Commission staff working document accompanying the Proposal for a Directive of the European Parliament and of the Council amending Directives 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market - Impact assessment {COM(2009) 491 final}  {SEC(2009) 1222}
Date: 2009-09-23
Institutions: European Commission
Subjects: approximation of laws, exchange of information, harmonisation of standards, official document, official market, powers of the institutions (EU), securities, transparency in decision-making

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COMMISSION OF THE EUROPEAN COMMUNITIES  

Brussels, 23.9.2009 
SEC(2009) 1223 

COMMISSION STAFF WORKING DOCUMENT  

accompanying the  

Proposal for a  

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  

amending Directives 2003/71/EC on the prospectus to be published when securities are 
offered to the public or admitted to trading and 2004/109/EC on the harmonisation of 
transparency requirements in relation to information about issuers whose securities are 
admitted to trading on a regulated market  

IMPACT ASSESSMENT  

{COM(2009) 491 final}  
{SEC(2009) 1222} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

Introduction .................................................................................................................. 3 

Procedure ..................................................................................................................... 4 

Problem Definition....................................................................................................... 7 

The baseline scenario, subsidiarity and proportionality............................................. 17 

Objectives................................................................................................................... 19 

Policy options............................................................................................................. 20 

Comparing the options ............................................................................................... 23 

Analysis of impacts .................................................................................................... 42 

Monitoring and Evaluation ........................................................................................ 49 

Annex I – Reports .................................................................................................................... 50 

Annex II – Outcome of the consultation .................................................................................. 52 

Annex III – Meeting on the consultation of the Prospectus Directive ..................................... 53 

Annex IV – Assessment of the Prospectus Directive............................................................... 58 

Annex V – Figures ................................................................................................................... 65 

Annex VI – Estimation of Reduction in Administrative Burden ............................................. 68 

Annex VII – Policy options...................................................................................................... 72 

Annex VIII – Number of Prospectuses Approved and Passports Sent – Source: CESR data . 80 

Annex IX – Additional minor changes .................................................................................... 82 

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1. 

INTRODUCTION  

In  January  2007,  the  European  Commission  launched  the  Action  Programme  for 
reducing  administrative  burdens  in  the  European  Union  to  measure  administrative 
costs arising from legislation in the EU and reduce administrative burdens by 25% by 
20121.  The  Prospectus  Directive2  has  been  identified  as  one  area  that  contains  a 
number of burdensome obligations for companies, some of which could possibly be 
alleviated3. In addition, Article 31 of the Prospectus Directive requires the European 
Commission to assess the application of the Directive five years after its entry into 
force4 and to present, where appropriate, proposals for its review.  

The financial crisis has provided a stark reminder of the importance of transparency 
and risk management in the financial markets. In the context of the current financial 
crisis, the Prospectus Directive has provided a sound framework in terms of investor 
protection  and  disclosure  obligations  for  the  financial  instruments  it  covers.  As 
stressed out in the ECOFIN Roadmap for financial stability, the absence of accurate 
and timely information on exposures of banks to credit risk has been the key factor 
for the generalized loss of confidence in financial markets5.  

Assessing the application of the Prospectus Directive, the European Commission has 
concluded  that  the  framework  created  by  the  Prospectus  Directive  has  eased  the 
possibility  to  offer  securities  in  different  Member  States.  This  has  boosted 
competition  among  issuers  and  has  generated  a  wider  variety  of  products  that  are 
now  available  to  investors,  ensuring  at  the  same  time  investor  protection  through  a 
harmonized  set  of  rules.  The  majority  of  market  participants  believe  that  the 
prospectus has had an important role to play as a legal document for investors in the 
single  European  market  of  securities  and  that  the  Prospectus  Directive  has  had  a 
significant  positive  impact  on  the  quality  and  appropriateness  of  information 

1 
2 

3 
4 
5 

See http://ec.europa.eu/enterprise/admin-burdens-reduction/home_en.htm  
Directive  2003/71/EC  of  the  European  Parliament  and  of  the  Council  of  4  November  2003  on  the 
prospectus  to  be  published  when  securities  are  offered  to  the  public  or  admitted  to  trading  and 
amending Directive 2001/34/EC. OJ L 345, 31.12.2003, p. 64.  
For details see Annex VI.  
The Prospectus Directive entered into force on 31 December 2003. 
Questions  about  the  adequacy  of  transparency  have  been  raised  with  respect  to  Special  Purpose 
Vehicles  (SPVs),  banks'  disclosure  of  securitization  operations  and  exposures  to  Special  Investment 
Vehicles (SIVs), the complexity in the structuring, risk measurement and valuation of structured finance 
products. These issues need to be tackled through the new rules on Credit Rating Agencies (CRAs), a 
sound and consistent implementation of the securitization related Capital Requirement Directive (CRD) 
disclosure  requirements  and  a  reliable  valuation  and  auditing  of  illiquid  assets.  In  particular,  in  the 
banking  sector,  there  is  the  need  for  clearer  rules  on:  (i)  large  exposures,  (ii)  banks'  trading  book 
exposures,  (iii)  enhanced  cooperation  between  supervisors,  (iv)  improvement  of  risk  management 
standards  by  non-bank  investors  and  (v)  banks'  liquidity  requirements.  The  Regulation  on  CRAs  has 
been  approved  by  the  European  Parliament  and  the  Council  on  23  April  2009.  P6_TA-
PROV(2009)0279.  Moreover,  the  European  Commission  will  table  a  proposal  on  CRD  to  further 
strengthen  capital  requirements  for  banks  and  investment  firms  in  June.  COM(2008)  602  final.  On 
standards to be used for the valuation of financial instruments, ECOFIN Council reiterated on 9 June 
2009 a call for IASB to work urgently to achieve clarity and consistency in the application of standards 
used for the valuation of assets in distressed and inactive markets.  

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available to investors6. Therefore the Prospectus Directive has met its objectives of 
market efficiency and investor protection.  

However, despite these achievements, there is still progress to be made. In particular, 
in  order  to  further  enhance  investor  protection  and  thus  respond  effectively  to  the 
current  financial  crisis,  the  summary  of  the  prospectus  should  be  improved  only  in 
terms  of  simplicity  and  actual  readability.  This  exercise  will  be  consistent  with  the 
approach  to  be  adopted  following  the  Commission's  Communication  on  Packaged 
Retail  Investment  Products,  which  aims  for  horizontal  requirements  on  pre-
contractual  disclosures  and  selling  practices  for  a  wide  range  of  retail  investment 
product7.  Moreover,  in  order  to  simplify  and  improve  the  application  of  the 
Directive, 
international 
competitiveness, the Commission has put forward suggestions for its review with the 
objective  of  reducing  administrative  burdens  for  companies  raising  capital  in  the 
securities  markets.  This  is  consistent  with  the  objective  of  maintaining  and,  when 
necessary, enhancing the level of investor protection envisaged in the Directive and 
ensuring that the information provided is sufficient and adequate to cover the needs 
of retail investors.  

its  effectiveness  and  enhance 

the  EU's 

increase 

This document is the impact assessment accompanying the initiative for the review 
of the Prospectus Directive; it does not pre-judge the final form of any decision to be 
taken by the European Commission.  

2. 

PROCEDURE  

The review of the Prospectus Directive and its impact assessment have been prepared 
in  accordance  with  the  Commission's  approach  to  applying  the  better  regulation 
principles.  The  initiative  is  the  result  of  an  extensive  and  continuous  dialogue  and 
consultation  with  all  major  stakeholders,  including  securities  regulators,  market 
participants  (issuers,  intermediaries  and  investors),  and  consumers.  It  is  built  upon 
the observations and analysis contained in the reports published by the Committee of 
European  Securities  Regulators  (CESR)8  and  by  the  European  Securities  Markets 
Expert  Group  (ESME)9.  The  initiative  and  the  impact  assessment  make  also  use  of 

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9 

See CSES study, p.52. 58% of the respondents to the survey think that the Prospectus Directive has had 
a positive impact in terms of investor protection and quality of information for investors. This has been 
confirmed in the context of the current financial crisis by the contributions received from stakeholders 
participating in the public consultation launched from 9 January to 10 March 2009.  
The exercise of the review of the Prospectus Directive is not a duplication of the work to be undertaken 
under  the  Commission's  Communication  on  Packaged  Retail  Investment  Products  because  this  will 
cover different types of retail investment products (such as unit-linked life insurance, investment funds, 
certain structured notes and certificates) which are outside the scope of the Prospectus Directive and do 
not benefit from the level of investor protection now granted by the Prospectus Directive.  
CESR  is  an  independent  advisory  group  to  the  European  Commission  composed  by  the  national 
supervisors of the EU securities markets. See the European Commission's Decision of 23 January 2009 
establishing the Committee of European Securities Regulators 2009/77/CE. OJ L25, 23.10.2009, p. 18). 
The role of CESR is to improve co-ordination among securities regulators, act as an advisory group to 
assist  the  EU  Commission  and  to  ensure  more  consistent  and  timely  day-to-day  implementation  of 
community legislation in the Member States.  
ESME  is  an  advisory  body  to  the  Commission,  composed  of  securities  markets  practitioners  and 
experts.  It  was  established  by  the  Commission  in  April  2006  and  operates  on  the  basis  of  the 
Commission Decision 2006/288/EC of 30 March 2006 setting up a European Securities Markets Expert 

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the findings of a study completed by the Centre for Strategy & Evaluation Services 
(CSES)10, and of the comments received from stakeholders participating in the public 
consultation launched from 9 January to 10 March 2009.  

2.1. 

CESR report  

The  CESR  report  on  the  supervisory  functioning  of  the  Prospectus  Directive11  was 
adopted and published in June 2007. The report is based on evidence gathered from 
market  participants  by  means  of  a  call  for  evidence  opened  in  November  2006, 
including an open hearing in January 2007, as well as on statistical data provided by 
regulators. The report contains a detailed summary and analysis of the 38 responses 
received.  It  aims  at  assessing  whether,  after  almost  two  years  in  operation,  the 
prospectus regime is achieving its objectives of investor protection, reduction in the 
cost of capital, and development of the single market for securities12.  

2.2. 

ESME report  

The  ESME  report  on  the  Prospectus  Directive13  was  published  in  September  2007 
and  reflects  the  views  and  practical  experience  of  ESME  members.  It  assesses  the 
effectiveness  of  the  Prospectus  Directive  in  achieving  its  primary  objectives  of 
investor  protection  and  market  efficiency;  identifies  significant  areas  where  the 
Directive  may  not  have  achieved  its  intended  effect,  or  where  lack  of  clarity  or 
flawed provisions are causing problems for market participants; and sets out detailed 
comments and suggestions on specific articles14.  

2.3. 

CSES study  

The "Study on the Impact of the Prospectus Regime on EU Financial Markets"15 was 
completed in June 2008 by the CSES. The study gives an overview of the impact of 
certain aspects of the Prospectus Directive on EU financial markets and supplements 
the  evidence  provided  in  the  CESR  and  ESME  reports.  It  also  addresses  some 
additional issues by providing qualitative and quantitative evidence. 16 

Group to provide legal and economic advice on the application of the EU securities Directives (OJ L 
106, 19.4.2006, p. 14–17). 
CSES is a private consultancy firm that carried out the study in response to a request for services in the 
context  of  the  Framework  Contract  for  Evaluation  and  Impact  Assessment  of  Internal  Market 
Directorate General activities.  
Ref. CESR/07-225, available at www.cesr-eu.org. 
See Annex I for a short summary of the CESR Report.  
The report is available at http://ec.europa.eu/internal_market/securities/esme/index_en.htm. 
See Annex I for a short summary of the ESME Report.  
The  study  is  available  at  http://ec.europa.eu/internal_market/securities/prospectus/index_en.htm.  The 
opinions  expressed  in  the  Study  by  CSES  do  not  necessarily  reflect  the  position  of  the  European 
Commission. CSES is a private firm that was contracted by the European Commission to undertake a 
fact finding exercise in relation to the review of the Prospectus Directive. The statements and opinions 
expressed in the study are the responsibility of the firm. The European Commission does not endorse 
the CSES report, but uses it as a source of information for the review of the Prospectus Directive.  
See Annex I for a short summary of the CSES Study.  

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12 
13 
14 
15 

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2.4. 

Public consultation  

On  9  January  2009,  the  European  Commission  launched  a  two  months  public 
consultation  on  the  review  of  the  Prospectus  Directive.  For  the  occasion  the 
Commission  services  made  available  to  the  public  a  consultation  document  with 
detailed  suggestions  for  changes  in  the  Directive,  together  with  a  background 
document  explaining  the  reasoning  for  those  changes  as  well  as  addressing  some 
further issues where no concrete legislative suggestions were made. The Commission 
services  received  121  contributions.  The  non-confidential  contributions  can  be 
consulted in the Commission website17.  

