EUROPEAN COMMISSION Brussels, 30.11.2015 SWD(2015) 255 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading {COM(2015) 583 final}

{SWD(2015) 256 final}



Table of Contents Introduction Procedural information concerning the preparation of the impact assessment 1.Regulatory Scrutiny Board 2.Consultation of interested parties 3.Policy context, problem definition and subsidiarity 3.1.Policy context 3.2.Problem definition 3.2.1.Drivers 3.2.2.Problems 3.2.3.Consequences 3.3.How would the problem evolve without EU action? The Baseline Scenario 3.4.Subsidiarity and proportionality 3.5.The EU’s right to act and justification 4.Objectives 5.Description, analysis and comparison of policy options 5.1.Exemption thresholds

5.1.1.Description of policy options 5.1.2.Analysis of impacts and comparison of options 5.2.Appropriate alleviated prospectus requirements for "secondary issuances" 5.2.1.Description of policy options 5.2.2.Analysis of impacts and comparison of options 5.3.Favourable treatment of issuers of debt securities with a high denomination per unit, with liquidity on the debt markets 5.3.1.Description of policy options 5.3.2.Analysis of impacts and comparison of options 5.4.Reforming the proportionate disclosure regime for SMEs 5.4.1.Description of policy options 5.4.2.Analysis of impacts and comparison of options 5.5.Prospectus summary and the Key Investor Information Document under the Packaged Retail and Insurance-Based Investment Products Regulation 5.5.1.Description of policy options 5.5.2.Analysis of impacts and comparison of options 5.6.System for the electronic access to prospectuses 5.6.1.Description of policy options 5.6.2.Analysis of impacts and comparison of options 5.7.Overall impact of the proposed options, compliance costs and subsidiarity 5.8.Choice of legal instrument, compliance costs and subsidiarity 6.Monitoring and evaluation

Annexes Annex 1: Glossary Annex 3: Background on Capital Markets Union Annex 4: Short description of the Prospectus Directive 1.Introduction 2.Purpose and scope 3.Content of the prospectus 4.Approval of the prospectus 5.Liability and sanctions regime Annex 5: Evaluation of the Prospectus Directive 2003/71/EC, as amended 1.Introduction: scope, methodology and input 2.Background: Objectives and intervention logic of the Prospectus Directive 3.Implementation 4.Evaluation questions and answers 4.1.Effectiveness 4.2.Efficiency 4.3.Relevance 4.4.Consistency and coherence 4.5.Added value of the Prospectus Directive 4.6.Conclusions

Annex 6: Summary of public consultation Annex 7: Selected statistics on initial public offerings (IPOs) made in European stock exchanges Annex 8: Summary of the most significant alleviations granted by the Proportionate Disclosure Regime for rights issues and the alleviations granted under the Proportionate Disclosure Regime for SMEs List of Figures: Figure 1: Size and composition of capital markets as share of Gross Domestic Product Figure 2: Problem Tree Figure 3: The prospectus requirement in function of the total consideration of the offer Figure 4: Denomination of debt securities Figure 5: Annual number of prospectus approvals from 2006 to 2014 (total EEA) Figure 6: Evolution of the number of prospectuses passported out between 2011 and 2014 (total EEA) Figure 7: Percentage of EU bonds with a denomination between EUR 50 000 and EUR 100 000 and above EUR 100 000 Figure 8: Threshold above which Member States require a prospectus to be drawn up (expressed as the total consideration of the offer in the EU over 12 months) Figure 9: Number of prospectuses drawn up using the proportionate schedules of Annexes XXV to XXVIII (SMEs & Small Caps) Figure 10: Number of prospectuses drawn up using the proportionate schedules of Annexes XXIII & XXIV (rights issues) Figure 11: Number of "tripartite" prospectuses approved in the EU Figure 12: Costs of capital in initial public offerings (IPO) List of Tables: Table 1: Costs of raising capital

Table 2: Drivers and issues discussed Table 3: Threshold above which Member States require an EU prospectus to be drawn up (expressed as the total consideration of the offer in the EU over 12 months) Table 4: Thresholds - Impacts on stakeholders relative to option 1 ('do nothing') Table 5: Thresholds - Achievement of objectives relative to option 1 ('do nothing') Table 6: Overview of the most significant alleviations granted by the proportionate disclosure regime for 'rights issues', in the share registration document (compared to a regular prospectus)(1) Table 7: Secondary issuances - Impacts on stakeholders relative to option 1 ('do nothing') Table 8: Secondary issuances - Achievement of objectives relative to option 1 ('do nothing') Table 9: Examples of bond issuance in Sterling, Euro and US Dollar highlighting the differences in minimum denominations Table 10: Denomination - Impacts on stakeholders relative to option 1 ('do nothing') Table 11: Denomination - Achievement of objectives relative to option 1 ('do nothing') Table 12: Proportionate disclosure regime - Impacts on stakeholders relative to option 1 ('do nothing') Table 13: Proportionate disclosure regime - Achievement of objectives relative to option 1 ('do nothing') Table 14: Prospectus summary - Impacts on stakeholders relative to option 1 ('do nothing') Table 15: Prospectus summary - Achievement of objectives relative to option 1 ('do nothing') Table 16: System for the electronic access to prospectuses - Impacts on stakeholders relative to option 1 ('do nothing') Table 17: System for the electronic access to prospectuses - Achievement of objectives relative to option 1 ('do nothing') Table 18: Summary of expected impacts of the proposed measures Table 19: Disclosure requirements in Regulated Markets and MTFs Table 20: Analysis of issuers by market capitalisation by trading venue Table 21: Total market capitalisation by trading venue (€bn)

Table 22: 2013 trading turnover by trading venue (€mn) Introduction The Prospectus Directive on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market was adopted in order to make it easier and cheaper for companies to raise capital throughout the Union on the basis of approval from a regulatory authority ("home competent authority") in only one Member State. Under the Directive, issuers, offerors or persons asking for the admission to trading on a regulated market can use a "passport" for their prospectuses for cross-border offers and listings. The Directive also ensures harmonised minimum protection for investors by guaranteeing that all prospectuses, wherever they are published, provide them with the clear, comprehensive and standardised information they need to make informed investment decisions. Investors thus benefit from common EU standards for prospectus disclosure and approval by national competent authorities. The Directive only concerns initial disclosure requirements for a public offer or listing on a regulated market. It neither affects on-going nor ad-hoc reporting obligations laid down in particular in the Transparency Directive and Market Abuse Regulation. The Directive entered into force in 2005 and was reviewed in 2009: The review revealed that while overall the Directive was meeting its objectives of market efficiency and investor protection, in a number of cases it created legal uncertainty and unjustified requirements, which increased costs and created inefficiencies hampering the process of raising funds on the securities markets in the EU. To promote investor protection taking into account the loss of confidence in capital markets due to the financial crisis, the review identified in particular the need to improve the summary of the prospectus to make it a simpler and better understandable document. As a result of the review, the Directive was amended in November 2010 as part of a simplification exercise within the "Action programme for the reduction of administrative burdens". The objectives were to increase legal clarity and efficiency in the prospectus regime while enhancing the level of investor protection and ensuring that the information provided is sufficient and adequate. The main changes were as follows: for some types of securities issues less comprehensive disclosure requirements were introduced (small and medium enterprises [SMEs] and companies with reduced market capitalisation, credit institutions, rights issues and government guarantee schemes); the format and content of the prospectus summary were amended; the exemptions from the obligation to publish a prospectus when companies sell through intermediaries (“retail cascades”) and for employee share schemes were clarified; disclosure requirements that overlapped with the Transparency Directive were repealed; the definition of "qualified investors" in the Prospectus Directive were aligned with the one of "professional clients" as defined in the Directive on Markets in Financial Instruments (MiFID). These measures were expected to generate savings. The evaluation of the functioning of the amended Directive indicated that all stakeholder groups, issuers, investors and Member States consider the Directive to be a useful instrument to foster market efficiency and integration as well as investor protection (see Annex 5). The Directive has created a minimum standard for disclosure and approval by national competent authorities which can be relied upon throughout the Union. However, despite those positive achievements, changes were largely incremental and not sufficient to materially reduce the cost of capital raising using a prospectus. Procedural information concerning the preparation of the impact assessment An Inter-Service Steering Group for this Impact Assessment, chaired by the Secretariat General comprised representatives from the following services of the European Commission: the Legal Service, the Directorates General for Competition; Economic and Financial Affairs; Financial Stability, Financial Services and the Capital Markets Union; Internal Market, Industry, Entrepreneurship & small and mid-sized enterprises; Justice; and Trade. This Group met three times. The last meeting took place on 28 July 2015. 1.Regulatory Scrutiny Board The Regulatory Scrutiny Board analysed this Impact Assessment and delivered a first opinion on 18 September 2015 that focused on the three following aspects: 1) The report should elaborate on why the lighter regime for SMEs did not meet its objectives and explain better why the new approach is more likely to succeed. These explanations should be supported by relevant evidence and data, drawing inter alia on the stakeholder consultation and evaluation. 2) As part of REFIT, the report should estimate the possible cost savings for SMEs introduced by lighter reporting requirements. In addition, it should substantiate the overall regulatory and administrative burdens for prospectus issuers, including for bond, secondary or frequent issuers. 3) The report should present the package of preferred options in a clearer manner, specifying its separate elements, how they interrelate and their overall coherence.

