exchanges (more than 30 stock exchanges in Europe compared to 8 in the USA) has made it difficult for entrepreneurially managed growing companies to raise funds in sufficient amounts, and to return for more funds when the need arises,

E. whereas these fast-growing companies are often in the high-technology sector and tend to be internationally oriented with international customers and large exports; whereas it would be in their interest to have a capital base in several countries and whereas they would normally be able to raise relatively more capital, expressed in terms of the share price/earnings ratio, on a large international exchange than on a small national one,

F. whereas, because of the lack of a European alternative, such companies are in increasing numbers turning to NASDAQ, the U.S. National Association of Securities Dealers Automated Quotation, to cover their capital needs; whereas practically every Member State has companies listed on NASDAQ,

G. whereas the European companies that turn to NASDAQ are often leading-edge high-technology companies that are vital to the development of the information society in Europe but whose listing on NASDAQ often leads to a gradual 'Americanization¨ of the company and the loss of technology base and jobs to the United States,

H. whereas, conversely, European institutional investors place large amounts of funds in the NASDAQ market, representing a loss of investment capital to Europe,

I. whereas companies listed on NASDAQ have over the last years created vast numbers of jobs whilst so-called 'blue-chip¨ companies, traditionally those listed on the official national stock exchanges, have been shedding jobs,

J. whereas the opportunities for shareholders, participating enterprises and individual participants in SMEs to sell their shares are very limited,

K. whereas there appears to be a need and an appetite for a pan-European capital market on which entrepreneurially managed growing companies could meet private and institutional investors at minimal transaction costs and quotation fees but with a high degree of transparency and security,

L. whereas previous attempts to internationalize markets through existing exchanges have failed because of a lack of liquidity, because of protectionism (the fear that existing national exchanges would lose market share), and because of the perception that an international market would not be sufficiently regulated,

M. whereas this time the Commission's report suggests there is widespread backing for a new European capital market for smaller entrepreneurially managed growing companies, and whereas the entry into force on 1 January 1996 of Directive 93/22/EEC, as amended by Directive 95/26/EC, on investment services in the securities field ((OJ L 141, 11.6.1993, p. 27 and OJ L 168, 18.7.1995, p. 7.)) lends weight to the argument that the time is now right,

N. whereas the European Parliament, in its aforementioned resolution of 24 October 1994, called on the Commission to coordinate exploration of the idea of establishing a European capital market for SMEs (point 23),

O. whereas Community and national authorities have proposed a plethora of programmes aimed at helping SMEs to expand and create jobs; whereas the creation of a capital market would be a concrete step that could potentially lead to very significant results, if the NASDAQ example is anything to go by,

1. Welcomes this communication from the Commission detailing the initiatives which have been taken so far and which have been encouraged and supported by the Commission and which are expected to result in a market, the European Capital Market for Entrepreneurial Companies (known as EASDAQ), opening for business already in 1996; recognizes that other pan-European small company stock markets are in the process of establishment;

2. Considers that, for the market to be a success, the issues of liquidity, regulation and possible protectionism need to be addressed;

Liquidity-related issues

3. Recognizes that any pan-European small company stock market will need to reach a 'critical mass¨ in turnover before it has the necessary liquidity and hence credibility; emphasizes the need for the market to be promoted in the investment community and calls on the European Association of Securities Dealers (EASD) to undertake this task;

4. Requests the Commission to investigate how many European undertakings which meet the requirements and are eligible for admission to EASDAQ, and which are now listed on NASDAQ, intend to apply for listing on EASDAQ when it is set up;

5. Recognizes that, for a variety of reasons including the need for a certain trading record, companies present on such a pan-European small company stock market will not be officially 'listed¨ but merely quoted; points out however that brokers holding the 'passport¨ introduced by Directive 93/22/EEC will still be able to market the shares throughout the Union;

6. Calls on the Member States to repeal restrictions on pension funds' investments in securities listed on exchanges in other Member States and in unlisted securities; holds that also for the purposes of investments by institutional investors the European Union should be regarded as a single domestic market, whilst recognizing that this will require the strict observance of prudential rules to be established by the regulatory authorities;

7. Points out that fees for acceptance to trading should not be so high as to deter companies from entering the market;

8. Emphasizes the importance of maintaining an efficient market making capability for each share on the market;

9. Calls on the Member States to ensure that investors who buy shares that are listed or otherwise marketed in Member States other than their own are not discriminated against fiscally, by examining their double taxation agreements as they apply to dividend tax, capital gains tax etc.;

Regulatory issues

10. Considers that the relationship between the proposed EASDAQ and other exchanges currently existing and yet to be established (both national and regional) should be defined in detail to prevent undesirable duplication and competition, and requests in this context a statement on the conditions under which businesses currently listed on the national exchange of a Member State may also be listed on EASDAQ; also asks for clarification on when a firm listed on EASDAQ should cease to be so listed on grounds of its extensive growth;

11. Emphasizes that, in order to attract the interest of the big institutional investors, the highest standards of regulation will have to be introduced and observed;

12. Calls for the process of prospectus approval to be streamlined by means of the application of the principle of either harmonization or mutual recognition;

13. Calls on the Commission to examine the wider regulatory framework of a Europe-wide capital market, one feature of which could be a European Securities and Exchange Commission along the lines of the USA SEC;

Protectionism

14. Holds that any pan-European small company stock market should be seen as complementary to the national official lists and even to the national small- company markets, rather than competitors to them; considers it would be unfortunate if efforts to create a pan-European small company stock market were to be diluted by 'competition¨ from national markets;

15. Calls therefore on the Member States to ensure that national markets do not engage in unfair competition practices with any pan-European small company stock market, for instance by withholding settlement facilities;

16. Calls for any pan-European small company stock market's regulatory body to be wholly independent;

Conclusion

17. Points out that the introduction of the Euro will heighten the attractions of a single capital market for all Europe's growing, hi-tech companies;

18. Believes that the nascent EASDAQ could be one appropriate means of channelling European investment funds into European companies that need them;

19. Instructs its President to forward this resolution to the Commission, the Council, the governments of Member States and the board of EASD.