2.5. 

Targeted discussion with 30 EU associations  

On 12 March 2009, the Commission services invited 30 EU associations to express 
their  views  on  the  review  of  the  Prospectus  Directive18.  The  discussion  focused  on 
the  impact  of  the  suggestions  on  the  objectives  of  investor  protection,  market 
efficiency,  reduction  in  cost  of  capital,  and  development  of  the  single  market  for 
securities. These views have been taken into account in this impact assessment.  

2.6. 

Steering Group  

The Steering Group for this Impact Assessment was formed by representatives of a 
number  of  services  of  the  European  Commission,  namely  the  Directorate  General 
Internal  Market  and  Services,  the  Directorate  General  Competition,  the  Directorate 
General  Economic  and  Financial  Affairs,  the  Directorate  General  Enterprise,  the 
Directorate General for Health and Consumers, the Legal Service and the Secretariat 
General. This Group met three times, on 7 November 2008 and on 6 and 24 March 
2009. The contributions of the members of the Steering Group have been taken into 
account in the content and shape of this impact assessment. The Directorate General 
Justice,  Freedom  and  Security  and  the  Directorate  General  Employment,  Social 
Affairs and Equal Opportunities were invited to join the last meeting19.  

2.7. 

Impact Assessment Board  

DG  MARKT  services  met  the  Impact  Assessment  Board  on  27  May  2009.  The 
Board analysed this Impact Assessment and delivered its opinion on 29 May 2009. 
During  this  meeting  the  members  of  the  Board  provided  DG  Markt  services  with 
comments  to  improve  the  content  of  the  Impact  Assessment  that  led  to  some 
modifications of this final draft. These are the most relevant ones:  

–  The  analysis  in  the  report  should  be  placed  in  a  broader  context,  notably  with 
regard  to  the  reflections  following  the  financial  crisis  and  the  parallel  work  on 
product disclosure for packaged retail products;  

17 

18 
19 

See  http://ec.europa.eu/internal_market/securities/prospectus/index_en.htm.  See  Annex  II  for  a  short 
summary of the consultation results.  
See Annex III for the outline of the discussion and the list of participants.  
In accordance with the rules for the elaboration of impact assessments the minutes of the last meeting of 
the  steering  group  have  been  submitted  to  the  Impact  Assessment  Board  together  with  this  impact 
assessment. 

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–  The  case  for  additional  EU  legislative  action  should  be  better  substantiated  by 
analysing possible improvements in the implementation of the current framework 
and clarifying the roles currently played by Member States and by the Committee 
of European Securities Regulators;  

–  The analysis of the problems affecting small quoted companies and credit entities 

and the solutions proposed in the report should be strengthened.  

–  The  DG  MARKT  services  incorporated  in  this  final  draft  of  the  Impact 
Assessment Report the recommendations in the opinion of the Impact Assessment 
Board and the technical comments.  

3. 

PROBLEM DEFINITION 

After five years of its entry into force, the general assessment of the overall effect of 
the  Prospectus  Directive  is  positive.  A  general  assessment  of  the  Prospectus 
Directive  with  information  on  the  cost  of  producing  a  prospectus  can  be  found  in 
Annex IV. Despite the general success of the Prospectus Directive, there is evidence 
about  some  burdens  and  legal  uncertainties  that  increase  cost  and  create 
inefficiencies  hampering  the  process  of  fundraising  for  companies  and  financial 
intermediaries  in  the  EU.  These  problems  could  be  divided  in  two  groups:  (i) 
ineffectiveness derived from the lack of legal clarity, and (ii) situations of unjustified 
burdensome  requirements  imposed  to  companies  raising  funds  from  securities 
markets and to the intermediaries involved. These two groups of problems have been 
tackled  in  this  impact  assessment  bearing in  mind  the  importance  of  enhancing  the 
level  of  investor  protection  envisaged  in  the  Directive  and  ensuring  that  the 
information provided is sufficient and adequate to cover the needs of retail investors, 
particularly in the context of the current international financial crisis.  

3.1. 

Ineffectiveness derived from the lack of legal clarity 

There  are  situations  of  ineffectiveness  derived  from  the  lack  of  legal  clarity  or 
inconsistencies in the legal framework. The lack of legal certainty makes issuers and 
intermediaries liable for unexpected risks. This may increase the cost of legal advice 
and – in order to be protected against any contingency – issuers and intermediaries 
include  non-mandatory  disclosure  in  the  prospectus.  The  prospectus  therefore 
becomes longer and obscure for retail investors.  

3.1.1.  Obligations  in  case  of  placement  of  securities  through  financial  intermediaries 

(retail cascade) 

Article 3 requires the publication of a prospectus when securities are offered to the 
public  (paragraph  1)  and  when  they  are  admitted  to  trading  on  a  regulated  market 
(paragraph 3). Paragraph 2 sets out a number of circumstances in which an offer of 
securities to the public is exempt from the requirement to publish a prospectus. The 
lack  of  clarity  in  Article  3(2)  seems  to  be  causing  problems  for  issuers  in  some 
markets where securities are distributed by "retail cascade". A retail cascade typically 
occurs when debt securities are sold to investors (other than qualified investors) by 
intermediaries  and  not  directly  by  the  issuer  itself.  Respondents  to  the  various 
consultations have raised two points of uncertainty:  

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- 

it  is  unclear  how  the  requirement  to  produce  and  update  a  prospectus,  and  the 
provisions on responsibility and liability, should apply when securities are placed 
by  the  issuer  with  financial  intermediaries  and  are  subsequently,  over  a  period 
that may run to many months, sold on to retail investors, possibly through one or 
more additional tiers of intermediaries; and 

-  where a prospectus is produced, it is unclear how the disclosure requirements in 
Annex  V  of  the  Prospectus  Regulation  apply  to  the  multiple  sales  by 
intermediaries that make up the retail cascade20.  

The problem is only experienced by issuers in a limited number of EU markets. This 
may  reflect  established  differences  in  distribution  patterns  (i.e.  selling  by  retail 
cascade  may  be  common  in  some  markets  but  not  in  others);  or  it  may  arise  from 
differences in national implementation and application of the final indent of Article 
3(2) and in the way a prospectus is used by persons other than those responsible for 
drawing it up. However, in those markets where it is experienced, it may cause some 
issuers  to  limit  or  suspend  their  retail  debt  programmes21.  The  cost  incurred  in  the 
event of a retail cascade is highly dependent on the obligation imposed on financial 
intermediaries. It is not possible to arrive to any reliable estimate about the precise 
magnitude  of  this  problem  due  to  the  diversity  and  the  very  nature  of  the  markets. 
However, the cost of producing a non-equity prospectus is estimated to an average of 
€ 63,000 in the CSES study. 22  

3.1.2.  Divergent definitions for qualified investors and professional clients  

The  prospectus  regime  for  qualified  investors  is  different  from  the  regime  for 
professional  clients  set  out  in  MiFID23.  Article  2(1)(e)  of  the  Prospectus  Directive 
defines  qualified  investors  and  Article  3(2)(a)  exempts  offers  of  securities  to 
qualified  investors  from  the  requirement  of  a  prospectus.  The  Directive  allows 
certain natural persons and small and medium-sized enterprises to ask to be treated as 
qualified  investors,  and  under  Article  2(2)  it  requires  them  to  register  in  a  national 
register available to all issuers.  

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22 
23 

Particularly those under the heading "terms and conditions of the offer". See point 5 of Annex V of the 
Prospectus  Regulation  (Commission  Regulation  (EC)  No  809/2004  of  29  April  2004  implementing 
Directive 2003/71/EC of the European Parliament and of the Council as regards information contained 
in prospectuses as well as the format, incorporation by reference and publication of such prospectuses 
and dissemination of advertisements. OJ L 149, 30.4.2004, p.1) 
"For  instance,  the  German  competent  authority  considers  that  a  Prospectus  Directive  compliant 
Prospectus needs to be prepared the first time a public offer is made (i.e. the first time a product is sold 
that does not qualify for one of the exemptions within the Prospectus Directive) and that this prospectus 
is valid for all subsequent stages. The legal liability for the product sold at retail level would then lie 
with  the  issuer  of  the  Prospectus  Directive  compliant  prospectus.  In  the  UK,  on  the  other  hand,  the 
competent authority has so far considered that a Prospectus Directive compliant prospectus is required 
every time an offer to the public is made. Clearly, this interpretation of the Prospectus requirements is 
much  more  costly  for  issuers  and  this  may,  in  some  cases,  affect  the  development  of  the  retail  bond 
market." (CSES Report, p 62-63) 
See Figure 8 in Annex IV.  
Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in 
financial  instruments  amending  Council  Directives  85/611/EEC  and  93/6/EEC  and  Directive 
2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC. 
OJ L 145, 30.4.2004, p. 1-44. 

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Annex  II  of  MiFID  defines  natural  and  legal  persons  that  can  request  investment 
firms  to  provide  them  investment  services  under  the  special  treatment  reserved  to 
professional clients. The definition of professional clients and eligible counterparties 
in  MiFID  is  wider  than  the  definition  of  qualified  investors  in  the  Prospectus 
Directive.  Investment  firms  cannot  rely  on  their  categorization  for  a  private 
placement and thus benefit from the exemption in Article 3(2)(a) of the Prospectus 
Directive. This creates complexity and costs for investment firms in case of private 
placements: a firm has to double check whether its professional clients are registered 
as  qualified  investors.  Alternatively,  the  firm  could  opt  to  renounce  to  place 
securities within its professional clients. This situation restricts the issuers' ability to 
conduct  private  placements  with  some  classes  of  experienced  individual  investors. 
There  is  no  justification  in  terms  of  investor  protection  for  having  divergent 
in  both  Directives.  The  consultation 
definitions  for  sophisticated 
contributions have confirmed that investment firms are subject to stringent rules on 
the criteria and procedure for categorising a client as professional24.  

investors 

According to information provided by 27 national supervisors in the EEA, there is a 
limited use of the national registers (mainly in the form of a database). In 16 Member 
States, the registers have either not been set up or have 2 or less qualified investors 
registered25.  In  the  remaining  11  Member  States,  the  number  of  qualified  investors 
registered  in  the  national  registers  ranges  from  11  to  526,  with  an  average  of 
approximately 120. This indicates that the use of the register may be significant, at 
least  in  some  countries.  Moreover,  national  registers  play  an  important  role  for 
private placements facilitating offerings directly carried out by the issuer without the 
intervention  of  an  intermediary.  Issuers  can  use  the  register  to  offer  directly  their 
securities  to  registered  qualified  investors.  This  ensures  additional  transparency  in 
the  European  securities  markets  offering  an  alternative  to  the  broad  use  of  private 
placements through financial intermediaries.  

Data  provided  by  competent  authorities  indicate  that  in  Member  States  with 
relatively  active  registers  it  is  free  for  qualified  investors  to  register.  Similarly  a 
query in the register is free or comes at a modest cost26. Indirect costs may also fall 
upon  investors  and  investment  firms  in  providing  information  to  the  register  and 
accessing the register. However, it is likely that the most significant cost in relation 
to the divergent definition of qualified investors and professional clients is linked to 
the  inability  of  investment  firms  to  offer  securities  to  investors  that  are  considered 
professional under MIFID, but are not part of the register. The effect of an alignment 
of the definitions would depend on the increase of securities sold to investors on this 
basis and hence the monetary gain of the investors and the issuers due to the more 
efficient exchange of capital. This effect is very difficult to quantify. 

In  addition,  many  stakeholders  suggested  in  their  contributions  to  the  public 
consultation  that  in  case  the  two  definitions  are  aligned,  the  concept  of  large 
undertaking  defined  by  opposition  to  small  and  medium  size  enterprise  in  Article 

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25 
26 

See Section II in Annex II of the MiFID. 
See Figure 1 in Annex V.  
In the UK the fee to view the register is £25 + VAT for a one-off copy or £150 + VAT a year to receive 
monthly copy. In Finland a submission in electronic form, is free of charge. A submission on paper is 
free of charge for the first 30 pages, while additional pages cost 0.16€ per page. 

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2.1.(e)(iii) of the Prospectus Directive should be aligned with the same concept set in 
Annex II, point I(2) in MiFID. 