On the basis of a revised impact assessment, a second opinion of the Regulatory Scrutiny Board was provided on 2 October 2015 that acknowledged that the revised report has been improved. It noted that the relevant prospectus problems were better described, the package of preferred options and its impacts had been clarified, cost savings estimates had been added and the report drawn better on the evaluation and the stakeholder consultation. Moreover, the revised version explained better how the preferred options interact to generate synergies for issuers, which seem more comprehensive and substantial than the amendments from 2010. The report was therefore considered to be clearer and supports better the claim that the proposed changes can lead to costs savings and improve the function of the capital markets. Further improvements were recommended, in particular on the estimated cost savings, that are taken into account in the version published today. 2.Consultation of interested parties The most important consultation of interested parties was an on-line public consultation which invited interested parties to comment on a broad range of issues between 18 February and 13 May 2015. This consultation was accessible through the European Commission's central consultation tool "EUSurvey" and was announced widely through a specific press release and mentioned in meetings and presentations as well as more generally through the launch of the Commission's landmark project on a Capital Markets Union. 182 interested parties responded to the consultation. In addition, the European Commission was provided with 83 position papers. Furthermore, the European Commission consulted national competent authorities specifically via the European Securities and Markets Authority (ESMA) between March and May 2015 in order to gather more detailed data. Finally, many interested parties expressed their views regarding the review of the Prospectus Directive in meetings held at the Commission's premises in Brussels. 3.Policy context, problem definition and subsidiarity 3.1.Policy context This impact assessment serves several purposes: It contains the review required by Article 4 of the Directive which requests the Commission to "assess the application of Directive 2003/71/EC as amended by this Directive, in particular with regard to the application and the effects of the rules (…)" by 1 January 2016, in Annex 5 on evaluation. Annex 5 serves as the REFIT evaluation report to which the Commission had committed itself in 2014. Furthermore, on the basis of the conclusions drawn by the evaluation and problems detected, this impact assessment serves to scrutinise certain potential amendments to the Directive which the Commission is reviewing as part of the Capital Markets Union initiative and as a contribution to its Jobs and Growth initiative. 3.2.Problem definition The Prospectus Directive was a top priority in the Financial Services Action Plan in 1999 to foster the raising of capital on an EU-wide basis. Although it has led to a significant harmonisation of the rules concerning prospectuses in the Member States and created the cross-border passporting mechanism, the evaluation mentioned above has identified the following issues which seem to still hinder the raising of capital on an EU-wide basis. 3.2.1.Drivers 1.High costs of compliance with the Prospectus Directive Respondents to the public consultation stressed that compliance costs related to the Directive are high. Rough estimates for costs of equity prospectus are on average at EUR 1 million. Estimates of the costs of a non-equity prospectus are considerably lower at around a fourth of the costs for equity prospectuses. Furthermore, prospectuses and their summaries are long documents often focused on avoiding liability risks, thus legal fees are accounting for 40% or more of the compliance costs. This makes the drafting and approval process an expensive, complex and time-consuming exercise. This holds especially for SMEs as some of these costs are fixed costs and thus the overall costs do not vary perfectly proportionally with the sums raised. Therefore, the costs of a new prospectus have a proportionally bigger impact on smaller issuances. The review of the Prospectus Directive in 2010 tried to address the problem with the so-called "proportionate disclosure regimes", introducing alleviated minimum disclosure and thus a reduced prospectus content for SMEs and rights issues. However, there was almost unanimity in the public consultation that the proportionate disclosure regimes introduced only very limited improvements and were not widely used (see section 5.4). When assessing the specific costs of preparing a prospectus, available data is very limited. Less than 20 respondents to the public consultation provided an estimate of these costs. The figures provided show a very wide range and respondents themselves stressed that they should not be generalised. The minimum cost estimates for an equity prospectus range from EUR 1 000 to EUR 3 million, with an average of almost EUR 700 000. The maximum amounts range between EUR 10 000 and EUR 4 million, averaging at EUR 1.3 million. Estimates of the costs of a non-equity prospectus are considerably lower with the minimum average of EUR 57 000 and the maximum average at almost EUR 500 000. Legal fees are by far the most important contributor to the overall cost of preparing a prospectus according to respondents to the public consultation, as legal fees represent about 40% of the total costs. The second most important cost factor are internal costs (about 23%), followed by audit costs and fees charged by competent authorities representing together about a quarter of the costs. However, as for the total costs, the figures are rough estimates and would vary considerably from case to case. Fees charged by the national competent authorities are usually well below EUR 10 000 for one prospectus. 2.Ineffective investor protection The length of prospectuses and the fact that they are often drafted with the objective to address any potential legal liability rather than to inform investors in a suitable way, undermine the objective to protect investors through the provision of suitable and appropriate information to protect them from being attracted into investments they would not have made had they fully understand the offer. Similarly, the divergent implementation and application of the Directive as well as very different approaches by Member States to regulate the offer of securities outside the scope of the Directive lead to irritation and uncertainty among investors. An example of ineffective investor protection is the prospectus summary which was intended to provide investors with concise and easy to understand information about the product. There was a widespread dissatisfaction expressed by most respondents to the public consultation about the current summary regime. Almost unanimously they consider that the revised requirements introduced in 2010 have not been helpful and as a result, the prospectus summary, as it exists today, is blamed for being too long, unwieldy and too comprehensive (see section 5.5). 3.Regulatory framework not flexible and inappropriate for SMEs and some securities The insufficient differentiation and proportionality of the requirements between specific situations and issuers results in an inappropriate administrative burden and might even deter companies from accessing capital markets. The proportionate disclosure regimes mentioned above are again a prominent example.

Another example of the unsatisfactory design of the prospectus regime is the treatment of securities with a high denomination of EUR 100 000 or above: Under both the Prospectus and Transparency Directive, a system of exemption and alleviation thresholds currently creates incentives for issuers to issue debt securities with a high denomination per unit, namely above EUR 100 000. The OECD found that this threshold most likely reduces liquidity on the secondary market for corporate bonds and a limits issuance of debt securities in smaller denominations (see section 5.3). The other consequence is that such a threshold prevents many investors from entering the bond market due to the high entry tickets. This concerns mainly small investors, for example, small investment funds but also retail investors. 4.Insufficient harmonisation achieved by the Prospectus Directive The Directive leaves Member States with considerable discretion in its implementation and application. The resulting differences hinder the emergence of a truly integrated EU capital market. For example, Member States have applied differently the flexibility in the Directive to exempt offers of securities with a total value below EUR 5 000 000 so that the requirement to produce a prospectus kicks in at different levels across the EU (see section 5.1). There are also indications that prospectus approval procedures are in practice handled differently between Member States as evidenced by ESMA's peer reviews including the currently ongoing peer review. The problems that arise from diverging implementation and application are also reflected in the difficulties investors have in finding and comparing issuances even if they come with a prospectus: No IT-tool exists which would allow investors easy and free online access to the relevant material or would even ensure that they are immediately informed about new issuances or offers (see section 5.6) 5.Insufficient alignment of more recent EU law with the Prospectus Directive The financial crises and market developments in the last years have led to a number of new or revised legislative texts which constitute the current EU legal framework for financial markets. Recent examples are the creation of SME growth markets under MiFID II, the introduction of key information documents for packaged retail and insurance-based investment products (PRIIPs) under Regulation (EU) No 1286/2014 and the revision of the Transparency Directive. These have sometimes led to insufficient alignment or even inconsistencies with the Prospectus Directive. For instance the market capitalisation threshold of EUR 200 000 000 which defines SMEs under MiFID II is not coherent with the definition of "companies with reduced market capitalisation" under the Prospectus Directive, which is based on a maximum market capitalisation of EUR 100 000 000. Likewise, when the PRIIPS Regulation and the Prospectus Directive both apply, there is a certain level of redundancy between the key information document required under PRIIPS and the prospectus summary, with both documents serving the same objectives of comparing investment products and helping investors' decision-making. It is thus necessary to review the prospectus regime with the objective of creating more consistency and legal clarity with regard to its inter-linkages with other legislative instruments. 3.2.2.Problems The above-identified drivers contribute to a number of problems which limit capital market integration and efficiency as well as the effectiveness of investor protection in these markets in the Union. Capital markets play a very limited role in the financing of companies in most Member States and the capital market of the Union is very fragmented. The following four contextual problems are linked to the current legal regime for prospectuses in the Union. 1.High costs of financing on capital markets in some Member States. Initial public offerings (IPOs) and debt underwriting are characterised by substantial fixed costs which are generated by due diligence and regulatory requirements, including the cost of information disclosure required by investors or regulators and meeting other corporate governance requirements. Data shows that compliance costs and disclosure requirements related to an IPO are particularly high for smaller firms: A study estimates that listing costs can account for 10 to 15% of proceeds for IPOs of less than EUR 6 million and only 5 to 8% for IPOs above EUR 50 million. For many firms, in particular SMEs, initial and on-going listing costs outweigh the benefits of listing: According to the International Organization of Securities Commissions (IOSCO), the 'costs and fulfilment of regulatory requirements' (i.e. the financial and bureaucratic burden) during and after an IPO are one of the two most important impediments faced by SMEs in accessing capital markets. Table 1 illustrates the relatively high burden of the overall costs of raising capital, which include the cost of a prospectus, when smaller amounts are being raised. Amount raised from the IPO Cost of raising capital

(as a % of the amount raised) less than EUR 6 million 10 to 15% between EUR 6 million and EUR 50 million 6 to 10% between EUR 50 million and EUR 100 million 5 to 8% more than EUR 100 million 3 to 7.5% Source: Federation of the European Securities Exchanges (FESE) 2.Differences in financing conditions between Member States The size of capital markets is conventionally measured by the ratio of outstanding financial assets relative to economic activity. According to this measure, the EU market is relatively big. However, this is largely driven by the extremely large share of bank assets. The stock market capitalisation on the other hand is below the global average. Furthermore, there is a wide variation in the development of capital markets across EU Member States, as illustrated in Figure 1 below: several EU Member States (Luxemburg, Ireland, Netherlands and Denmark) have relatively larger capital markets than the USA, suggesting that conditions in the EU can be supportive to the development of large capital markets. Source: IMF Global Financial Stability Report, April 2015 3.Limited access to finance for many SMEs European companies, and in particular SMEs, rely heavily on bank finance. The Commission services found that the vast majority of their financing is via banks and only 20 per cent of capital or less is obtained from capital markets. Also for SMEs considerable differences between Member States exist: In Slovakia, Denmark and Sweden 9 to 32% of SMEs used equity as a source of funding, whereas in Hungary, Portugal and the Czech Republic almost no equity funding was used and the EU average is at only 3%.There are, of course, various factors influencing the decision of companies when choosing the most appropriate source of capital. For example, most companies have well-established relationships with their banks and therefore turn to them as a preferred choice of finance. Similarly, tax and liability treatments differ between different sources of finance and Member States. Nevertheless, the recent banking crisis showed that reliance on bank financing only can have severe adverse effects in case of such a crisis. Furthermore, it limits the company's bargaining position vis-a-vis the bank. It is therefore important that access to capital markets is open at least as a viable alternative.

