WRITTEN QUESTION E-2005/01

by Cristiana Muscardini (UEN) to the Commission

(6 July 2001)

Subject: Crisis in the new economy and risks to savers

The bankruptcy proceedings started by American leading-edge technology companies have also had repercussions in Europe.

The Italian case is particularly striking because, in addition to the weak safeguards for share-owning savers, many consultants tend to run the business of companies once these have gone public, earning substantial commissions in the process, and later claim to be professional rescuers or to be seeking buyers for companies in financial difficulty. In the United States a conflict of interest of that kind would be roundly condemned. Finally, the failure of infant new technology industries has reduced competition and strengthened dominant positions, thus undermining consumer protection.

Since it is surely aware of the situation, what steps will the Commission take to prevent savers from being put at a further disadvantage?

Answer given by Mr Byrne on behalf of the Commission

(18 October 2001)

The Honourable Member's question touches upon many issues relating to Community law.

In principle, there are no financial guarantees for those purchasing shares (even in the United States). An investor in shares is always exposed to a certain risk of loss.

Nevertheless, legal protection for savers and shareholders has been subject to a gradual strengthening at Community level for many years now(1).

As far as company information and information on securities offered to the public are concerned, certain texts have been adopted which stipulate the minimum amount of information to be made available, both when a company is first listed and throughout its life on the stock exchange. These texts have recently been codified by Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities(2).

As for the information to be disclosed when a company is first listed on the stock exchange, the Commission has recently adopted a proposal on prospectuses(3) with the aim of improving and harmonising the amount of information required. This covers the new economy's growth stocks despite the fact that these are not covered by current Community law.

The same approach is envisaged for the periodic and permanent bonds of companies once they are admitted for trading on a regulated market. The Commission launched a public consultation on this matter on 17 July 2001.

As far as commercial relations between broker and client are concerned (conduct of business rules), the Commission intends to propose an amendment to the Directive on investment services to improve conditions for investors. The Commission is currently carrying out a public consultation on this matter.

Lastly, the Commission has recently adopted a proposal for a directive on market abuse(5) which will help to prohibit practices that run counter to the smooth functioning of the markets, in particular false or misleading information.

Moreover, Community law also covers the provisions on bankruptcies of investment firms etc(4).

Each Member State also has recourse to supervisory authorities which monitor everything from competition (in Italy, the Competition and Market Authority (Autorità Garante della Concorrenza e del Mercato) and the Banca d'Italia) to stock market transactions (e.g. Italy's Consob).

At present, the Commission does not have sufficient facts at its disposal to determine the impact that the bankruptcies of new technology startup companies will have on future dominant positions.

(1) See, in particular: Council Directive 89/298/EEC of 17 April 1989 coordinating the requirements for the drawing-up, scrutiny and distribution of the prospectus to be published when transferable securities are offered to the public, OJ L 124, 5.5.1989 Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field, OJ L 141, 11.6.1993 Council Directive 89/592/EEC of 13 November 1989 coordinating regulations on insider dealing, OJ L 334, 18.11.1989.

(2) OJ L 184, 6.7.2001.

(3) OJ C 240 E, 28.8.2001.

(4) Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, OJ L 160, 30.6.2000.

(5) OJ C 240 E, 28.8.2001.