3.1.3.  Legal uncertainty in relation to the obligation of supplementing a prospectus and the 
exercise of the right of withdrawal (Article 16 of the Prospectus Directive)  

Article 16 regulates the publication of the supplement to the prospectus. Every time 
there  is  a  significant  new  factor,  material  mistake  or  inaccuracy  relating  to  the 
information  included  in  the  prospectus,  the  prospectus  has  to  be  supplemented. 
Investors  who  have  already  agreed  to  purchase  or  subscribe  for  the  securities  have 
the right to withdraw their acceptances. The wording of this Article leaves room for 
divergent  application  in  the  Member  States.  This  has  generated  an  intense  debate 
among  stakeholders.  Some  issues  require  clarification  in  order  to  ensure  legal 
certainty,  such  as,  for  instance,  the  meaning  of  "significant  new  factor"27  and  the 
question whether — in a situation where there is both an offer and an admission to 
trading  —  the  obligation  to  supplement  the  prospectus  ceases  once  the  trading 
begins, even if the public offer is still open.  

Concerns  have  been  raised  with  respect  to  cross-border  offers  in  relation  to  the 
period  for  the  exercise  of  the  right  of  withdrawal.  Every  time  a  prospectus  is 
supplemented in the course of an offer, the Directive grants investors the exercise of 
the right of withdrawal of their previous acceptances. Such a right can be exercised 
during a period no shorter than two days following the publication of the supplement. 
The time frame for the exercise of such a right is not harmonised and Member States 
have set different periods through national implementing legislation. The period for 
withdrawal  is  two  days  in  the  vast  majority  of  Member  States,  three  days  in  three 
Member States and it exceeds three days in three other Member States (see Figure 2 
in Annex V)28. Therefore, in the case of a cross-border offer, it is unclear whether the 
time frame set out in the national legislation of the home Member State of the issuer 
should  apply  or  those  stemming  from  the  legislation  of  each  of  the  Member  States 
where the offer or admission to trading takes place. The lack of common time frame 
increases therefore the cost of legal advice.  

3.1.4.  Lack of harmonised rules on liability 

Article  6(1)  of  the  Prospectus  Directive  requires  Member  States  to  ensure  that 
responsibility  for  the  information  given  in  a  prospectus  attaches  to  a  clearly 
identified  person  (normally  the  issuer).  Article  6(2)  furthermore  requires  Member 
States to ensure that their laws on civil liability apply to the person responsible for 
the  prospectus.  Article  6(2)  does  not,  however,  provide  for  a  harmonised  liability 
regime under the Prospectus Directive. It is often argued that the same information is 
subject to different liability regimes, depending on the home Member State where the 
prospectus  is  approved,  and  possibly  also  on  the  Member  State  where  it  is  being 
used, in case, under the relevant conflict of law rules, the host Member State's regime 
for  civil  liability  applies29.  There  is  divergent  intensity  in  the  various  liability 

27 

28 
29 

In this regard, ESME noted that there should be an element of proportionality in the application of this 
rule, and the withdrawal right should not be available, for instance, for positive news. 
See Figure 2 in Annex V.  
See, for instance, section 3.6 of the ESME report. 

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regimes. Issuers may be liable to unexpected risks. This may create a barrier to the 
effective use of the passport.  

3.1.5.  Functioning of the summary of the prospectus  

Article 5.2 requires the prospectus to include a summary that "in a brief manner and 
in non-technical language, convey the essential characteristics and risks associated 
with the issuer, any guarantor and the securities".  

Due to the length and complexity of prospectuses, the summary is in practice a key 
element for retail investors in their investment decisions.  

However,  the  primary  aim  of  the  Prospectus  Directive  of  informing  investors  may 
actually  be  hampered  by  the  limitation  imposed  by  recital  21  on  the  length  of  the 
summary to 2.500 words. In fact, this limitation may prevent issuers from including 
relevant information in a more comprehensible way. Therefore many respondents to 
the  public  consultation  highlighted  that  the  summary  should  not  be  restricted  to  a 
prescribed length, but should enable issuers to provide meaningful information.  

On  the  other  hand,  it  is  questionable  whether  all  items  in  the  indicative  Annexes  I 
and IV of the Prospectus Directive are relevant to retail investors and are appropriate 
to enable them to make an investment decision (for example, information on research 
and development, patents and licences).  

Finally,  there  are  significant  inconsistencies  in  the  form  and  the  content  of  the 
summary  disclosures  for  broadly  comparable  products.  This  is  the  case  for  the 
structured  securities  in  the  Prospectus  Directive,  the  simplified  prospectus  of  the 
investment  funds regulated  by the  UCITS  Directive,  the  disclosure  requirements  of 
the Insurance Mediation Directive for unit-linked life insurance policies30. There are 
even  other  products  that  lack  disclosure  rules  in  Community  Law  (like  structured 
term  deposits).  These  inconsistencies  impede  the  comparability  of  products  which 
have different legal forms but which may compete for the same retail savings.31  

3.2. 

Situations of burdensome requirements imposed on companies raising capital in 
securities markets and to the intermediaries involved.  

3.2.1.  Divergent regime for Employee Shares Schemes 

Article 4 of the Prospectus Directive contains a series of exemptions which remove 
the  need  to  publish  a  prospectus  that  would  otherwise  apply  where  securities  are 
offered  to  the  public  (paragraph  1)  or  admitted  to  trading  on  a  regulated  market 
(paragraph  2).  The  exemptions  cover  a  wide  range  of  different  situations,  varying 
from  securities  offered  free  of  charge,  to  securities  offered  in  connection  with  a 
merger  or  a  takeover.  Particularly  relevant  is  the  exemption  dealing  with  securities 
offered to employees.  

30 

31 

Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance 
mediation. OJ L 9, 15.1.2003, p. 3–10  
COM (2009) 204 of April 30, 2009. 

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Offers of transferable securities to employees are considered to be offers of securities 
to the public in line with the definition in Article 2(1)(d) of the Prospectus Directive. 
A prospectus is therefore required unless an exemption applies. Article 4(1)(e) grants 
an  exemption  specifically  for  offers  of  securities  to  employees,  provided  that  two 
conditions  are  met:  (i)  the  issuer  must  have  securities  admitted  to  trading  on  a 
regulated  market;  and  (ii)  a  document  must  be  available  containing  information  on 
the number and nature of the securities and the reason for and the details of the offer.  

This  exemption  does  not  apply  equally  to  all  employees,  but  creates  a  less 
advantageous  situation  for  the  employees  of  two  categories  of  companies,  namely 
third country companies that do not have a listing on a regulated market within the 
EU,  and  EU  non-listed  companies  or  EU  companies  that  have  securities  traded  on 
EU "exchange-regulated" markets.  

The exemption is not available to third country issuers that do not have a listing on a 
regulated market because the concept of regulated market is by definition limited to 
the  EU,  as  provided  for  in  Article  4(1)(14)  of  MiFID.  In  addition,  it  is  equally 
impossible for EU non-listed companies or EU companies that have securities traded 
on  EU  exchange-regulated  markets  (i.e.  AIM  in  London)  to  satisfy  this  condition, 
because  once  again  they  are  not  listed  on  a  regulated  market  in  line  with  the 
applicable MiFID definition.  

Employee  share  schemes  run  by  all  such  companies  are  exempted  from  the 
obligation  to  publish  a  prospectus  if  there  are  less  than  one  hundred  scheme 
participants  in  a  particular  Member  State32.  This  may  generate  the  perverse  effect 
that  executive  share  incentive  plans  are  generally  exempted,  while  "all  employees" 
schemes  require  a  (relatively  costly)  prospectus.  The  Directive  could  therefore  be 
criticised  as  preserving  the  interests  of  directors  while  penalising  ordinary 
employees.  

Views  have  been  expressed  that,  with  its  current  structure,  the  exemption  fails  to 
address the concern expressed by the Commission in its 2002 Communication on a 
framework  for  the  promotion  of  employee  financial  participation33.  EU  employees 
working for non-EU companies or companies listed in a non-regulated EU market or 
EU non-listed companies should not be penalised in comparison to EU employees of 
companies listed on an EU regulated market. This could lead to unequal employment 
conditions  for  staff  in  Europe  as  compared  to  outside  Europe  and  have  a  negative 
effect on competitiveness of firms in the EU and wealth creation and accumulation 
by employees.  

A  2006  survey  for  Linklaters  on  employee  share  schemes  referred  to  the  CSES 
study34 highlighted the following findings:  

–  Some  20%  of  respondents  to  the  survey  were  considering  changing  or 

withdrawing their employee share schemes; 

32 

33 
34 

If there are less than 100 scheme participants by Member State the issuer will not be obliged to produce 
a prospectus in accordance with Article 3.2(b) of the Prospectus Directive. 
COM(2002) 364. 
CSES study, pages 41 and 42. 

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–  One  third  reported  “serious  inconsistencies”  among  states  in  application  of  the 
Prospectus Directive to employee share schemes. Some of them have withdrawn 
schemes in those member states that present significant legal problems, resulting 
in a non-harmonised EU employment environment for their staff; 

–  90% considered that the EU should accept non-EU listing document as a base for 

offering employee share schemes.  

An updated survey by Linklaters in June 200835 shows that some global employers 
have removed or reduced their employee share schemes and others are in the process 
of doing so.  

Six Member States have approved prospectuses for the purpose of ESS in the period 
2006  to  2008,  as  specified  in  Figure  3  in  Annex  V36.  Accordingly,  the  recorded 
number of prospectuses approved that could have had benefit from an exemption in 
that period was at least 114. The vast majority (at least 102) fall in the category Non-
EU listed companies. Based on the estimated cost of producing a prospectus ranging 
from € 480,000 to € 720,000 (excluding insura nce of comfort letter) a conservative 
estimate  of  the  annual  cost  savings  on  European  level  is  €  18  million.  In  addition, 
stakeholders often  mention that the costs associated  with producing a prospectus is 
an important and sometimes decisive factor when assessing the feasibility of offering 
ESS.  

A survey conducted by Baker & McKenzie LLP offers information on the operation 
of  ESS  within  75  companies.  Most  of  the  companies  are  non-EU  listed  and  many 
have chosen to rely on the exemptions provided for offers addressed to less than 100 
natural  or  legal  persons  and  for  offers  with  a  total  consideration  of  less  than  €  2.5 
million within a period of 12 months. This verifies that ESS may be artificially held 
within  thresholds  specified  in  the  Prospectus  Directive  to  avoid  the  obligation  of 
producing a prospectus. 

3.2.2.  Overlap of transparency obligations (Article 10 of the Prospectus Directive)  

Article  10  of  the  Prospectus  Directive  requires  issuers  with  listed  securities  to 
provide annually a document containing or referring to all information published in 
the twelve months preceding the issuance of the prospectus37.  

The  requirement  imposed  by  Article  10  of  the  Prospectus  Directive  has  been 
superseded  by  the  Transparency  Directive38.  This  directive  provides  for  a 

35 

36 
37 

How  the  EU’s  Prospectus  Directive  is  Adversely  Affecting  Employee  Share  Plans.  Senior  executives 
from 65 global firms were interviewed. 
See Figure 3 in Annex V.  
In  its  opinion  of  18  September  2008  the  High  Level  Group  of  Independent  Stakeholders  on 
Administrative Burdens advised the European Commission to consider the suppression of Article 10 of 
the Prospectus Directive. The deletion of Articles 10, 14.7 (see section 3.2.6) and 18 (see section 3.2.7) 
were  suggested  to  the  "Stoiber  group"  by  the  Dutch  Ministry  of  Finance,  in  association  with  the 
representatives  of  the  Dutch  financial  sector  (Dutch  Banking  Association,  Association  of  Dutch 
Insurers, Dutch Fund and Asset Management Association, Dutch Association of Investment Firms) and 
the national financial supervisors (De Dutch Central Bank and the Financial Markets Authority). See: 
http://ec.europa.eu/enterprise/admin-burdens-
reduction/docs/OpinionOfflineSuggestions080918_Final.pdf  

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comprehensive  regime  for  the  disclosure  of  information  about  issuers  with  listed 
securities,  comprising  the  periodic  financial  information  (annual  and  half-yearly 
financial  reports,  interim  management  statement)  and  the  ongoing  information 
(market  abuse  disclosures  –  i.e.  inside  information,  information  about  major 
holdings,  etc).  This  information  has  to  be  stored  in  the  officially  appointed 
mechanism  set  in  Article  21.2  of  the  Transparency  Directive  and  is  publicly 
available. The provisions of the Transparency Directive have made the requirement 
of Article 10 redundant, generating a duplication of the same requirement for issuers. 
There is no added value in terms of investor protection in the obligation of Article 10 
of the Prospectus Directive. 