4.Ineffective investor protection on capital markets, in particular in across borders By increasing the investment opportunities, efficient capital markets offer investors a broader set of financial products to (i) meet their investment objectives, (ii) diversify and manage their risks and (iii) optimise their risk-return profile, while respecting their investment constraints. However, considerable differences exist within the EU concerning investor protection, which are mainly caused by different legal and institutional traditions. An example where these differences amongst Member States become obvious are withdrawal rights relating to prospectuses. The withdrawal right is the right of investors who have agreed to purchase or subscribe for securities to withdraw their acceptances. The Directive grants such withdrawal rights during two working days under two sets of circumstances: (i) if the final offer price and amount of securities which will be offered to the public cannot be included in the prospectus and is thus published after the approval; or after the publication of a supplement by the issuer, when a significant new factor, a material mistake or an inaccuracy relating to the information included in the prospectus arises or is noted before the final closing of the offer to the public. Some Member States have introduced additional, sometimes very far-reaching withdrawal rights. This creates uncertainty for investors as to their level of protection when investing abroad, but also for issuers who perceive these differences as legal risks deterring them from cross-border offers. This in turn, results in a considerable home-bias. 3.2.3.Consequences These problems make capital markets unattractive for many companies, in particular SMEs, as an alternative source of funding. However, if companies cannot raise capital effectively this often translates into less investment, fewer jobs and less growth in the Union. The differences across Member States as well as the ineffective investor protection make investors reluctant to invest in securities and in particular in those from other Member States. Similarly, issuers are not interested in targeting capital markets in other Member States as this would often trigger considerable additional costs while expectations to raise a lot of funding remain low. Taken together, this means missed investment and funding opportunities for investors and companies in the Union. Although the short-comings in the prospectus regime are only one part of the capital market regulatory framework and there are many other factors influencing the functioning of these markets, these shortcomings can in specific cases nevertheless be the decisive element that keeps a company from raising capital or keeps investors from investing in the most suitable financial instrument. Both situations would contribute to triggering the above consequences. Figure 2 illustrates how the problems and the drivers described above interrelate. Each of these drivers and problems can have adverse impacts as described in the third column of Figure 2 and in section 3.2.3 below. Drivers Problems Consequences Regulatory framework not flexible Limited access to finance for many SMEs Companies cannot raise capital effectively High costs of compliance High costs of financing on capital markets in some Member States Less investment, fewer jobs, and less growth Ineffective investor disclosure Ineffective investor protection on capital markets, in particular in a cross-border context Insufficient alignment and harmonisation Differences in financing conditions between Member States Missed investment and funding opportunities for investors and companies 3.3.How would the problem evolve without EU action? The Baseline Scenario Financial fragmentation has a significant effect on the possibility to share economic risks across borders. Economic literature identified capital markets and bank credit markets as having an important role in cushioning the impact of economic shocks. By giving access to foreign assets, the capital markets channel can provide stable revenues to investors when domestic income sources decay. The bank credit market channel assumes that banks provide stable funding to the economy even when the economic activity weakens and credit risks increase. Studies on risk sharing in the euro area found that these channels were ineffective during the financial crisis. Indeed, the credit market channel was impaired because of the severity and persistence of the economic downturn and because the fragmentation it entailed annihilated the cushioning effect of diversification. The reasons for the capital market channel having a limited cushioning effect during the crisis were seen in the limited size of capital markets in the EU. Economic theory has long conjectured a link between financial integration, risk sharing and higher economic growth through a "risk-amelioration" channel. The recent EU experience of low growth coinciding with financial market fragmentation is consistent with it. Deep, liquid and efficient capital markets bring advantages to borrowers and investors not only during times of financial distress, but also under normal market conditions: For borrowers they (i) improve their access to funds; (ii) reduce their capital costs by creating competition among investors; and (iii) reduce the risk of disruption in financing by diversifying their funding sources. On the investors' side, by increasing the investment opportunities, efficient capital markets offer investors a broader set of financial products to (i) meet their investment objectives, (ii) diversify and manage their risks, and (iii) optimise their risk-return profile, while respecting their investment constraints (such as terms of risk, duration, preference for certain asset types). As described above, the Directive plays an important role at the gateway of EU securities markets. If no measures were taken to improve the Directive, prospectus disclosure could not support creating deeper, more liquid, more efficient and less fragmented capital markets within the EU. While Member States could try to make their national capital markets somewhat more efficient, they could not change the shortcomings of the Directive itself. Companies, in particular SMEs and companies based in smaller markets, would therefore remain deprived of a potentially important source of finance. This in turn would hamper the creation of jobs and growth in the Union. 3.4.Subsidiarity and proportionality According to the principle of subsidiarity (Article 5 (3) of the Treaty on the Functioning of the European Union), action on EU level should be taken only when the objectives of the proposed action cannot be achieved sufficiently by Member States alone and thus mandate action on an EU level. The first objective of reviewing the Directive in the context of the Capital Markets Union is to remove undue administrative burden, to enable companies, in particular SMEs, to easily and timely access capital markets in order to diversify their sources of capital from anywhere within the EU, and thus to improve the financing of the EU economy. The second and equally important objective is to safeguard investor protection by making available prospectus disclosure which enables them to take informed investment decisions. Both objectives aim at facilitating cross-border flows of capital and ultimately at enhancing growth and creating jobs in all EU Member States. The passporting of harmonised prospectuses as introduced by the Prospectus Directive in 2003 links issuers or offerors, authorities and potential investors from different Member States and European Economic Area (EEA)-Member States: When a competent authority approves a prospectus, the issuer can ask for a passport to another EU or EEA Member State where the prospectus can then be used without undergoing another approval. The minimum content of the prospectus is harmonised at EU level by the Prospectus Regulation (EC) No 809/2004. The prospectus regime is therefore European in nature and its improvement can only be tackled at EU level. The possible alternatives, i.e. non-legislative action at Union level, e.g. guidelines by ESMA, and action at Member State level, could not sufficiently and effectively achieve the objectives as they could not amend the provisions of the Directive or Regulation. Improving the EU prospectus regime will lead to a more level playing field for issuers and investors alike and to avoiding regulatory arbitrage, which in the end could work against the objectives of the Capital Markets Union. The proposed action would give a clear and consistent signal throughout the EU that the prospectus regime performed well even during the financial crisis, but that substantial improvements need to be made to create a truly single market for capital and foster convergence amongst Member States. Therefore, the objectives of the proposed action cannot be achieved by the Member States alone and can be better achieved by the Union. The options analysed respect the principle of proportionality, are adequate for reaching the objectives and do not go beyond what is necessary. The retained policy options are compatible with the proportionality principle, taking into account the right balance between the public interest at stake and cost-efficiency. Member States will still enjoy flexibility due to the proposed exemption thresholds. The retained options are consistent with the existing EU transparency, market abuse and MiFID regimes. Thus, financial markets can continue to function on the basis of the existing legal framework without having to face unnecessary regulatory disruption. Hence, the overall objectives of reducing the administrative burden (in particular compliance costs) whilst safeguarding investor protection will be met. 3.5.The EU’s right to act and justification The legal basis for action is the Treaty on the Functioning of the European Union (TFEU), and in particular Article 114 thereof.