The  cost  for  the  issuer  of  fulfilling  this  obligation  could  amount  from  2,500  to  a 
maximum of 5,000 € per year 39. At least 12,000 companies are listed on a regulated 
market  in  Europe40  and  are  consequently  subject  to  this  obligation.  A  conservative 
estimate of the annual costs saved by removing the obligation would be € 30 million 
per year.  

3.2.3.  Restriction for the choice of home Member State for the issuers of debt 

Article 2(1)(m)(ii) imposes a restriction on the choice of the home Member State for 
issues of non-equity securities. The choice is available only for debt securities with a 
denomination  above  €1.000  (issuers  could  choose  supervisor  among  those  Member 
States  where  the  issuer  has  its  registered  office  or  where  the  debt  is  going  to  be 
admitted to trading on a regulated market or where the debt is offered to the public). 
Below this threshold the home Member State mandated by the Directive is the one 
where the issuer has its registered office. It is argued that this restriction is causing 
practical problems for issuers, either because it obliges them to maintain additional 
debt issuance programmes41 or because the threshold does not accommodate certain 
structured products which are not denominated (i.e. certificates)42.  

38 

39 

40 

41 

42 

Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the 
harmonisation of transparency requirements in relation to information about issuers whose securities are 
admitted  to  trading  on  a  regulated  market  and  amending  Directive  2001/34/EC,  OJ  L  390  of 
31.12.2004, p.38. The Transparency Directive entered into force on 20 January 2005, and was due to be 
transposed by all Member States by 20 January 2007.  
The  document  required  by  Article  10  of  the  Prospectus  Directive  is  more  or  less  a  collection  and 
compilation of already published information. The number of employees assigned to the preparation of 
this document is medium. However, given the possible legal consequences in case of non-compliance, a 
senior officer is in charge of the control. Overall, the preparation time for a company should not exceed 
two days and the cost varies from about €2,500 to €5,000. Dr. Wolfgang Gerhardt, member of ESME, 
provided  this  cost  estimation  for  Germany  in  his  reply  to  a  questionnaire  sent  by  the  Commission 
services for the elaboration of this impact assessment. According to Dr. Gerhardt, this cost estimation is 
can be considered a reasonable approximation of the average cost across all EEA member countries.  
This figure is calculated based on the number of companies with listed shares (12,299), as provided by 
FESE  monthly  statistics,  February  2009,  and  the  estimated  annual  cost  of  meeting  the  obligation 
(€2,500). Some companies may not have shares traded  on a regulated market but only other securities, 
such as bonds. These companies should also be taken into account. However, the number of companies 
with listed shares is the most reliable figure available. 
The threshold is causing practical problems to issuers of non-equity securities who may need to draw up 
several prospectuses, i.e. one to cover a debt issuance program within the threshold and another for the 
remaining debt issuance activities which might exceed that threshold (see the ESME report, p.13). 
Only  issuers  of  securities  that  are  denominated  can  opt  to  benefit  from  a  choice  reserved  to  offers 
denominated above 1.000€. See ESME report, section 3.2 and Annex. See also CSES study, section 4.6. 

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3.2.4.  Burdensome disclosure requirements in some cases 

3.2.4.1.  Rights issues43  

Stakeholders  have  expressed  concerns  in  relation  to  the  obligation  to  publish  a  full 
prospectus for rights issues44 or "open offers"45, notably because of the fact that the 
cost  for  producing  a  full  prospectus  for  this  type  of  offer  might  not  be  justified. 
Indeed,  these  are  share  offerings  to  existing  shareholders;  stakeholders  claim  that 
these investors do not need the special protection provided for by a full prospectus as 
they are familiar with and confident in the company in which they have invested in 
the past. The cost of producing a prospectus for rights issues is comparable with the 
general estimate provided for the production of a prospectus. This implies a cost in 
the range of € 480,000 to € 720,000, excludi

ng insurance of comfort letter46. 

3.2.4.2.  Small quoted companies47  

Companies  with  reduced  market  capitalization  have  expressed  their  concerns  about 
the  low  level  of  the  threshold  relating  to  the  exemption  for  offers  with  a  total 
consideration  below  €2.5  million  set  in  Article  1(2)(h)  of  the  Prospectus  Directive. 
Indeed they claim that the threshold is too low relatively to their financial needs and 
that it creates difficulties when raising capital on the financial markets because from 
a  cost-benefit  perspective  there  is  no  incentive  to  raise  capital  below  it,  whereas 
above it they incur the costs of producing a full prospectus, which may be relatively 
costly given their size and the amount they raise. This forces companies with small 
market  capitalization  to  raise  funds  mainly  through  private  placements.  Therefore, 
given  the  size  of  companies  with  small  market  capitalization  and  the  amount  they 
generally  raise  on  the  financial  markets,  it  seems  that  the  costs  of  producing  a  full 
prospectus are always prohibitive and that the disclosure requirements for such kind 
of issuers might be alleviated where excessive. Small credit institutions 

In accordance with Article 1.2(j) of the Prospectus Directive, certain offers of non-
equity  securities  issued  by  credit  institutions  are  excluded  from  the  scope  of  the 
Directive48.  The  total  consideration  of  the  offer  should  amount  to  less  than  €50 
million  calculated  over  a  period  of  12  months.  Offers  included  in  the  scope  of  the 
Prospectus Directive require the publication of a prospectus. Though the wording of 
this  Article  only  refers  to  the  size  of  the  offers,  the  exemption  in  Article  1.2(j)  is 

43 
44 

45  

46 
47 

48 

For the number of rights issues in the EU see Figure 4 in Annex V.  
A rights issue is a pre-emptive issue like an open offer, but it allows the existing shareholder to sell the 
right to subscribe for shares.  
In  the  UK,  the  expression  "open  offer"  encompasses  placings  with  clawback  where  shares  are 
conditionally placed and then offered to existing shareholders via a clawback. Existing shareholders are 
offered shares in proportion to their existing holdings (the pre-emptive right). Those shares not taken up 
by shareholders are usually taken by placees. 
See the cost breakdown of producing a prospectus in Annex IV. 
There  is  no  legal  or  academic  definition  of  "small  quoted  company.  It  could  be  conventionally 
considered that a "small cap" is a company with less than 500 Million € of market capitalization. 
The  article  refers  to  non-equity  securities  issued  in  a  continuous  or  repeated  manner  by  credit 
institutions where the total consideration of the offer is less than EUR 50 000 000, which limit shall be 
calculated  over  a  period  of  12  months,  provided  that  these  securities:  (i)  are  not  subordinated, 
convertible or exchangeable; (ii) do not give a right to subscribe to or acquire other types of securities 
and that they are not linked to a derivative instrument. 

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designed  for  small  credit  institutions49.  Representatives  of  small  credit  institutions 
consider  that  in  practice  the  limit  of  €50  million  is  too  low  for  the  annual  issuing 
volume and, as a consequence, small banks cannot fully benefit from this exemption. 
The  case  is  similar  as  the  one  of  the  small  quoted  companies  mentioned  in  the 
previous section. Below the limit of €50 milli on they claim that the threshold is too 
low  relatively  to  their  financial  needs  and  that  it  creates  difficulties  when  raising 
capital  on  the  financial  markets  because  from  a  cost-benefit  perspective  it  is  not 
worth to raise capital below it, whereas above it they incur the costs of producing a 
full  prospectus,  which  may  be  prohibitively  costly  given  their  size  and  the  amount 
they raise. This forces small credit institutions to raise funds mainly through private 
placements. Therefore, given the size of small credit institutions and the amount they 
generally  raise  on  the  financial  markets,  it  seems  that  the  costs  of  producing  a  full 
prospectus are always prohibitive and that the disclosure requirements for such kind 
of issuers might be alleviated where excessive. 

3.2.5.  Burdensome disclosures for government guarantee schemes 

In the context of the current financial crisis Member States have decided to guarantee 
the issuance of debt by banks. Due to the novelty of this scheme, uncertainties have 
been  reported  on  the  legal  regime  applicable  to  this  type  of  offers  concerning  the 
information to be provided in the prospectus in relation to the State guarantor.  

Article  5.1  of  the  Prospectus  Directive  sets  out  that  the  prospectus  has  to  include 
information  about  the  issuer,  the  securities  and  the  guarantor  of  the  offer.  In 
accordance  with  the  Annex  VI  of  the  Prospectus  Regulation,  when  an  offer  of 
securities  is  guaranteed  by  a  third  party,  the  issuer  has  to  give  in  the  prospectus 
information about the nature and scope of the guarantee and about the guarantor. In 
particular,  the  guarantor  of  the  offer  "must disclose  information  about  itself  as  if  it 
were the issuer of that same type of security that is the subject of the guarantee". In 
case  the  guarantor  is  a  State,  the  information  to  be  provided  in  the  prospectus  is 
contained in Annex XVI of the Prospectus Regulation. 

In  accordance  with  Article  1(2)(d),  the  Prospectus  Directive  does  not  apply  to 
securities unconditionally and irrevocably guaranteed by a Member State. However, 
in  accordance  with  Article  1(3)  of  the  Directive,  the  issuers  benefiting  from  the 
guarantee of a State  could  opt to  produce a prospectus in  order to benefit from the 
passport  mechanism  and  make  a  multinational  offer  in  the  EU.  In  this  case  the 
prospectus  must  comply  with  the  disclosure  requirements  mentioned  above.  The 
reason  for  the  exemption  foreseen  in  Article  1(2)(d)  of  the  Prospectus  Directive  is 
that  the  public  has  constant  access  to  sufficient  information  on  the  solvency  and 
economic status of the States50. Information on public finances of Member States are 
already  public,  thus  there  is  no  added  value  for  investors  in  requiring  the  issuer  to 
include in the prospectus information about the State required by Annex XVI of the 
Prospectus Regulation.  

49 

50 

The size of offering programs used by the big credit institutions for funding purposes is usually €10 – 
15 billion.  
Among  other  sources,  Eurostat  provides  information  about  the  solvency  and  economic  status  of  the 
States. See:  
http://epp.eurostat.ec.europa.eu/portal/page?_pageid=2373,47631312,2373_58674332&_dad=portal&_
schema=PORTAL  

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3.2.6.  Printed form (paper form) of the prospectus  

Article 14 of the Prospectus Directive lays down the rules concerning the publication 
of the prospectus. Paragraph 2 of Article 14 permits the publication of the prospectus 
either in printed or electronic form. In case the prospectus is published in electronic 
form,  paragraph  7  of  this  article  grants  the  right  of  the  investor  to  receive  a  paper 
copy  of  the  prospectus.  Upon  the  request  of  the  investor  to  the  offeror,  the  person 
asking for the admission to trading or the financial intermediaries placing or selling 
the securities have to deliver a paper copy of the prospectus free of charge.  

In  its  opinion  of  18  September  2008  the  High  Level  Group  of  Independent 
Stakeholders  on  Administrative  Burdens  advised  the  European  Commission  to 
consider  the  suppression  of  this  obligation.  A  group  of  industry  stakeholders 
suggested  that  this  obligation  would  have  no  added  value  and  advocated  for  the 
deletion  of  obligations  to  provide  documents  and  information  on  paper.  It  was 
considered  that  the  electronic  provision  of  information  would  be  sufficient  for 
effective supervision.  

3.2.7.  Translation of the summary of the prospectus  

The rules for the functioning of the passport of the prospectus for cross border offers 
and  admission  to  trading  are  laid  down  in  Articles  17  and  18  of  the  Prospectus 
Directive.  In  accordance  with  Article  17  a  prospectus  approved  by  the  authority  of 
one Member State (home competent authority) is valid for the rest of the Members 
States  included  in  the  scope  of  a  cross  border  offer  or  admission  to  trading  (host 
competent authorities).  

The only condition for the acceptance of the prospectus is stipulated in Article 18.1: 
the home competent authority has to certify to the host competent authorities that the 
prospectus  has  been  drawn  up  in  accordance  with  the  Prospectus  Directive.  This 
notification has to be accompanied by a translation of the summary of the prospectus 
into  the  language  accepted  by  the  host  Member  States.  The  translations  of  the 
summary  have  to  be  produced  under  the  responsibility  of  the  issuer  or  the  person 
responsible for drawing up the prospectus.  

In  its  opinion  of  18  September  2008  the  High  Level  Group  of  Independent 
Stakeholders  on  Administrative  Burdens  advised  the  European  Commission  to 
consider the suppression of the obligation to provide the translation of the summary. 
A  group  of  stakeholders  considered  that  this  requirement  was  unnecessary  and 
advocated  for  the  harmonisation  of  the  language  regime  for  the  whole  internal 
market.  

4. 

THE BASELINE SCENARIO, SUBSIDIARITY AND PROPORTIONALITY 

The  problems  detected  in  section  3  stem  from  EU  legislation  and  can  only  be 
addressed  through  changes  in  EU  legislation.  If  no  action  is  taken  through  the 
modification  of  the  Prospectus  Directive,  the  problems  deriving  from  the  EU 
legislation  may  continue  to  generate  legal  uncertainty  which  might  find  only 
temporary and partial clarification through clarification, coordination and convergent 

EN 

17 

   EN 

 
application  by  CESR51.  CESR  is  indeed  an  independent  advisory  group  to  the 
European  Commission  composed  by  the  national  supervisors  of  the  EU  securities 
markets.  At  the  same  time,  its  role  is  to  improve  co-ordination  among  securities 
regulators, act as an advisory group to assist the EU Commission and to ensure more 
consistent  and  timely  day-to-day  implementation  of  community  legislation  in  the 
Member  States52.  However,  despite  the  fact  that  such  an  "improved  policy 
implementation" through CESR and the national supervisors of the Member States is 
analysed, when appropriate, among the possible policy options of this report, this is 
not  the  most  effective  solution  to  the  problems  identified  because  the  legal 
uncertainty derives from the existing EU legislation and it may lead to inconsistent or 
conflicting  implementation  by  national  competent  authorities.  Thus  it  can  only  be 
addressed at this same level. In addition, the review of the Prospectus Directive aims 
at  increasing  effectiveness  and  reducing  the  administrative  burdens  for  companies 
raising  capital  in  the  EU.  Taking  into  account  that  offers  of  securities  could  have 
cross  border  dimension  in  the  EU  this  exercise  will  be  better  addressed  in  an  EU 
legal text. A consistent approach is essential in order to avoid regulatory arbitrage in 
the  Member  States  and  competition  distortion  in  the  various  markets.  The 
amendment  of  the  Prospectus  Directive  proposed  by  the  European  Commission 
respects therefore the principle of subsidiarity.  

In its conclusions in March 2000, the Lisbon European Council emphasised that in order to accelerate 
completion of the internal market for financial services, steps should be taken to set a tight timetable so 
that the Financial Services Action Plan (FSAP) is implemented by 2005. In this context, the Committee 
of Wise Men (chaired by A. Lamfalussy) in February 2001 proposed a new legislative approach, which 
was endorsed in a Resolution of the Stockholm European Council in March 2001 and by the European 
Parliament in a Resolution adopted on 5 February 2002. The core of this process centres around a new 4 
level  legislative  approach:  Level  1:  Level  1  is  traditional  EU  decision  making,  i.e.  Directives  or 
Regulations  proposed  by  the  Commission  containing  framework  principles,  reflecting  key  political 
choices  to be co-decided  by the  EP  and  the  Council,  with  implementing  powers being  delegated  to  a 
second  level.  Level  2:  Technical  implementing  measures  to  render  the  level  1  principles  operational, 
can  be  adopted,  adapted  and  updated  through  comitology:  they  are  adopted  by  the  Commission  after 
having been submitted to the European Securities Committee (ESC) and the European Parliament for 
their  opinion.  The  ESC  is  a  comitology  committee;  however,  a  part  from  its  legislative  capacity,  the 
ESC  is  also  responsible  for  assisting  the  Commission  with  respect  to  policy  issues  in  the  field  of 
securities.  Upon  request  in  the  form  of  mandates,  the  Committee  of  European  Securities  Regulators 
(CESR),  an  independent  advisory  group,  can  advise  the  Commission  on  the  technical  implementing 
details to be included in level 2 legislation. Both the ESC and CESR are high level Committees. Level 
3:  In  order  to  facilitate  coherent  implementation  and  uniform  application  of  EU  legislation  by  the 
Member  States  CESR  may  adopt  non-binding  guidelines  (level  3).  CESR  can  also  adopt  common 
standards regarding matters not covered by EU legislation (but these standards have to be compatible 
with  level  1  and  2  legislation).  Level  4:  Enforcement:  This  refers  to  monitoring  correctness  of 
implementation  of  EU  legislation  into  national  legislation  by  the  Commission  and,  in  case  of  non-
conformity,  launching  of  infringement  proceedings.  In  order  to  ensure  coherence  in  the  field  of 
financial services, this approach was extended in 2004 to include UCITS (Undertakings for Collective 
Instruments  in  Transferable  Securities)  within  the  CESR/ESC  process  and  set  up  similar  Lamfalussy 
structures for banking and insurance. With respect to UCITS, extension of the scope of the activities of 
both the ESC and CESR has been provided to also cover these products, whereas in the field of banking 
and insurance four new level 2 and 3 committees have been created: At level 2 the new organisations 
are  the  European  Banking  Committee  (EBC)  and  the European  Insurance  and  Occupational  Pensions 
Committee  (EIOPC);  at  level  3  the  Committee  of  European  Banking  Supervisors  (CEBS)  and  the 
Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS).  
An "improved policy implementation" would certainly be more effective under the European financial 
supervision regime of the Communication of 27 May 2009 if an enforced coordination role is attributed 
to CESR. COM (2009) 252 of May 27, 2009.  

18 

   EN 

51 

52 

EN 

 
                                                 
The  European  Commission  considers  that  the  solutions  proposed  respect  the 
principle  of  proportionality:  all  solutions  have  been  drafted  bearing  in  mind  cost-
efficiency; the calculations and estimates that are brought forward in section 8.3 and 
Annex  VI  advocate  that  the  objectives  in  terms  of  effective  product  disclosure  and 
investor protection are fully respected while important cost savings and reduction of 
administrative  burden  are  possible.  The  analysis  of  the  impact  of  the  solutions  on 
stakeholders  presented  in  sections  8.1  and  8.2  shows  that  the  changes  proposed  by 
the European Commission are likely to have positive impact on investors, companies 
intermediaries,  shareholders  and  small  and  medium  size 
issuing  securities, 
enterprises. Concerning this last category of stakeholders, the European Commission 
proposes  the  introduction  of  a  new  "proportionate"  prospectus  in  order  to  avoid 
excessive burden and costs (see sections 7.2.4, 7.2.5 and 7.2.6) 

5. 

OBJECTIVES 

The  review  of  the  Prospectus  Directive  aims  at  (i)  increasing  legal  clarity  and 
effectiveness  in  the  prospectus  regime;  and  (ii)  reducing  the  burdens  for  EU 
companies  when  raising  capital  in  the  European  securities  markets.  These  two 
objectives  are  consistent  with  the  overall  objective  of  maintaining  and,  when 
necessary, enhancing the level of investor protection envisaged in the Directive and 
ensuring that the information provided is sufficient and adequate to cover the needs 
of  retail  investors,  particularly  in  the  context  of  the  current  international  financial 
crisis.  

5.1. 

Increase legal clarity and effectiveness in the prospectus regime 

Within  the  first  objective,  the  suggestions  of  the  Commission  seek  to  achieve  the 
following sub-objectives:  

–  Clarify  the  obligations  in  case  of  placement  of  securities  through  financial 

intermediaries (retail cascade);  

–  Align the definitions for qualified investors and professional clients;  

–  Provide  legal  certainty  in  relation  to  the  exercise  of  the  right  of  withdrawal 

(Article 16 of the Prospectus Directive);  

–  Clarify the rules on liability;  

–  Improve the functioning of the Prospectus.  

5.2. 

Eliminate  the  disproportionate  requirements  for  EU  companies  when  raising 
capital in the European securities markets and to the intermediaries involved. 

Within the second objective, the suggestions of the Commission seek to achieve the 
following sub-objectives:  

–  Provide a level paying field for Employee Shares Schemes in the EU;  

–  Avoid the overlapping disclosure obligation of Article 10 of the Prospectus;  

EN 

19 

   EN 

 
–  Provide the choice of the home Member State for issuers of debt; 

–  Provide  proportionate  disclosure  requirements  for  right  issues,  small  quoted 

companies and small credit institutions;  

–  Provide proportionate disclosures for Government Guarantee Schemes.  

6. 

POLICY OPTIONS 

With  the  intention  to  meet  the  objectives  set  out  in  the  previous  section,  the 
Commission  services  have  analysed  different  policy  options53.  The  first  section 
reflects the most relevant policy options that have been considered in relation to the 
increase  of  effectiveness  in  the  prospectus  regime.  The  second  section  contains  the 
list  of  policy  options  that  have  been  analysed  in  relation  to  the  situations  of 
unjustified  burdensome  requirements  imposed  to  companies  raising  funding  in 
securities markets and to the intermediaries involved.  

6.1. 

Policy options for the increase of legal clarity and effectiveness in the prospectus 
regime.  

6.1.1.  Policy  options  in  case  of  subsequent  placements  of  securities  through  financial 

intermediaries (retail cascade).  

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Clarify  that  the  further  resale  of  the  securities  to  retail 
investors through financial intermediaries following the initial issue does 
not qualify as a public offering of the initial issuer54.  

(3)  Option 3 – Amend Article 3(2) of the Prospectus Directive to clarify that 
whenever  an  intermediary  offers  securities  to  the  public  (i.e.,  makes  a 
non-exempted  offer)  the  intermediary  should  put  at  the  disposal  of  the 
public a valid prospectus.  

6.1.2.  Policy  option  in  relation  to  the  divergent  definitions  for  qualified  investors  and 

professional clients  

(1)  Option 1 – No action at EU level.  

(4)  Option  2  –  Amend  the  Directive  and  align  the  definitions  of  qualified 
investors  in  Article  2.1(e)(i)  and  (ii)  of  the  Prospectus  Directive  and  of 
professional clients and eligible counterparties in MiFID.  

(5)  Option 3 – In addition to the alignment proposed in option 2, the system 
of central registers could be removed from the Prospectus Directive.  

53  
54 

For a full description of the policy options see Annex VII.  
This option was suggested by ESME. See ESME report on the Prospectus Directive, September 2007, 
p. 15. 

EN 

20 

   EN 

 
                                                 
6.1.3.  Policy  options  in  relation  to  the  obligation  of  supplementing  a  prospectus  and  the 
exercise of the right of withdrawal (Article 16 of the Prospectus Directive) 

(1)  Option 1 – No action at EU level.  

(2)  Option 2 – Harmonize the different periods of time for the exercise of the 

right of withdrawal.  

(6)  Option  3  –  Harmonize  the  different  periods  of  time  with  possibility  for 

issuer to grant longer time.  

(7)  Option  4  -  Harmonize  the  different  periods  of  time  at  the  settlement  of 

the securities55.  

6.1.4.  Policy options in relation to the lack of harmonised rules on liability 

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Harmonize  the  liability  standards  applicable  to  the 

prospectus.  

6.1.5.  Policy options in relation to the summary of the prospectus  

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Provide  retail  investors  with  appropriate  information  in  an 
easily analyzable and comprehensible form in order to make investment 
decisions in full knowledge of facts.  

6.2. 

Situations  of  disproportionate  or  burdensome  requirements  imposed  to 
companies  raising  capital  in  securities  markets  and  to  the  intermediaries 
involved.  

6.2.1.  Policy  options  for  bringing  forward  a  level  playing  field  for  Employee  Shares 

Schemes  

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Amend  the  Directive  and  extend  the  exemption  in  Article 
4.1(e)  to  the  employee  share  schemes  launched  by  companies  that  are 
listed in a non-regulated market (third country and EU issuers).  

(3)  Option  3  –  Amend  the  Directive  and  extend  the  exemption  in  Article 
4.1.(e) including not only the employee share schemes of companies that 
are  listed  in  a  non-regulated  market  ("exchange-regulated"  market  or 

55 

The  settlement  of  securities  is  the  process  whereby  securities  or  interests  in  securities  are  delivered, 
usually against payment, to fulfil contractual obligations, such as those arising under securities trades. 
This  involves  the  delivery  of  securities  to  perform  contractual  delivery  obligations.  It  usually  also 
involves  the  corresponding  payment  of  a  purchase  price.  Usually  settlement  is  preceded  by  trading, 
which involves entering into contracts of sale and purchase. 

EN 

21 

   EN 

 
                                                 
third  country  securities  markets)  as  proposed  in  option  2,  but  also 
encompass companies that are not listed.  

6.2.2.  Policy options in relation to the overlapping of transparency obligations (Article 10 

of the Prospectus Directive)  

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Eliminate  the  obligation  established  in  Article  10  of  the 

Directive.  

6.2.3.  Policy options in relation to the restriction for the choice of home Member State for 

the issuers of debt  

(1)  Option 1 – No action at EU level.    

(8)  Option 2 – Provide for the choice of the home Member State for issues of 

non-equity securities below the €1000 threshold. 