4.Objectives The general objectives of the proposal are to ensure that companies everywhere in the Union can raise capital effectively in the financial markets and that investors can invest in those securities they consider most appropriate for their needs, based on adequate disclosure about the security as well as the issuer. This should help to increase investment, job creation and growth in the Union. Specific objectives would therefore be: 1.to reduce the costs of financing; 2.to achieve more convergence in the disclosure regimes for capital markets across Member States; 3.to improve access to capital markets for SMEs and companies with reduced market capitalisation; 4.to improve investor protection in capital markets. Finally, operational objectives are: 1.to reduce the administrative burden of compliance with the Prospectus Directive; 2.to make the regulatory framework for prospectuses more flexible and appropriate for the various types of securities and issuers covered, in particular SMEs; 3.to achieve more convergence in the application of the Prospectus Directive; 4.to better align the Prospectus Directive with recent EU law; 5.to make disclosure to investors under the prospectus regime more effective. The operational objective of investor protection under the Prospectus Directive is primarily to be understood as providing retail investors with access to appropriate securities and information about the respective security, its issuer and putting them in a position to assess and compare different offers. Consistency of the objectives with other EU policies: The identified objectives are coherent with the EU's fundamental goals of promoting a harmonised and sustainable development of economic activities, a high degree of competitiveness, and a high level of consumer protection, which includes safety and economic interests of citizens (Article 169 TFEU). Consistency of the objectives with fundamental rights: Future legislative measures on the prospectus regime, including appropriate sanctions, need to be in compliance with relevant fundamental rights embodied in the EU Charter of Fundamental Rights ("EU CFR"), and particular attention should be given to the necessity and proportionality of the legislative measures. Only the protection of personal data (Article 8), the freedom to conduct a business (Art. 16) and consumer protection (Art. 38) of the EU CFR are to some extent relevant. Limitations on these rights and freedoms are allowed under Article 52 EU CFR. The objectives as defined above are consistent with the EU's obligations to respect fundamental rights. However, any limitation on the exercise of these rights and freedoms must be provided for by the law and respect the essence of these rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet the objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others. In the case of the prospectus-related legislation, the general interest objective which justifies certain limitations of fundamental rights is the objective of ensuring the market integrity and financial stability. The freedom to conduct a business may be impacted by the necessity to follow certain disclosure, approval and filing obligations in order to ensure an alignment of interests in the investment chain and to ensure that potential investors act in a prudent manner. As regards the protection of personal data, the disclosure of certain information in the prospectus is necessary to ensure that investors are able to conduct their due diligence. It is however noted that these provisions are currently already in place in EU law. All retained options safeguard proportionality with regard to limitation of fundamental rights. In other words, the objective of the Prospectus Directive is to balance on the one hand the trade-off between ensuring investor protection and limiting administrative burden for issuers and on the other hand the trade-off between fostering the internal market for capital and the Capital Market Union and preserving sufficient flexibility for national and local markets. 5.Description, analysis and comparison of policy options In order to address the problems discussed above it is necessary to amend different parts of the Prospectus Directive. Therefore, as already indicated above, this impact assessment discusses options regarding various separate issues. Which of these issues address which driver is illustrated in Table 2 .

Driver: Issue: High costs of compliance with the Prospectus Directive Ineffective investor protection Regulatory framework not flexible and inappropriate for SMEs and some securities Insufficient harmonisation achieved by the Directive Insufficient alignment of more recent EU law with the Directive Exemption thresholds ✓ ✓ "Secondary issuances" ✓ ✓ High denomination per unit ✓ Proportionate disclosure regime for SMEs ✓ ✓ ✓ Prospectus summary ✓ ✓ ✓ Electronic publication system ✓ In the remainder of this chapter for each of these issues policy options will be described, their potential impacts discussed and their relative (dis-)advantages compared. 5.1.Exemption thresholds The scope of the Directive is defined by a number of thresholds . These thresholds were initially designed to strike a balance between investor protection and alleviating the administrative burden on small issuers and small offers. Some of these thresholds were raised by Directive 2010/73/EC (see Annex 5). However, in view of market developments, in particular the development of securities-based crowdfunding, some thresholds, including those not amended by the review in 2010, might need to be re-calibrated. The thresholds that identify the offers exempted from the scope of application of the EU Prospectus regime are related, firstly, to the size of an offer: under the current Article 1(2)(h) the EU prospectus is mandatory for offers above EUR 5 000 000, while under Article 3(2)(e) Member States are not allowed to require any prospectus for offers below EUR 100 000. For offers of a total consideration between EUR 100 000 and EUR 5 000 000, Member States are free to apply national rules. Secondly, under Article 3(2)(b) an offer of securities addressed to a restricted circle of non-qualified investors is exempted from the prospectus requirement: to that end, the Directive sets a limit of 150 natural or legal persons per Member State, other than qualified investors. This threshold was raised from 100 to 150 persons by the amending Directive 2010/73/EU. Figure 3 below illustrates the exemption thresholds related to the total consideration of an offer. Some stakeholders claim that the thresholds are set too low as they render the Directive already applicable to small offers. In particular the threshold of EUR 100 000 be it at national or EU level, is regarded as too low to support emerging models such as crowdfunding. 5.1.1.Description of policy options Option 1 – "Do nothing": Exemption thresholds of EUR 100 000, EUR 5 000 000 and 150 persons remain unchanged and Member States retain the ability to regulate prospectus requirements for offers between EUR 100 000 and EUR 5 000 000 as they deem appropriate. Option 2 – "Raise the upper threshold under Article 1(2)(h)" from EUR 5 000 000 to EUR 10 000 000, keep the other thresholds unchanged. Option 3 – "Raise the lower threshold under Article 3(2)(e)" from EUR 100 000 to EUR 500 000, keep the other thresholds unchanged. Option 4 – "Raise the number of non-qualified investors under Article 3(2)(b)": Raise from 150 to 300 the maximum number of non-qualified investors to whom an offer can be addressed in each Member State without triggering a prospectus obligation, keep the other thresholds unchanged. 5.1.2.Analysis of impacts and comparison of options Option 1: With regard to the "EUR 5 000 000" and "150 persons" thresholds, the general feedback from the consultation was that they should remain unchanged because they already strike an appropriate balance between investor protection and alleviating the administrative burden on small issuers and small offers. According to stakeholders, reducing barriers to access capital markets could not be effectively achieved by raising them. The preference for a status quo was confirmed by the Expert Group of the European Securities Committee (EGESC), where a majority of Member States was reluctant to change the thresholds, highlighting in particular that the quantum of 150 persons is already very large in view of the underlying concept of "restricted circle of non-qualified investors". Besides, as the "150 persons" threshold is expressed per Member State, increasing it further could cause some cross-border offers addressed to several thousands of non-qualified investors within the EU to become prospectus-exempt, which would run counter the objective of investor protection. Option 2: An increased upper threshold would not affect larger issuers as they do not usually carry out offerings on such small scale. Smaller issuers, especially private companies or issuers traded on multilateral trading facilities (including SME growth markets) might benefit from lower regulatory costs if they issued and offered securities for a total consideration between the old and the new threshold. However, such savings are confined to Member States who would: (1) decide to forego any disclosure obligation at national level or (2) apply significantly lighter disclosure requirements below the new threshold. Currently, based on available data, 17 Member States extend the prospectus obligation below the EUR 5 000 000 threshold, while 9 Member States don't (Table 3). A reduction in administrative burden would be granted to small issuers domiciled in these 9 Member States, assuming that the latter do not extend the prospectus obligation below the new threshold of EUR 10 000 000. In the other 17 Member States, the increase to EUR 10 000 000 would have no effect assuming these Member States continue to apply their current lower thresholds. Table 3: Threshold above which Member States require an EU prospectus to be drawn up (expressed as the total consideration of the offer in the EU over 12 months) Threshold (EUR) 100 000 250 000 1 000 000 1 500 000 2 500 000 5 000 000 Member States Belgium, Bulgaria, Germany, France(1), Hungary, Latvia, Slovak Republic, Slovenia Austria Czech Republic, Denmark, Romania(2) Finland(3), Luxemburg The Netherlands, Sweden, Poland Croatia, Greece, Ireland, Italia, Lithuania, Malta, Portugal, Spain, United Kingdom

Note: Data not available for Cyprus, Estonia. (1) Only for offers representing more than 50% of the share capital of the issuer. (2) EUR 200 000 for debt instruments. (3) Finland is in the process of raising this threshold to EUR 2 500 000.