6.2.4.  Policy options for facilitating the raise of capital through the issuance of rights 

(1)  Option 1 – No action at EU level.   

(2)  Option 2 – Share offerings to existing shareholders by the way of a rights 

issue could be exempted from the prospectus requirement.  

(3)  Option 3 – The principle of a "proportionate" prospectus for right issues 

could be introduced.  

6.2.5.  Policy options for providing proportionate disclosure requirements for small quoted 

companies 

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Small  quoted  companies  could  be  exempted  from  the 
obligation  to  publish  a  prospectus  by  raising  the  threshold  in  Article 
1(2)(h) of the Prospectus Directive.  

(3)  Option  3  –  The  principle  of  a  "proportionate"  prospectus  for  small 

quoted companies could be introduced.  

6.2.6.  Policy options for providing proportionate disclosure requirements for small credit 

institutions 

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Small  credit  institutions  could  be  exempted  from  the 
obligation  to  publish  a  prospectus  by  raising  the  threshold  in  Article 
1(2)(j) of the Prospectus Directive. 

(3)  Option  3  –  The  principle  of  a  "proportionate"  prospectus  for  small 

credit institutions could be introduced.  

EN 

22 

   EN 

 
   
6.2.7.  Policy  options  in  relation  to  the  prospectus  disclosures  in  case  of  government 

guarantee schemes should be rationalised 

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Issuers  of  securities  guaranteed  by  the  government  of  a 
Member  State  could  be  exempted  from  the  obligation  to  provide 
information about the guarantor in the prospectus.  

(3)  Option  3  –  The  same  policy  option  could  be  extended  to  cover  the 
information not only about the guarantor, but also about the guarantee.  

6.2.8.  Policy options in relation to the printed form (paper copy) of the prospectus  

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Abolish  the  obligation  to  deliver  a  paper  copy  of  the 

prospectus.   

6.2.9.  Policy options in relation to the translation of the summary of the prospectus 

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Abolish  the  obligation  to  translate  the  summary  of  the 

prospectus.  

7. 

COMPARING THE OPTIONS  

This  section  discusses  the  advantages  and  disadvantages  of  the  different  policy 
options against the following criteria: 

1.  Investor protection56: the option proposed should maintain and, when necessary, 
enhance the level of investor protection achieved by the Prospectus Directive.  

2.  Consumer  confidence57:  the  option  proposed  should  maintain  consumers' 

confidence in the securities markets.  

3.  Reduction  of  disproportionate  burdens/administrative  burden: 

the  option 

proposed should reduce the administrative burden for companies in the EU.  

4.  Clarity  and  legal  certainty:  the  option  proposed  should  provide  the  highest 

possible confidence to stakeholders as of the rules to comply with.  

56 

57 

"Investor  protection"  defines  the  entity  of  efforts  and  activities  to  observe,  safeguard  and  enforce  the 
rights  and  claims  of  a  person  in  his  role  as  an  investor.  This  includes  advice  and  legal  action.  The 
assumption  of  a  need  of  protection  is  based  on  the  experience  that  financial  investors  are  usually 
structurally  disadvantaged  compared  to  providers  of  financial  services  and  products  due  to  lack  of 
professional knowledge, information and/or experience.  
"Consumer confidence" is the degree of optimism and confidence that consumers feel about the overall 
state of the financial markets. Therefore it serves as one of the key indicators of their purchase activity. 
In  essence,  if  consumer  confidence  is  higher,  consumers  are  making  more  purchases,  boosting  the 
financial markets.  

EN 

23 

   EN 

 
                                                 
5.  Effectiveness:  the  extent  to  which  the  option  achieves  the  problem  specific 

objectives and facilitates the operation of EU securities markets. 

The  options  are  measured  against  the  above-mentioned  pre-defined  criteria  in  the 
tables  below.  Each  scenario  is  rated  between  "---"  (very  negative),  0  (neutral)  and 
"+++" (very positive). In some cases not all criteria are applicable to the issues under 
analysis.  The  assessment  highlights  the  policy  option  which  is  best  placed  to  reach 
the objectives outlined in section 5 and therefore the preferred one. 

7.1. 

Analysis of the options related to situations of lack of clarity or inconsistencies 
in the securities market legal framework 

7.1.1.  Policy  options  in  case  of  subsequent  placements  of  securities  through  financial 

intermediaries (retail cascade) 

Option  1.  No  action  at  the  EU  level:  If  the  EU  legislator  took  no  action  (the 
"baseline  scenario"),  the  market  would  be  expected  to  develop  in  the  following 
way.  The  uncertainties  surrounding  the  retail  cascade  issue  could  be  partially  and 
temporarily solved by applying the common interpretation agreed by the members of 
CESR58  (the "improved  policy  implementation  option").  In  accordance  with  this 
interpretation any subsequent resale of securities shall be regarded as a separate offer 
and  therefore  each  level  of  a  retail  cascade  is  to  be  separately  considered  as  to 
whether or not an exemption from the obligation to publish a prospectus is available 
to  such  public  offer.  A  valid  prospectus  should  be  required  at  each  level  of  the 
offering  mechanism.  If  the  issuer  has  published  a  prospectus,  all  financial 
intermediaries  may  use  such  prospectus  for  their  resale  of  the  securities  to  retail 
investors if they act in association with the issuer and thereby ensure that the issuer's 
prospectus is still valid. No further prospectus shall be required for a public offer as 
long as a valid prospectus is available59. If the issuer has not published a prospectus 
because a retail cascade was not foreseen, or if the issuer has published a prospectus 
but  the  intermediary  is  not  acting  in  association  with  the  issuer  but  selling  the 
securities  on  its  account,  then  a  separate  prospectus  would  be  required.  In  these 
circumstances, it is up to the offeror to use the issuer's prospectus by incorporating 
the relevant parts by reference into its own prospectus in accordance with Article 11 
of  the  Prospectus  Directive  ("incorporation  by  reference")  subject  to  the  provisions 
of  Article  28  of  the  Prospectus  Regulation  ("arrangements  for  incorporation  by 
reference").  

A number of respondents to the public consultation have pointed out that for the sake 
of  certainty  and  effectiveness  the  solution  to  the  retail  cascade  problem  should  be 
clarified in the text of the Directive.  

58 

59 

This  interpretation  is  applied  by  the  EU  competent  authorities  and  is  inspired  in  CESR's  common 
interpretation  (see  question  number  56  "Retail  cascade  offers"  of  the  frequently  asked  questions 
regarding  prospectuses).  The  concept  of  'acting  in  association'  between  the  issuer  and  the  financial 
intermediary is the key element of this interpretation. See www.cesr.eu 
According to Article 9 (1) of the Prospectus Directive a prospectus is only valid on condition that it is 
completed by any supplements required pursuant to Article 16 of the Prospectus Directive and only the 
issuer can update its prospectus by publishing supplements thereto.  

EN 

24 

   EN 

 
                                                 
Option  2.  Clarify  that  the  further  resale  of  the  securities  to  retail  investors 
through financial intermediaries following the initial issue does not qualify as a 
public offering of the initial issuer: as a number of contributors have signalled, the 
option  of  deleting  the  last  sentence  of  the  Article  3.2  of  the  Prospectus  Directive 
could not solve the problem either but create more uncertainty. The last sentence of 
Article 3.2 was meant to be an anti-avoidance provision: to avoid the circumvention 
of  the  obligation  to  publish  a  prospectus  by  breaking  a  public  offer  into  different 
private  placements  through  financial  intermediaries.  Therefore  this  option  could 
harm consumers' confidence in the proper functioning of the securities markets legal 
framework  and  should  be  negatively  assessed  in  terms  of  investor  protection.  Such 
an  option  would  permit  intermediaries  to  circumvent  the  obligation  to  publish  a 
prospectus. 

Option  3.  Amend  Article  3(2)  of  the  Prospectus  Directive  to  clarify  that 
whenever  an  intermediary  offers  securities  to  the  public  (i.e.,  makes  a  non-
exempted  offer)  the  intermediary  should  put  at  the  disposal  of  the  public  an 
updated and valid prospectus: the option of amending the Prospectus Directive to 
clarify  that  Member  States  shall  not  require  another  prospectus  in  any  such 
subsequent  resale  of  securities  or  final  placement  of  securities  through  financial 
intermediaries as long as a valid prospectus is available in accordance with Article 9 
and the issuer or the person responsible for drawing up such prospectus consents to 
its  use,has  benefits  in  terms  of  investor  protection,  reduction  of  administrative 
burden,  consumer  confidence  and  effectiveness:  investors  will  be  better  protected 
because there will be a valid prospectus available for these type of offers; the cost of 
the offer will be reduced as the intermediary acting with the consent of the issuer will 
be able to use the initial prospectus produced by the issuer as long as it is valid and 
will not have to produce a new prospectus; consumer confidence will increase as a 
consequence of a more rational legal framework; finally, there will be more certainty 
for  stakeholders  if  the  legal  framework  for  this  type  of  offers  is  clarified  in  the 
Directive. 

This option requires some cooperation between the issuer and the intermediary: the 
issuer should supplement its prospectus for the subsequent offers at the request of the 
intermediary. In case there is no such cooperation, the intermediary should produce a 
new prospectus. In this case it could incorporate by reference the information already 
disclosed  by  the  issuer  in  the  initial  prospectus  or  in  other  pieces  of  regulated 
information in accordance with Article 11 of the Prospectus Directive. In any event 
the intermediary should be responsible for the accuracy of the information included 
in such prospectus and should keep it up-to-date.  

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status quo  

Delete last sentence in 
3.2 PD 

Clarify that 
intermediaries can use 
the valid prospectus 
of the issuer if 

0 

- 

++ 

EN 

0 

-- 

++ 

25 

0 

0 

0 

- 

++ 

++ 

0 

0 

+ 

   EN 

 
 
updated 

For reasons of investor protection, consumer confidence, reduction of administrative 
burden, certainty and effectiveness, the preferred option is to amend the Prospectus 
Directive in order to clarify that Member States shall not require another prospectus 
in  any  such  subsequent  resale  of  securities  or  final  placement  of  securities  through 
financial intermediaries as long as a valid prospectus is available in accordance with 
Article  9  and  the  issuer  or  the  person  responsible  for  drawing  up  such  prospectus 
consents to its use.  

7.1.2.  Policy  options  in  relation  to  the  divergent  definitions  for  qualified  investors  and 

professional clients  

Option  1.  No  action  at  EU  level:  this  would  imply  that  two  different  definitions 
would  be  maintained  in  the  MiFID  and  the  Prospectus  Directive  (the  "baseline 
scenario").  As  explained  under  section  3.1.2,  it  is  not  effective  to  have  different 
systems in the Prospectus Directive and in MiFID for determining what persons can 
be  treated  as  sophisticated  investors.  Very  often  investors  that  could  qualify  under 
the Prospectus Directive are already categorised by investment firms as professional 
clients in accordance with the MiFID requirements. However the firm cannot benefit 
from the exemption of Article 3.2(a) of the Prospectus Directive since these investors 
are not registered in the national register of qualified investors.  

Option 2. Amend the Directive and align the definitions of qualified investors in 
Article  2.1(e)(i)  and  (ii)  of  the  Prospectus  Directive  and  of  professional  clients 
and eligible counterparties in MiFID: the alignment of both definitions will have 
clear  benefits  for  intermediaries  and  investors  in  terms  of  efficiency:  firms  will  be 
able  to  invite  their  professional  clients  to  participate  in  a  private  placement  of 
securities  without  the  need  of  visiting  and  relying  only  on  the  limited  information 
contained  in  the  national  register  of  qualified  investors.  As  a  consequence, 
professional  investors  will  have  access  to  new  investment  opportunities  without 
having to be listed in national registers.  

The fact that firms will not need to double check whether their professional clients 
are  or  not  also  listed  in  the  national  registers  will  provide  certainty  to  these 
companies  and  will  help  them  to  reduce  the  time  spent  organising  a  private 
placement  and  to  reduce  the  administrative  burden  of  the  operation.  In  some 
countries, there is a fee charged for the consultation of the register.  

UK charges £25 (approx. €27) for a one-off  copy, while a monthly copy costs £150 
(approx.  €163)  per  year.  Finland  charges  €0.16  per  page  exceeding  30  pages 
resulting from a request to the competent authority. Other Member states apply a fee 
for the registration. Austria and Slovenia apply a fee of €200 and €80, respectively. 
In Poland a stamp duty of 10 PLN (approx. €2.17) is required. Romania charges a fee 
of  100  lei  and  1000  lei  (approx.  €  23  and  23 4)  respectively  to  natural  and  legal 
persons authorised under the competent authority: for entities not authorised by the 
competent authority the fee is 5,000 lei (approx. € 1,172). 