Source: ESMA. In addition, the number of prospectuses for offers between EUR 5 000 000 (included) and EUR 10 000 000 (excluded) approved by the national competent authorities in 2013 and 2014 was fairly small: about 3% of all prospectuses related to offers within that range. While it could be expected that there would have been more offers between EUR 5 000 000 and EUR 10 000 000 if there was no or only a lighter prospectus requirement under national law, it is not possible to provide a robust estimate of the potential increase of capital raised in the EUR 5 000 000 – EUR 10 000 000 bracket. It should also be borne in mind that the national prospectus requirements applicable in this bracket would not necessarily prove less costly than the EU prospectus. This option would to some extent run counter the stated objective to achieve more convergence in the disclosure regimes for capital markets across Member States. Small companies in Member States imposing the prospectus requirements below EUR 10 000 000 will be disadvantaged in comparison to companies operating in countries not imposing such thresholds, potentially leading to different costs of capital according to the country of domicile. However, those companies would still be free to offer or list securities of this size range in more favourable markets. Retail investors, on the other hand, would be left with less information to take an investment decision or even no disclosure at all in those Member States who would decide not to put in place any safeguard below the new threshold. Hence Option 2 could result in reduced investor protection. It is, however, open to what extent such investor protection concerns would actually materialise as, even without an EU or national requirement to draw up a prospectus, issuers would still need to provide appropriate information to attract and convince investors. A minority of respondents to the consultation (essentially trade associations and some market operators) argued in favour of raising the "EUR 5 000 000" threshold to considerations between EUR 7 500 000 and EUR 50 000 000 (with EUR 10 000 000 most frequently cited), invoking the necessity to simplify the fund raising process for small issuers and offerings. However, according to the majority of respondents the lack of convergence regarding the prospectus requirement throughout the EU below the "EUR 5 000 000" threshold creates a non-level playing field and represents an impediment to cross-border financing that is contrary to the goals of the Capital Market Union. They argue that the flexibility of Member States below this threshold results in market fragmentation and thus higher compliance costs for issuers seeking to carry out offerings in several Member States. Option 3 would directly benefit small issuers and in particular securities-based crowdfunding in those nine Member States which currently require a prospectus for offers with a consideration below EUR 500 000 and would preclude the introduction of such a requirement in the other Member States. Currently, platforms and companies wishing to raise funds via crowdfunding need to consider each Member State as a domestic market in respect of the prospectus requirement and to carry out a country-by-country analysis before addressing investors across borders. Respondents to the consultation stated that offers on crowdfunding platforms usually have a total consideration between EUR 50 000 and EUR 1 500 000. Research found that the average fund raising on crowdfunding platforms in the EU was about EUR 250 000. Therefore, raising the lower threshold from EUR 100 000 up to EUR 500 000 would provide a safe harbour for the development of the vast majority of crowdfunding initiatives. Option 4: Option 4 would most likely not have impacts on the majority stakeholder groups analysed in this impact assessment. Stakeholders suggest that the "150 persons" threshold could be increased to 300 or even 500 persons, arguing that such a rise could benefit the development of crowdfunding. However, for crowdfunding platforms the 'private placement' threshold is much less relevant than those relating to the total consideration of the offer: today most offers on crowdfunding platforms, even if addressed to more than 150 non-qualified investors, are prospectus-exempt anyway because they remain below the EUR "5 000 000" threshold, or, where applicable, the lower threshold set by Member States at national level above which the prospectus requirement applies. This is reflected in comments from stakeholders from the crowdfunding sector who responded to the consultation. They were satisfied with the 'EUR 5 000 000' threshold but mainly criticised Member States' discretion to extend the prospectus requirement below that level, arguing that the diversity of domestic regulations was a barrier to the development of equity crowdfunding in Europe. Furthermore, a threshold of 300 non-qualified investors per Member State would add up to 8 400 non-qualified investors across the entire Union. Were those investors to invest only EUR 2 500 on average, this would add up to more than 20 million euro of retail money collected without a legal requirement for appropriate disclosure. This would go far beyond the original objective of the exemption which was to serve as a kind of 'de minimis' clause allowing issuers in a private placement to include a restricted circle of non-qualified investors in their offer. Impacts per stakeholder: Options Description Types of issuers and markets affected Estimated impact Option 2 Raise the threshold of Article 1(2)(h) (EUR 5 000 000) to a higher level while maintaining Member States' ability to extend the prospectus requirement below such threshold, subject to option 3 - Unlisted companies and companies not listed on a regulated market (1) If threshold set at 10 million euro: at least 3% of approved prospectuses in 2013-2014 would have fallen out of scope If threshold set at 20 million euro : at least 6% of approved prospectuses in 2013-2014 would have fallen out of scope Option 3 Raise the threshold of Article 3(2)(e) (EUR 100 000) to EUR 500 000, below which Member States cannot extend the prospectus requirement - Unlisted companies and companies not listed on a regulated market - Companies raising capital through crowdfunding platforms n/a(2) (1) As a prospectus is required upon admission to trading of securities on a regulated market, companies listed on a regulated market would not normally benefit from the exemption.

(2) No data available on the size of public offers taking place in the EUR 100 000 – EUR 5 000 000 range, where a prospectus is required under national law. Impacted parties: Options: Larger issuers/ offerors Small issuers/ offerors* Wholesale

investors Retail

investors Competent

authorities Option 2 (upper threshold): 0 ++ 0 - 0 Option 3 (lower threshold): 0 + 0 0 0 Option 4 (300 persons): + + 0 - 0 *SMEs and companies with a reduced market capitalisation ++: major improvements; +: some improvement; 0: no or marginal impacts; –: some deterioration;

– –: significant deterioration Comparison of options: Option 2 and 3 would have similar effects on small issuers and investor protection, but arguably with a different magnitude as each one of them targets different ranges of the offering activity. While Option 3 would lower the regulatory burden on offers in the range between EUR 100 000 and EUR 500 000, Option 2 would do so on offers in the range between EUR 5 000 000 and EUR 10 000 000 to the extent that there are no disclosure requirement at national level. Higher thresholds under both option 2 and 3 would reduce administrative burden and make access to capital markets relatively easier for SMEs not listed on regulated markets. However, the effectiveness of option 2 would largely depend on how each Member State would compensate for the absence of EU disclosure requirement under the new threshold. In those Member States who decide not to put in place a national prospectus requirement below the new threshold, retail investors would suffer from the reduction of available information while small offers of securities would be facilitated. Conversely, in those Member States who impose a national prospectus, investor protection would not be affected and there would be no real reduction of administrative burden on SMEs. This option will also result in an increase of the size range of offers or admissions to trading where prospectus requirements might diverge among Member States. In comparison, the effectiveness of option 3 can be more easily predicted (as it does not depend on national choices by Member States), but would be of a lesser magnitude given the range of offers concerned. It would lower administrative burden for offers which would no longer fall under the national prospectus requirements and SMEs' access to capital markets would improve. Retail investors might benefit from an increase in the number of offers but would see a reduction in approved disclosure material. Both options would not trigger any costs (except maybe search costs and compliance costs in option 2 for issuers wishing to offer securities to the public in several Member States) but would have some positive impacts on access to capital markets, they can be considered efficient and effective. It is even more difficult to assess the impacts of option 4 as it would rather work 'at the fringes' of the scope of application. There is no obvious reason for exempting offers on the basis of the number of (retail) investors as each investor should have the right to benefit from investor protection. Therefore, the '150 persons' exemption is only justified if there is an appropriate trade-off in the form of the costs of compliance or if it is to provide legal certainty at the fringes. These objectives are already achieved with the current threshold level. Therefore, option 4 provides a much lower net benefit than options 2 and 3. The preferred options are therefore Options 2 and 3 combined, i.e. to raise the lower threshold of Article 3(2)(e) from EUR 100 000 to EUR 500 000 and the upper threshold of Article 1(2)(h) from EUR 5 000 000 to EUR 10 000 000.

Impact on: Options: Administrative burden reduction SME access to capital markets Investor

protection Efficiency Effectiveness Option 2: + ++ 0/- + ++ Option 3: + + - + + Option 4: 0 0 - - - ++: major improvements; +: some improvement; 0: no or marginal impacts; –: some deterioration;