The  alignment  of  the  definitions  would  not  have  impact  in  terms  of  investor 
protection or consumer confidence, as the underlying philosophy for both institutions 
is the same: both qualified investors and professional clients do not require the same 

EN 

26 

   EN 

 
treatment as retail investors for the provision of investment services and the private 
placement of securities.  

The  safeguards  envisaged  in  MiFID  for  the  client  categorisation  are  adequate  in 
terms of investor protection. In accordance to the rules laid down in the Section II of 
Annex II of the MiFID an investment firm could treat a client as professional only if 
an  adequate  assessment  of  the  expertise,  experience  and  knowledge  of  the  client, 
undertaken by the investment firm, gives reasonable assurance, in light of the nature 
of the transactions or services envisaged, that the client is capable of making his own 
investment decisions and understanding the risks involved60. The firm has to comply 
with strict procedures to categorise the client as sophisticated61. 

Option  3.  In  addition  to  the  alignment  proposed  above,  the  system  of  central 
registers could be removed from the Prospectus Directive: in the contributions to 
the  public  consultation  some  stakeholders  wonder  whether  the  national  register  of 
qualified investors should be removed from article 2.3 of the Prospectus Directive . 
In  this  regard,  in  accordance  with  the  evidence  provided  by  CESR  members,  the 
national  registers  of  qualified  investors  envisaged  in  article  2.3  of  the  Prospectus 
Directive are not working effectively in all EU countries.  

As  indicated  in  Figure  1  in  Annex  V62,  only  11  out  of  27  Member  States  have 
established a register that currently has more than 2 names. Among these 11 Member 
States,  two  declare  that  the  register  has  never  been  accessed  for  the  purpose  of 
private placements. One Member State declares that it has not been accessed in the 
last  two  years,  while  another  declares  that  it  is  not  accessed  very  often.  The 
remaining Member  States cannot  provide information in this regard,  either because 
the registry is publicly available or because no statistics are produced. These include 
France, Germany and UK with 975 registered qualified investors. The three Member 
States account for 74 percent of all registered qualified investors in Europe; therefore 
in these Member States the registry may play an important role.  

Moreover,  the  data  on  the  national  register  are  often  not  representative  because 
sophisticated investors are reluctant to appear in a public register for privacy reasons. 
If  the  register  is  removed,  the  competent  authorities  could  save  the  administrative 
costs  of  its  maintenance  and,  if  applicable,  investors  would  save  the  cost  of  the 
registration fees and intermediaries would save the cost of consultation fees.  

On  the  other  hand,  if  the  register  is  removed  there  will  be  no  room  for  private 
placements  directly  carried  out  by  the  issuer  without  the  intervention  of  an 
intermediary.  Issuers  could  use  the  register  to  offer  directly  their  securities  to 
qualified investors (nonetheless, in accordance with the data provided by the CESR 
members, there is no evidence of such practice). The register of qualified investors 
ensures more transparency, and therefore it is advisable to maintain it.  

60 
61 

62  

Third paragraph of Section II.1 in Annex II of the MiFID.   
First,  the  client  must  state  in  writing  to  the  investment  firm  that  he  or  she  wishes  to  be  treated  as  a 
professional;  second,  the  investment  firm  must  give  him  or  her  a  clear  written  warning  of  the 
protections  and  investor  compensation  rights  he  or  she  may  lose;  and  third,  the  client  must  state  in 
writing, in a separate document from the contract, that he or she is aware of the consequences of being 
treated as professional. See Section II.2 in Annex II of the MiFID. 
See Annex V.  

EN 

27 

   EN 

 
                                                 
For  reasons  of  reduction  of  administrative  burden,  certainty  and  effectiveness,  the 

Criteria 

Options 

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status quo 

Align both definitions 
and keep the register 

Align both definitions 
and remove the 
register 

0 

0 

0  

0 

0 

0 

0 

+ 

+ 

0 

+ 

+ 

0 

+ 

+ 

preferred option is to align the definitions of qualified investors set in Article 2.3 of 
the  Prospectus  Directive.  Moreover,  national  registers  should  be  kept  because  they 
play  an  important  role  for  private  placements  facilitating  offerings  directly  carried 
out  by  the  issuer  without  the  intervention  of  an  intermediary.  Issuers  can  use  the 
register to offer directly their securities to registered qualified investors. This ensures 
additional transparency in the European securities markets offering an alternative to 
the broad use of private placements through financial intermediaries.  

7.1.3.  Policy  options  in  relation  to  the  obligation  of  supplementing  a  prospectus  and  the 
exercise of the right of withdrawal (Article 16 of the Prospectus Directive) 

Option 1. No action at the EU level: this signifies that the uncertainty in relation to 
the time frame for the exercise of the right of withdrawal would remain, as explained 
in section 3.1.3 (the "baseline scenario"). 

Option 2. Harmonize the different periods of time for the exercise of the right of 
withdrawal:  the  maximum  harmonisation  of  the  time  frame  for  the  right  of 
withdrawal  will  provide  certainty  to  the  issuers  making  cross  border  offers  of 
securities,  as  there  will  not  be  different  time  frames  depending  on  the  national 
legislation of the countries involved in the offer. However, if this harmonisation were 
made at the lowest level, investors of countries where longer deadlines are currently 
applied would be less protected because the time to withdraw their acceptances will 
be reduced compared to the current regime and thus their confidence may decrease. 
The majority of responses to the consultation agreed on the need for a common time 
frame for the exercise of this right. Within this majority, a minority considered that, 
on  the  basis  of  a  common  time  frame,  it  should  be  up  to  the  issuer  to  extend 
voluntarily its duration.  

Though  this  is  very  difficult  to  estimate  in  concrete  figures,  it  could  be  sensibly 
argued that a common time frame would reduce the cost of legal advices in case of 
cross-border  offers,  as  there  will  not  be  any  need  to  analyse  in  this  regard  the 
particularities of the national legislation of the countries involved in the offer. 

Option 3. Harmonize the different periods of time with possibility for issuer to 
grant longer time: a common fixed time frame with the possibility for the issuer to 
extend the time frame for each particular offer would provide a flexible solution to 
issuers  from  countries  with  traditionally  longer  time  frames.  This  approach  would 
merge  effectiveness  and  efficiency  with  more  investor  protection  and  consumer 
confidence. 

EN 

28 

   EN 

 
Option  4.  Harmonize  the  different  periods  of  time  at  the  settlement  of  the 
securities: some stakeholders insisted on the possibility to limit the exercise of the 
right of withdrawal at the settlement of the securities. Such an option would be very 
efficient for the issuer, but would reduce investor protection: investors might not be 
aware of the date of the settlement. Taking into account that such a date might differ 
from  one  system  of  settlement  to  another,  this  might  not  be  the  best  option  for 
increasing  consumer  confidence.  Finally,  the  benefits  of  this  option  in  terms  of 
reduction of administrative burden are not entirely clear. 

Moreover,  some  respondents  pointed  out  that  this  is  a  good  opportunity  at  least  to 
clarify in the text of the Prospectus Directive that the registration document could be 
independently supplemented and that the time frame for the exercise of the right of 
withdrawal envisaged in Article 16.2 of the Prospectus Directive should finish at the 
close of the offer and when the admission to trading begins.  

Investor protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep status 
quo 

Maximum 
harmonization 
of the time 
frame 

Harmonize 
time frame and 
allow extension 
by the issuer 

Harmonize 
time frame to 
the settlement 
of the securities 

0 

- 

+ 

-- 

0 

- 

++ 

-- 

0 

+ 

+ 

0 

0 

++ 

0 

++ 

++ 

+++ 

-- 

++ 

For reasons of investor protection, consumer confidence, reduction of administrative 
burden,  certainty  and  effectiveness,  the  preferred  option  is  to  harmonize  the  time 
frame for the exercise of the right of withdrawal and the issuer would be entitled to 
extend the period voluntarily.  

7.1.4.  Policy options in relation to the lack of harmonised rules on liability 

Option  1.  No  action  at  EU  level:  Rome  I  Regulation63  on  the  law  applicable  to 
contractual obligations is not applicable to the terms and conditions of an offer to the 
public.  National  systems  of  civil  liability  are  not  harmonised  in  the  EU.  National 
rules  of  civil  liability  are deeply  embedded  in  the  civil law  of  Member  States.  The 
harmonisation  of  the  liability  standards  is  a  goal  that  exceeds  the  Prospectus 
Directive; it  is  not pertinent to  ask for a limited harmonization of the civil liability 

63 

Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the 
law applicable to contractual obligations (Rome I). OJ L 177, 4.7.2008, p.6. See recital 28 and Article 
6.4(d). 

EN 

29 

   EN 

 
                                                 
 
standards  applicable  just  to  prospectuses.  Such  a  proposal  could  even  create  more 
disruptions  and  uncertainties  when  interacting  with  other  provisions  of  the  national 
legal frameworks for liability. Such an initiative should embrace a larger spectrum of 
legislation, notably financial services law. 

Option  2.  Harmonize  the  liability  standards  applicable  to  the  prospectus:  the 
harmonization of the rules on liability would certainly reduce the costs of producing 
a prospectus (at least those related to the legal advice) and enhance certainty in the 
securities  market.  Investor  protection  and  consumer  confidence  could  certainly  be 
strengthened  by  the  harmonization  of  the  liability  standards  of  the  Prospectus 
Directive: more certainty would be added to the current requirements of article 6 of 
the Prospectus Directive which already requires that someone is responsible for the 
information  given  in  the  prospectus  and  that  such  a  person  or  persons  is  clearly 
identified in the prospectus. Both obligations are already included in Article 6 of the 
Prospectus Directive.  

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the 
status quo of 
the liability 
standards in 
the PD 

Harmonize the 
liability 
standards  

0 

+ 

0 

+ 

0 

++ 

0 

+ 

0 

+ 

The  harmonisation  of  the  liability  standards  is  a  goal  that  exceeds  the  Prospectus 
Directive. Therefore the preferred option is to keep the status quo.  

7.1.5.  Analysis of the policy options in relation to the summary of the prospectus 

Option 1. No action at EU level: this would imply that the situation of the summary 
of  the  prospectus  will  remain  unchanged  as  defined  in  section  3.1.5  (the  "baseline 
scenario").  The  current  limitation  of  2,500  words  and  Annex  I  and  IV  of  the 
Prospectus  should  not  be  read  prescriptively  but  as  an  indication  for  an  optimum 
length  for  prospectuses.  However,  depending  on  the  specific  circumstances 
surrounding  each  issue,  a  meaningful  summary  could  exceed  such  limit  and/or 
contain fewer items than those in the Annexes.  

Option  2.  Provide  retail  investors  with  appropriate  information  in  an  easily 
analyzable  and  comprehensible  form  in  order  to  make  investment  decisions  in 
full  knowledge  of  facts:  the  standardisation  of  the  content  of  the  summary  will 
increase investor protection, consumer confidence and certainty: first, investors will 
receive  a  more  useful  piece  of  information  to  form  their  investment  decision  and, 
second,  a  summary  inspired  by  the UCITS  Key  Investor  Information64  could  allow 
the investor to compare the security with other investment products. For reasons of 

64  

EN 

For  more 
http://ec.europa.eu/internal_market/investment/investor_information_en.htm.  

the  UCITS  Key 

information 

Investor 

on 

Information 

concept, 

see 

30 

   EN 

 
 
                                                 
issuers  from 

including  relevant 

effectiveness, issuers should not be constrained by the limit of 2.500 words for the 
summary. The  size  of  the  summary should not be determined a priori, because the 
limitation  prevents 
in  a  more 
comprehensible  way.  The  summary  should  be  as  short  as  possible  but  as  long  as 
necessary  to  enable  issuers  to  convey  meaningful  information  to  the  investor.  A 
logical  consequence  of  having  a  more  substantial  summary  document  would  be  to 
attach  civil  liability  on  the  basis  of  the  summary  not  only  if  it  is  misleading, 
inaccurate or inconsistent, when read together with the other parts of the prospectus, 
but  also  if  it  does  not  provide  key  information  enabling  investors  to  take  informed 
investment decisions and to compare the securities with other investment products. 

information 

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 
quo 

Standardise 
the content of 
the summary 

0 

++ 

0 

++ 

0 

0 

0 

+ 

0 

++ 

For reasons of investor protection, consumer confidence, certainty and effectiveness, 
the  preferred  option  is  the  standardisation  of  the  summary  of  the  prospectus 
following the approach adopted by the European Commission in its Communication 
on Packaged Retail Investment Products65. 

7.2. 