– –: significant deterioration 5.2.Appropriate alleviated prospectus requirements for "secondary issuances" A company which already has a class of securities admitted to trading on a regulated market is known to the market through the prospectus it prepared and got approved on the occasion of its initial listing (IPO), as well as through the ongoing disclosure requirements under Regulation (EU) 596/2014 (Market Abuse Regulation) and Directive 2004/109/EC (Transparency Directive). This could justify the introduction of certain alleviations in the disclosure requirements when such company makes further offers to the public, as some of the information about the issuer usually contained in the prospectus (e.g. the 'operating and financial review' and the 'historical financial information') could also be found in the annual financial report which issuers whose securities are admitted to trading on a regulated market have to publish under the Transparency Directive. The annual financial report comprises, among others, the audited financial statements and the management report. One already-existing alleviation is the option given by the Prospectus Directive to issuers to draw up a prospectus as three separate documents (the registration document, the securities note and the summary) approved separately and at different points in time ("tripartite prospectus"). The rationale behind this is that the information relating to the issuer in the registration document can be prepared and kept up-to-date "on the shelf" and then completed later by adding a securities note and a summary when market conditions allow the issuer to raise financing. The intent of this "tripartite regime" is to provide issuers with an optional faster and more flexible procedure since producing a securities note and a summary at the time of issue is much less time-consuming than the preparation of a full-blown prospectus. Yet, as shown in the evaluation below (Annex 5), the tripartite prospectus is only popular in a few Member States and there is scope to encourage more issuers to use it. Another existing alleviation is the proportionate disclosure regime granted to ‘rights issues’, i.e. any issue of statutory pre-emption rights which allows for the subscription of new shares and is addressed only to existing shareholders. Under this regime, a prospectus consists of a registration document and a securities note which contain less information items than required for a normal prospectus as illustrated in Table 6 . 1. The following information items and sub-items – required in a regular prospectus – are not required: Selected financial information Operating and financial review Capital resources Conflicts of interests Remuneration and benefits Pro forma financial information History and development Important events in the developments of the issuer's business Products sold or services performed Breakdown of revenues by category of activity and geographic market List of issuer's subsidiaries and information thereof 2. The following items need only be disclosed for the past year (instead of the past two years) Material contracts 3. The following items need only be disclosed for the past year (instead of the past three years) Historical financial information Nature of the issuer's operation and its principal activities Related party transactions Dividend per share (1) Comparison between Annexes I and XXIII of the Prospectus Implementing Regulation No 809/2004. Although the alleviations granted under that regime are significant and aim at avoiding duplications with ongoing disclosures under the Transparency Directive, the regime is in practice rarely used, arguably because its scope is too narrow (only "rights issues" to existing shareholders are covered). In consequence, only 97 prospectuses were drawn up under that regime in 2013-2014, i.e. 1.2% of all prospectuses approved in those years (see figures in the evaluation, Annex 5). The specific problem to be addressed is the insufficient differentiation between the prospectus required upon first admission to trading (IPO) and the prospectuses required for subsequent offers ('secondary issuances') once the issuer is listed. For secondary issuances, in the absence of widespread use of proportionate disclosure regime, this leads to overlapping disclosure between the prospectus and the ongoing disclosure required by the Transparency Directive. Besides, issuers already listed on regulated markets face the time-consuming and costly process of preparation and approval of their prospectus which makes it often difficult for them to take advantage of market windows. In the public consultation they expressed the need for faster access to capital markets when using a prospectus. 5.2.1.Description of policy options Option 1 – "Do nothing and keep the current regime": If no action was taken, the alignment of disclosure requirements between the Prospectus Directive and the Transparency Directive would remain limited to rights issues. For other secondary issuances the duplication of disclosures would continue. Absent any incentive to encourage its use, the tripartite prospectus would remain a popular practice in only a handful of Member States. Option 2 – "Abolish the admission prospectus when securities are already listed on a regulated market". Under this option, the exemption of admission prospectus in Article 4(2)(a) of the Directive would be extended to all fungible securities (equity and non-equity) already listed on a regulated market in the EU, and the 10% dilution cap would be removed. As an issuer of such securities is already subject to the disclosure obligations under the Market Abuse Regulation and Transparency Directive, investors would have access to the secondary issuers annual and half-yearly financial reports and the inside information on that issuer, as both are required to be made public as regulated information. Option 3 – "Raise the dilution threshold of Article 4(2)(a)". Under this option, the exemption of admission prospectus in Article 4(2)(a) of the Directive would be extended, but, unlike under Option 2, subject to conditions. The threshold for the dilution of existing shares would be raised from 10% to 20% of shares of the same class already admitted to trading on the same regulated market, calculated over a period of 12 months. In addition, the exemption would be extended from shares to all fungible securities. Option 4 – "Alleviate the prospectus regime for all secondary issuances of securities". The current proportionate disclosure regime of Article 7(2)(g) of the Directive would be extended to all secondary issuances of securities and recalibrated to take into account all information that issuers on a regulated market or on an SME growth market have already published pursuant to the Market Abuse Regulation, the Transparency Directive (for issuers on a regulated market) or the market rules concerning ongoing periodic financial reporting (for issuers on an SME growth market). Option 4 would therefore focus the secondary issuance prospectus on information needed by investors in securities that are already known on the market and are subject to the disclosure requirements of regulated markets. This approach is supported by a large majority of respondents to the public consultation and Member States as it would address the perceived failure of the current prospectus regime to adequately distinguish between the information appropriate when an issuer is new to a public market and when it is seeking financing through secondary issuances (where a significant amount of information is already in the public domain with regard to the financial statements and the operating and financial review of the issuer's past performances). Option 5 – "Universal registration document and tripartite prospectus for frequent issuers": The registration document, containing information on the issuer, is typically the part of a prospectus which generates the most discussion with the competent authority during the scrutiny and approval process. A registration document typically amounts up to 2/3 or 4/5 of the size of a full prospectus. To streamline prospectus approvals, Option 5 envisages a new optional system for frequent issuers who repeatedly file updated registration documents with their national competent authorities. A "universal registration document" would contain the essential descriptive information about the issuer (incl. risk factors, business overview, corporate governance, shareholding structure, financial information), irrespective of the type of securities to be issued by the company. When a national competent authority reviews the registration document every year, the review process of the securities note and summary becomes a more straightforward and faster exercise. An issuer which has obtained approval for its universal registration document with its competent authority for three consecutive years would be granted a fast-track approval process of 5 days (instead of the current 10 days) for the approval of the securities note and the summary. The aim is to provide frequent issuers with easier and faster access to capital markets once an opportunity to raise funds presents itself. This new system would be optional and available to all listed issuers (including SMEs) on regulated markets and multilateral trading facilities. Options 2 and 3 are mutually exclusive but could be combined with options 4 and 5 5.2.2.Analysis of impacts and comparison of options Option 2 would lead to a considerable reduction in the administrative burden for listed issuers, but would deprive investors of essential information which only a prospectus contains and which is not featured in the ongoing disclosures required under the Market Abuse Regulation and the Transparency Directive. In the absence of a prospectus, investors would no longer have access to comprehensive and well-structured information on the issuer (shareholding structure, board practices, related party transactions, risk factors, etc.), on the securities (terms and conditions, risk factors, use of the capital raised, etc) and the admission itself (timetable, expenses, etc.). This full exemption would therefore severely undermine investor protection and investor confidence as investors may be less willing to participate to secondary issuances of listed issuers. In light of these shortcomings, Option 2 will not be pursued further. Option 3 would open the incentive to increase capital and/or "reopen" previous debt issuances to more issuers and may have a positive effect on the liquidity of equity and non-equity markets. A threshold of 20% seems to reflect the needs of market participants as voiced in their responses to the consultation, without compromising the interests of existing shareholders. A higher threshold than 20%, on the other hand, would potentially allow for transformational transactions which significantly alter the capital structure of a company to be exempted from the prospectus requirement and thus would not be desirable from an investor protection point of view. The suggestion to raise the dilution threshold from 10% to 20% was supported by Member States and respondents to the public consultation. It would also benefit smaller companies for which already a fairly small new issuance could represent more than 10% of its capital. As offers resulting in a capital dilution in excess of 20% are, however, likely to be transformational transactions with a significant impact on the structure and prospects of the company, it is legitimate that detailed information should continue to be provided to investors through a prospectus.

Through its wider scope, Option 4 has the potential of significantly increasing recourse to the proportionate disclosure regime (PDR) for secondary issuances. The PDR for rights issues established by Directive 2010/73/EU was only used in 97 prospectuses in 2013 and 2014 in the Union, representing a mere 1.2% of the total number of prospectuses approved in those years. Option 4 would extend the current PDR to all secondary issuances of securities fungible with securities already admitted to trading on a regulated market or an SME growth market, as well as offers of non-equity securities by issuers whose shares are already admitted to trading on a regulated market or SME growth market. Besides, in order to increase take-up of the PDR, Option 4 would cover all forms of "secondary" equity issuances (share capital increases with or without pre-emptive rights for existing shareholders). Based on statistical data provided by 21 Member States, an average of 70% of all equity prospectuses approved in 2013 and 2014 corresponded to secondary issuances (public offers made by companies already admitted to trading on a regulated market or an MTF). Equity prospectuses represented a quarter of all prospectuses approved in the EU in 2014 (935 prospectuses). Assuming that the total number of prospectuses approved in the EU remains stable at around 4 000 per year on average and that the new regime would be used mostly by equity issuers - re-openings of non-equity "benchmark" issuances still appear to be a rare practise in the Union - the expected usage rate of the new proportionate disclosure regime could be estimated at 17.5% (instead of 1.2% currently) of all approved prospectuses, i.e. 700 prospectuses per year on average . Based on an analysis of some of the elements that do not have to be disclosed in the current PDR (e.g. 2 years of historical financial information, selected key financial data and operating and financial review) compared to a regular equity prospectus, Option 4 is estimated to reduce the cost of a secondary issuance prospectus by about 20% when compared to a full prospectus . Compared to producing a regular equity prospectus (that would otherwise cost about € 1 million on average), this means that savings of around EUR 200 000 per prospectus seem realistic. Based on these assumptions, the administrative costs saved under Option 4 could be in the range of EUR 130 million per year . Option 5: The idea of a fast-track approval process of 5 working days for frequent issuers admitted to trading on regulated markets or MTFs who file annually a universal registration document with their competent authority, is modelled on the "document de référence" which has been in operation in France for more than two decades and which around 350 issuers voluntarily file every year with the French competent authority. Such issuers integrate the universal registration document into a tripartite prospectus when they offer securities to the public. Based on data collected by ESMA during the 2013-2014 period , only 20% of equity prospectuses (excluding IPO prospectuses) and 32% of non-equity prospectuses (excluding base prospectuses) were approved by competent authorities in less than 10 working days. In France, partly due to the widespread use of tripartite prospectuses, these proportions are much higher, 50% and 55%, respectively. Therefore, the introduction of a universal registration document could shorten approval times significantly across the EU. Assuming that the number of prospectuses approved every year remains in the range observed in 2013-2014 (around 4000 per year), a more widespread use of the universal registration document could lead to 370 equity prospectuses and 838 non-equity prospectuses to be approved every year in less than 10 working days (instead of respectively 150 and 493 on average per year in 2013-2014). Use of the universal registration document could potentially lead an increase by 146% for fast track approvals in the case of equity and by 70% in fast track approvals for non-equity prospectuses. Although these shortened approval times cannot easily be expressed in monetary terms, shorter approval times means more opportunities for issuers to seize "market windows" and raise financing on capital markets. Impacts per stakeholder: Options Description Issuers and markets affected Estimated reduction of administrative burden Option 3 Extend exemption of admission prospectus of Article 4(2)(a) to all fungible securities and raise dilution threshold from 10% to 20% Issuers (including SMEs) listed on regulated markets issuing "more of the same" n/a(1) Option 4 Extend scope of 'proportionate disclosure regime' to all secondary issuances of securities Issuers (including SMEs) listed on regulated markets or SME growth markets who only occasionally offer securities to the public Around € 130 million per year, saved collectively by issuers drawing up a PDR prospectus. Option 5 Fast-track approval for frequent issuers filing a 'universal registration document' every year and drawing up a tripartite prospectus Issuers (including SMEs) listed on a RM or traded on MTFs (including SME growth markets) who frequently issue new securities / offer them to the public Increase by ~150% and ~70% respectively in the number of equity and non-equity prospectuses approved by competent authorities in less than 10 working days, every year. SME-GM = SME growth markets. (1) There are no available EU data linking capital dilution with prospectuses required on account of an admission to trading on a regulated market (with no concurrent offer to the public). Note: The three options target different types of issuers and transactions; they would be implemented in parallel. Impacted parties: Options: Larger issuers/ offerors Small issuers/ offerors* Wholesale

investors Retail

investors Competent

authorities Option 2: ++ + + -- 0 Option 3: + ++ 0 0 0 Option 4: + ++ + + 0 Option 5: + ++ + + 0 *Falling under the exemptions for SMEs and companies with a reduced market capitalisation ++: major improvements; +: some improvement; 0: no or marginal impacts; –: some deterioration;

– –: significant deterioration Comparison of options: Option 2 would be the most radical but is not pursued due to its detrimental consequences for investor protection. Options 4 and 5 would alleviate considerably the burden on issuers, albeit less radically than option 2. These Options would safeguard investors' interests, while addressing different profiles of listed issuers. Both options provide "tools" which listed issuers are free to use or not. Listed issuers frequently offering securities to the public would seek the flexibility of the tripartite prospectus and fast-track approval granted under Option 5, in exchange for the commitment to file a comprehensive registration document every year. Conversely, listed issuers who do not envisage regular capital raising on the market will be more inclined to make use of the proportionate regime under Option 4 as it allows them to draw up a lighter registration document (still, the normal approval process applies). Option 3 is independent of the other options and would be preferred because of its positive impacts on the administrative burden as well as SME's access to finance. The preferred options are therefore Options 3, 4 and 5 combined. Impact on: Options: Administrative burden SME access to capital markets Investor

protection Efficiency Effectiveness Option 2: ++ 0 -- + - Option 3: + + 0 + + Option 4: + + 0 + + Option 5: + + 0 + + ++: major improvements; +: some improvement; 0: no or marginal impacts; – : some deterioration; – –: significant deterioration

5.3.Favourable treatment of issuers of debt securities with a high denomination per unit, with liquidity on the debt markets The specific problem to be addressed is the potential adverse unintended effects of the existing exemptions under the Prospectus Directive which grant a favourable treatment to companies issuing debt securities with a denomination per unit of EUR 100 000 or above. There is evidence that such a high threshold creates an incentive for debt issuers to only issue in large denominations, which as a consequence contributes to inhibiting liquidity on the secondary market for bonds and limits the issuance of debt securities in smaller, retail-friendly denominations. More specifically, the Prospectus Directive contains a prospectus exemption in Article 3(2)(d) for issuers of securities (debt or equity) with a denomination per unit of at least EUR 100 000. In practice this exemption (which only applies to public offers) is used by issuers of non-equity securities traded on unregulated markets or by issuers of unlisted non-equity securities offered to institutional investors through private placements which may then be traded over the counter. On the contrary, non-equity securities traded on regulated markets are caught by the prospectus requirement on account of their admission to trading so that the exemption of Article 3(2)(d) does not apply. Instead, the Directive grants alleviations to issuers of high-denomination debt. The prospectus necessary for the admission to trading on regulated markets of debt securities with a denomination per unit of at least EUR 100 000 is less burdensome than for smaller denominations: the content to be covered in the prospectus is reduced, no summary is required and issuers benefit from some greater flexibility in the choice of language used in the documents. This dual information content between retail and wholesale debt prospectuses creates an incentive to only issue in larger denominations in order to save the costs and time for a prospectus. Therefore, the incentive for debt issuers to denominate their debt securities above EUR 100 000 per unit is (i) either less information and no summary to disclose if the securities are admitted to trading on a regulated market, (ii) or no prospectus at all if no such admission is sought. This favourable treatment encourages investment-grade issuers to issue non-equity securities in denomination per unit above EUR 100 000, making them inaccessible to retail investors. The EUR 100 000 threshold (which was raised from EUR 50 000 by Directive 2010/73/EU from 1 July 2012) was originally intended as a "price protection" for non-professional investors, but it is now argued that the differentiation made by the Directive between "retail" and "wholesale" prospectuses mainly leads issuers, including blue chip companies with a high creditworthiness, to shun the retail market to avoid the costs of preparing a "retail prospectus" and because they can easily find funding from institutional investors. This is eventually detrimental to European retail investors, at a time when a growing portion of them needs to have access to appropriate debt securities to invest their savings in anticipation of their retirement. However today, the high-quality end of the corporate bond market is inaccessible to them, as the majority of securities are denominated above EUR 100 000. This is illustrated in the evaluation report in Annex 5. According to OECD data, about 70 per cent of bonds listed in the Union are in such high denominations. Figure 4: Denomination of debt securities Source: OECD 2015 Figure 4 illustrates the apparent anomaly caused by the favourable provisions granted by the EU prospectus regime. Several US and European companies issued almost identical bonds around the same date, if not on the same day, in two European currencies and in US dollar. However, the differences in denomination are obvious: while the minimum denomination in the European currencies is at or above the exemption threshold of EUR 100 000 and therefore out of scope for retail investors (except some high-net-worth individuals), the minimum denomination in US dollar is only USD 1 000 or USD 2 000, i.e. clearly accessible by retail investors. This shows that the EUR 100 000 denomination threshold might deprive retail investors from access to blue chip bonds issued by well-known international companies with good credit ratings. Although the business considerations behind these differences in denominations are not known, it can reasonably be inferred that these companies did not try to avoid retail participation in the US (as evidenced by the low denomination in US dollar) while they purposely chose to denominate their debt securities in the EU at a level which would be inaccessible to EU retail investors and would grant them a lighter prospectus regime (if the securities were to be admitted to trading on a regulated market) or a total prospectus exemption (if the securities were to be traded on a multilateral trading facility or not listed at all). Overall, it can be considered that the EUR 100 000 has distorted the behaviour of debt issuers in the EU. Issuer Name Announce Date Minimum Piece Amount Outstanding Currency McDonald's Corp 06/04/2014 100 000 300 000 000 GBP McDonald's Corp 06/04/2014 100 000 400 000 000 EUR McDonald's Corp 06/04/2014 1 000 500 000 000 USD Walgreens Boots 11/10/2014 100 000 300 000 000 GBP Walgreens Boots 11/10/2014 100 000 750 000 000 EUR Walgreens Boots 11/06/2014 2 000 2 000 000 000 USD Bat Intl Finance 09/02/2013 100 000 650 000 000 GBP Bat Intl Finance 03/10/2015 100 000 800 000 000 EUR Bat Intl Finance 06/10/2015 2 000 1 500 000 000 USD Pepsico Inc 10/23/2012 100 000 500 000 000 GBP Pepsico Inc 04/23/2014 100 000 500 000 000 EUR Pepsico Inc 08/08/2012 2 000 1 000 000 000 USD BP Capital PLC 03/07/2011 100 000 750 000 000 GBP BP Capital PLC 02/11/2015 100 000 1 250 000 000 EUR BP Capital PLC 02/10/2015 1 000 1 250 000 000 USD GBP: Pound Sterling, EUR: Euro, USD: US Dollar; Source: The Wealth Management Association (WMA), based on data provided by Bloomberg 5.3.1.Description of policy options Option 1 – "Do nothing": the EUR 100 000 threshold of Article 3(2)(d) remains unchanged and the dual standard of disclosure linked to the EUR 100 000 denomination per unit, as mandated by Article 7(2)(b) for non-equity securities admitted to trading on a regulated market, is kept. Option 2 – "Lower the threshold": Lower the EUR 100 000 threshold of Article 3(2)(d) to a level between EUR 10 000 and EUR 50 000 (level in place before the amending Directive 2010/73/EU was adopted). Option 3 – "Remove the incentives to issue debt securities in high denominations". This option has two components: (i) it removes the prospectus exemption under Article 3(2)(d) of the Directive and (ii) for non-equity securities admitted to trading on a regulated market, it unifies the disclosure regimes in order to promote retail investor participation in debt securities listed on regulated markets. 5.3.2.Analysis of impacts and comparison of options

Option 1 - If no action was taken the current situation would persist. As the threshold is fixed in the Directive, Member States could not address the issue at their level. A large part of the debt securities would remain outside the reach of retail investors. The market fragmentation between non-equity securities below and above the EUR 100 000 threshold would remain. This part of the market would remain fairly illiquid because of the size of the single securities which limits the range of potential investors considerably while the public market would remain small and therefore neglected by many smaller investors. No reliable data is available whether the current EUR 100 000 threshold is overall beneficial for the protection of retail investors or not. Option 2 would at least partially address the concerns regarding liquidity in the sense that more investors, possibly including a higher number of non-qualified investors, could afford to buy debt securities in denominations between EUR 10 000 and EUR 50 000. The positive effect of this option on the liquidity of the secondary market for debt securities is only likely to be sizable if the new threshold is set close to or at EUR 10 000. Where bonds denominated above the new threshold would be admitted to trading on a regulated market, a wholesale prospectus (without a summary) would be required, whose content would not be suitable for those retail investors who could afford to spend more than EUR 10 000 in one bond. In that case, some retail investors may invest a considerable share of their savings in one security for which they would receive insufficient information. Therefore, investor protection could suffer considerably. Under Option 3, where admission to trading on a regulated market is sought, a single disclosure standard for non-equity prospectuses would be adopted by defining the same minimum information items through the implementing legislation (currently the Prospectus Regulation). Companies issuing debt securities admitted to trading on regulated markets would cease to be incentivised to use denominations of EUR 100 000 or above as doing so would not translate into lighter disclosure requirements any longer. The average denomination per unit of bonds traded on regulated markets should therefore decrease and, assuming the overall volume of debt issuances admitted to trading on regulated markets remains unchanged, retail investors would benefit from more investment opportunities as more corporate bond issuances would become accessible to them due to their lower denomination per unit. Retail investor participation into corporate bonds listed on regulated markets would therefore increase, in line with the CMU objectives. There is however a risk that this Option could lead to a shift of new listings of debt securities from regulated markets towards multilateral trading facilities, as the Directive does not apply to the admission to trading on these venues. Option 3 seeks to introduce a level playing field in the disclosure contents of prospectuses drawn up for non-equity securities admitted to trading on the regulated market (arguably a small fraction of all non-equity securities issued), by removing the distinction between "retail" and "wholesale" prospectuses, to foster liquidity on the regulated markets for non-equity securities, while ensuring adequate investor protection, as a prospectus will still be required. Responses to the consultation did not provide a clear picture on any prevailing view regarding the removal of the favourable treatments granted to the above issuers. In particular, it should be noted that the consultation did not highlight the unification of the debt prospectus templates as being a question to be treated at the level of the Directive. Where no admission to trading on a regulated market is sought, i.e. for debt securities traded on multilateral trading facilities or offered through private placements, the removal of the prospectus exemption of Article 3(2)(d) for public offers of debt securities would also contribute to lifting one potential cause for the lack of liquidity in secondary debt markets and foster more "retail-friendly" denominations, consistent with the objective to foster retail participation in these markets. Regarding the EUR 100 000 threshold of Article 3(2)(d), the majority of Member States expressed a preference for leaving it unchanged because this exemption supposedly offers legal certainty to issuers and because they believe that there are other more fundamental reasons explaining the lack of liquidity of the secondary markets for bonds. Conversely, stock exchange operators and portfolio managers supported the removal of Article 3(2)(d), as the EUR 100 000 was repeatedly criticised by these professionals for being a barrier to the development of electronic trading platforms using a central limit order book protocol, and for constituting an impediment to proper diversification of portfolios. Lastly, the Financial Service User Group (FSUG) expressed the view that the threshold should not be adjusted downwardly as it considered that the benefits that such a downward adjustment provides to issuers would not outweigh the negative effects it has on retail investors. Impacts per stakeholder: Option 2 would broaden the exemption from the prospectus obligation considerably and therefore benefit larger issuers as they would no longer have to issue in EUR 100 000 but could use denomination between EUR 10 000 to EUR 50 000, or above, and thereby gain some flexibility. Smaller issuers would not be impacted much as they usually do not use such high denominations. However, some might issue in denominations between EUR 10 000 to EUR 50 000 in order to avoid the prospectus obligation. Wholesale investors (e.g. portfolio managers) would benefit as well as they would gain some flexibility in their investments if more securities were offered in smaller denominations. The majority of retail investors would probably not be affected directly; depending on where the threshold is set between EUR 10 000 to EUR 50 000 only a few might be able to afford to invest in securities of such denominations. The lower the threshold, the higher the risk that retail investors might take uninformed investment decisions. Option 3 may result in a relatively higher disclosure burden for debt issuers seeking admission to trading on a regulated market, although it will have to be taken into account that the revision of the Prospectus Directive will alleviate a substantial number of burdens attached to the preparation of a prospectus, in particular the alleviations for secondary issuances and frequent issuers (see section 3.2) and those resulting from the simplified and shortened summary (see section 3.5). The level 2 Regulation that contains all the details to be reported in a prospectus will also be considerably streamlined, thereby also contributing to reduce the disclosure burdens. The expected higher disclosure burdens can therefore not be compared to the current situation but to the situation when the revised Prospectus legislation will enter into application. Smaller issuers, who do not typically issue non-equity securities with a denomination above EUR 100 000, should not be affected by this option. The ability of retail investors to participate in the corporate debt market would be enhanced as this option would potentially lead to the decrease of the average denomination per unit of bonds traded on regulated markets. Besides, under that option, the removal of the exemption of Article 3(2)(d) Prospectus Directive will not necessarily cause an increase in the administrative burden on issuers who currently make use of it today. This is because issuers currently use this exemption as an additional legal protection to avoid the prospectus requirement, while they are already eligible to the exemption of Article 3(2)(a) Prospectus Directive, as debt securities traded on multilateral trading facilities and/or offered through private placements are typically addressed to professional investors only. In addition, issuers seeking legal certainty may still introduce a contractual clause imposing a "minimum entry ticket" per investor of EUR 100 000, thus placing themselves under the prospectus exemption of Article 3(2)(c), which will not be removed. Impacted parties: Options: Larger issuers/ offerors Small issuers/ offerors Wholesale

investors Retail

investors Competent

authorities Option 2: ++ 0 + 0 + Option 3: - 0 0 ++ 0 ++: major improvements; +: some improvement; 0: no or marginal impacts; –: some deterioration;

– –: significant deterioration Comparison of options: Option 2 would reduce administrative burden for issuers of high denomination bonds and give them more flexibility in choosing a lower denomination. SME access to capital markets would not be affected as SMEs do not typically issue securities of such high denominations. Investor protection would suffer as some retail investors may be able to afford to buy securities with a denomination of EUR 10 000 to EUR 50 000. The efficiency of the option is difficult to assess as it on the one hand will address the risk to liquidity in bond markets at least to some extent at almost no cost in terms of implementation, on the other hand, it will not improve but reduce investor protection. As this latter impact is regarded more important than the (uncertain) liquidity impact and the reduction of administrative burden for some debt issuers the overall effectiveness is considered to be negative. For companies issuing debt securities with a denomination above EUR 100 000, Option 3 will result in a somewhat higher administrative burden than under option 1 (depending on how the unified disclosure schedules compares with the previous wholesale template), but it will create more opportunities for investors (in particular retail investors) to invest in non-equity securities, and in particular in corporate bonds, and it will remove one barrier to liquidity on the secondary markets for debts, while enhancing retail participation into these markets. Preferred option Description Types of issuers and markets targeted Estimated impact Option 3 (i) Unify the disclosure regimes for retail and wholesale non-equity securities admitted to trading on a regulated market, (ii) Remove the prospectus exemption of Article 3(2)(d) for denominations of EUR 100 000 or more All issuers of non-equity securities, whether traded on regulated markets, MTFs or offered through private placements It can be expected that a considerable share of debt securities will be issued in much smaller denominations, e.g. EUR 1 000, as it is mainly done in the US. (1) (1) Compared to the current situation where more than 70% of debt securities issued have a denomination per unit of more than EUR 100 000. Thus option 3 is the preferred option.

Impact on: Options: Administrative burden SME access to capital markets Investor

protection Efficiency Effectiveness Option 2: + 0 -- 0 - Option 3: - 0 ++ + + ++: major improvements; +: some improvement; 0: no or marginal impacts; – : some deterioration; – –: significant deterioration 5.4.Reforming the proportionate disclosure regime for SMEs The proportionate disclosure regime for SMEs and companies with reduced market capitalisation (SME PDR) established by Directive 2010/73/EU was only used in 143 prospectuses in 2013 and 2014 in the Union, representing a mere 1.8% of the total number of prospectuses approved in those years. The SME PDR has not delivered its intended effect mainly because it is still perceived as too burdensome. The reductions were so small that most issuers decided not to make use of the SME PDR as they feared that damage from the possible 'stigma' of making use of the regime, regarded as a potential attempt to hide some information, might be greater than the benefit of the reduced prospectus costs. 5.4.1.Description of policy options Option 1 – "Do nothing and keep the proportionate disclosure regime for SMEs as it is" Option 2 – "Design a new SME PDR that would further alleviate the mandatory contents of the proportionate disclosure regime for SMEs. To avoid the abovementioned SME stigma, the new SME PDR would not be available for companies listed on a regulated market. It would, however, be available to all unquoted SMEs and SMEs traded on MTFs (including the new category of SME growth markets). The objective is to cut administrative burden for SMEs who wish to do a public offer or to trade on an MTF/SME growth market but do not seek admission to trading on regulated markets. Option 3 – "Modified alternative presentation ("MAP") prospectus": An alternative prospectus format in the form of a prospectus template containing standardised language typically included in prospectuses which SMEs could then complement themselves with their specific, individual issuer / issue-specific information. This format would create a distinct approach to prospectuses for SMEs as they would "fill in" a prospectus instead of draft it from scratch. The "MAP prospectus" would also contain guidance on how to fill in the additional issuer / issue-specific content not covered by the standardised language. In addition, ESMA and national competent authorities would be required to develop tools to assist SMEs in drafting a "MAP prospectus" and remove any national rule forcing SMEs to use the services of an intermediary (lawyer, bank, etc.) to interact with the competent authority during the approval process in order to reduce the cost of preparing a prospectus. Prospectus drawn up as a "MAP prospectus" might be easier for investors to compare than regular prospectuses, as their content would partially consist of standardised language. It is important to point out that this alternative format would be optional, i.e. issuers would not be obliged to use it and would still have the possibility to draw up a prospectus in a classic format under the proportionate disclosure regime. Being an alternative format under the proportionate disclosure regime, the "MAP prospectus" would not be available for companies listed on a regulated market. Options 2 and 3 are not mutually exclusive but could be implemented in a combined manner. 5.4.2.Analysis of impacts and comparison of options Option 2: Although no reliable data exists on the number of prospectuses drawn up for public offers by unlisted companies which meet the definition of an SME, a major part of the prospectuses approved for public offers carried out by companies traded on MTFs/SME growth markets can reasonably be assumed to have been drawn up by either SMEs or companies with reduced market capitalisation. Companies listed on MTFs/SME growth markets can therefore serve as a useful proxy to estimate the potential number of prospectuses which could be drawn up under the new SME PDR. Based on statistical data from 24 Member States, on average 8% of all prospectuses approved in 2013 and 2014 were drawn up for a public offer of securities traded on an MTF. Assuming that the total number of prospectuses approved in the EU remains around 4 000 per year on average, this means that at least 320 prospectuses per year could be eligible to the new SME PDR. Assuming that the average cost of producing a prospectus for a small quoted company is EUR 700 000 (the average minimum cost, based on the consultation feedback), and that the cost reduction could be in the range of 20% (based on the information items that would no longer be required to be disc