Analysis  of  the  options  related  to  situations  of  burdensome  requirements 
imposed  on  companies  raising  funding  in  securities  markets  and  to  the 
intermediaries involved  

7.2.1.  Policy  options  for  bringing  forward  a  level  playing  field  for  Employee  Shares 

Schemes  

Option  1.  No  action  at  EU  level:  in  this  situation  (the  "baseline  scenario")  the 
competent authorities of the Member States could use the possibilities provided for 
in  the  Directive  and  the  implementing  Regulation  (the  "improved  policy 
implementation  option"):  in  accordance  with  Article  23.4  of  the  Prospectus 
Regulation,  in  those  cases  where  one  of  the  information  items  required  by  the 
Regulation is not pertinent to the issuer, to the offer or to the securities to which the 
prospectus relates, that information may be omitted. Third country issuers or EU non 
listed  issuers  that  have  decided  to  launch  employee  shares  schemes  do  not  need  to 
elaborate a fully fledged prospectus. The prospectus for these types of offers could 
contain  less  amount  of  information.  The  reasoning  is  twofold:  first,  if  the  issuer  is 
already admitted to trading in the securities market of a third country, there is already 
public information about the company in the public domain; second, employees of a 
company  are  not  comparable  to  the  common  investor  in  terms  of  their  information 
needs. In these cases the issuer will find easier (and cheaper) to produce a prospectus 
that is just focused on aspects that are essential for the employees (like information 

65  

COM (2009) 204 of April 30, 2009.  

EN 

31 

   EN 

 
 
                                                 
on the number and nature of the securities and the reasons for and the details of the 
offer – see Articles 4.1(e) and 4.2(f) of the Prospectus Directive).66 

However,  the  common  interpretation  agreed  by  the  CESR  members  in  January 
200967 on the short-form disclosure regime for offers to the employees in those cases 
where a prospectus is required has partially alleviated the situation of the European 
employees  of  companies  listed  in  third  countries.  But,  the  solution  is  not  fully 
satisfactory for various reasons: first, this interpretation was meant to be a temporal 
arrangement, pending the amendment of the Prospectus Directive that would provide 
a better solution in terms of the legal certainty; second, the CESR interpretation still 
requires  the  companies  that  benefit  from  the  interpretation  to  publish  a  prospectus, 
which  is  still  costly,  and  in  case  of  employee  share  schemes  a  prospectus  has  not 
added value in terms of investor protection or consumer confidence: employees are 
better  protected  than  investors  because  they  could  receive  adequate  information 
through the employee information document of article 4.1(e) and article 4.2(f) of the 
Directive  (see  CESR  guidance  on  the  contents  of  the  employee  information 
document68); finally, the CESR interpretation covers only part of the companies (just 
non-EU listed companies) and does not cover the European employees of non-listed 
companies and of companies listed in multilateral trading facilities (these companies 
have to publish a full prospectus).  

Option 2. Amend the Directive and extend the exemption in Article 4.1(e) to the 
employee  share  schemes  launched  by  companies  that  are  listed  in  a  non-
regulated market (third country and EU issuers): introducing an exemption in the 
Prospectus  Directive  for  employee  share  schemes  launched  by  companies  that  are 
listed  in  a  non-regulated  market  (third  country  and  EU  issuers)  would  help  to 
overcome the limitations described in the previous paragraph. However, employees 
from non-listed companies would be excluded from this regime.  

Option  3.  Amend  the  Directive  and  extend  the  exemption  in  Article  4.1.(e) 
including not only the employee share schemes of companies that are listed in a 

66 

67 

68 

This  policy  option  is  inspired  by  CESR's  common  interpretation  set  up in  question number  71  of  the 
frequently asked questions regarding prospectuses ("Employee Share Scheme Prospectuses: Short-form 
disclosure  regime  for  offers  to  the  employees  in  those  cases  where  a  prospectus  is  required").  CESR 
members agreed on a list of information items that are not pertinent for an offer addressed to employees 
of  third  country  listed  issuers  and  issuers  listed  in  a  non-regulated  market  (the  employer  has  to  have 
securities already admitted to trading on a market or by an affiliated undertaking).  
Frequently asked questions regarding Prospectuses: Common positions agreed by CESR Members 8th 
Updated Version - February 2009 (Ref. CESR/09-103). Question number 71. 
The  CESR’s  recommendations  for  the  consistent  implementation  of  the  European  Commission’s 
Regulation on Prospectuses nº 809/2004 (ref. CESR/05-054b), paragraphs 173 to 176. The CESR would 
expect  the  document  referred  to  in  articles  4.1.d  and  4.2.e  and  4.1.e  and  4.2.f  to  include:  a)  the 
identification of the issuer and a indication of where additional information on the issuer can be found; 
b) an explanation of the reasons of the offer or admission to trading together with an indication of the 
specific provision of the Directive under which the exemption applies; c) details of the offer (key terms 
and  conditions  of  the  offer  or  admission  to  trading,  which  is  likely  to  include  information  on  the 
addressees of the offer, time frame of the offer, minimum and maximum amount of orders, information 
on where details of the price can be found, if not yet determined), including the nature of the offer (offer 
to issue or to sale securities), conditions upon which the securities will be issued or admitted to trading, 
price of the securities, if any. In relation to the number and nature of the securities involved in the offer 
or admission to trading, the CESR would expect this to include a summarised description of the rights 
attaching to the securities. 

EN 

32 

   EN 

 
                                                 
non-regulated market ("exchange-regulated" market or third country securities 
markets)  as  proposed  in  option  above,  but  also  encompass  companies  that  are 
not  listed:  the  introduction  in  the  Prospectus  Directive  of  a  wide  exemption  by 
which the employees are not discriminated on whether their company is listed or not 
could  be  considered  an  improvement  in  terms  of  efficiency  (no  only  companies  in 
third countries will benefit from the new regime but also EU non listed companies), 
certainty  (the  legal  basis  for  the  exemption  will  be  included  in  a  Directive,  and  no 
longer  in  a  non-binding  interpretation  from  CESR)  and  reduction  of  administrative 
burdens  (companies  launching  employee  share  schemes  will  save  the  cost  of 
producing a prospectus). This option is also positive in terms of investor protection 
because employees will receive tailored information about the financial participation 
scheme  in  accordance  with  Article  4.1(e)  of  the  Prospectus  Directive.  In  fact, 
employee  share  schemes  are  exempted  from  the  obligation  to  publish  a  prospectus 
"provided that a document is made available containing information on the number 
and nature of the securities and the reasons for and details of the offer"69.  

Investor protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 
quo 

Exempt ESS 
for third 
country listed 
issuers 

Exempt all 
kind of ESS 

0 

0 

0 

0 

0 

0 

0 

+ 

+++ 

0 

+ 

+ 

0 

+ 

++++ 

For  reasons  of  certainty  and  reduction  of  administrative  burdens  and  effectiveness, 
the preferred option is to amend the Prospectus Directive in a way that exempts from 
the obligation to publish a  prospectus  employee  share schemes  launched in the EU 
by any type of company. 

69  

The  outline  of  the  information  that  the  issuer  has  to  include  in  such  a  document  is  suggested  in  the 
CESR recommendation for the consistent implementation of the Prospectus Regulation (n° 809/2004). 
The  CESR  would  expect  the  document  referred  to  in  articles  4.1.d  and  4.2.e  and  4.1.e  and  4.2.f  to 
include: a) the identification of the issuer and a indication of where additional information on the issuer 
can  be  found;  b)  an  explanation  of  the  reasons  of  the  offer  or  admission  to  trading  together  with  an 
indication of the specific provision of the Directive under which the exemption applies; c) details of the 
offer  (key  terms  and  conditions  of  the  offer  or  admission  to  trading,  which  is  likely  to  include 
information on the addressees of the offer, time frame of the offer, minimum and maximum amount of 
orders,  information  on  where  details  of  the  price  can  be  found,  if  not  yet  determined),  including  the 
nature  of  the  offer  (offer  to  issue  or  to  sale  securities),  conditions  upon  which  the  securities  will  be 
issued or admitted to trading, price of the securities, if any. In relation to the number and nature of the 
securities  involved  in  the  offer  or  admission  to  trading,  the  CESR  would  expect  this  to  include  a 
summarised description of the rights attaching to the securities. See www.cesr.eu (ref. CESR/05-054b, 
paragraphs 173-176). 

EN 

33 

   EN 

 
 
                                                 
7.2.2.  Policy options in relation to the duplication of transparency obligations (Article 10 

of the Prospectus Directive) 

Option 1. No action at EU level: this will keep in place the obligation stipulated in 
Article  10  of  the  Prospectus  Directive  with  the  consequences  explained  in  section 
3.2.2:  issuers  will  keep  on  publishing  annually  a  document  with  no  added  value  in 
terms of transparency (the "baseline scenario"). 

Option  2.  Eliminate  the  obligation  established  in  Article  10  of  the  Directive: 
taking into account that the provisions of the Transparency Directive have made the 
requirement  of  Article  10  redundant,  the  deletion  of  article  10  of  the  Prospectus 
Directive  will  not  have  any  negative  impact  in  terms  of  investor  protection  or 
consumer confidence. On the contrary, as ESME suggests, such a change would be 
even  more  effective  and  would  help  to  increase  consumer  confidence  as  it  would 
serve  to  remove  from  the  public  domain  outdated  and  therefore  misleading 
information70. 

The  deletion  of  article  10  would  imply  a  reduction  of  administrative  burden  for 
issuers.  In  accordance  with  the  estimations  provided  by  ESME  members,  the  cost 
saved by EU issuers could amount to € 30 million 71. 

Stakeholders participating in the public consultation have unanimously agreed on the 
benefits from the deletion of Article 10 of the Prospectus Directive. A number of the 
contributions  have  pointed  out  that  the  deletion  of  article  10  would  require 
adjustments in Articles 9.4 and 11.1 of the Prospectus Directive and 2.1.i (i) of the 
Transparency Directive, where there is a cross-reference to Article 10. 

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the 
status quo of 
art. 10 of PD 

Delete art. 10 
of PD 

0 

+ 

0 

+ 

0 

+++ 

0 

0 

0 

++ 

70 

71  

"The Annual Document does not contain current information, but a collection of historical information 
only. Therefore, the issuers only accept liability for correctly having collected the required data, not for 
the correctness of the information at the time of publication of the document. This is reflected by the 
statement  of  the  issuer  normally  contained  in  the  Annual  Document:  Examples  are  "Information 
included or referenced in this annual document may be out of date." and "The information referred to 
below is not necessarily up to date as at the date of this annual information and the Company does not 
undertake  any  obligation  to  up-date  any  such  information  in  the  future."  ESME  paper  "Position  on 
Article  10  of  the  Prospectus  Directive  in  relation  to  the  Transparency  Directive",  4  June  2008.  See 
http://ec.europa.eu/internal_market/securities/docs/esme  
This figure is calculated based on the number of companies with listed shares (12,299), as provided by 
FESE  monthly  statistics,  February  2009,  and  the  estimated  annual  cost  of  meeting  the  obligation 
(€2,500). See section 3.2.2. Some companies may not  have shares traded on a regulated market but only 
other  securities,  such  as  bonds.  These  companies  should  also  be  taken  into  account.  However,  the 
number of companies with listed shares is the most reliable figure available. 

EN 

34 

   EN 

 
                                                 
 
For reasons of investor protection, consumer confidence, reduction of administrative 
burden  and  effectiveness,  the  preferred  option  is  to  delete  article  10  from  the 
Prospectus Directive. 

7.2.3.  Policy options in relation to the restriction for the choice of home Member State for 

the issuers of non-equity securities 

Option  1.  No  action  at  EU  level:  this  willkeep  the  threshold  of  1.000  €  for  the 
determination of the home Member State for the issuers of non-equity securities (the 
"baseline scenario"). This situation has the consequences described in section 3.2.3: 
issuers  of  non-equity  securities  below  €1.000  and  securities  without  denomination 
are  excluded  from  the  possibility  of  choosing  a  home  Member  State,  with  the 
implications, notably for debt issuance, explained in this section. 

Since the Prospectus Directive entered into force, issuers of securities mentioned in 
article 2.1(m)(ii) have been entitled to appoint – among those of the countries where 
the  offer  or  the  admission  to  trading  is  taking  place  –  the  competent  authority  in 
charge  of  the  approval  of  the  prospectus.  This  possibility  has  proven  to  be  an 
efficient tool for issuers of debt denominated above € 1.000 per unit. 

Option  2.  Provide  for  the  choice  of  the  home  Member  State  for  issues  of  non-
equity  securities  below  the  €1000  threshold: 
the  elimination  of  the  €1.000 
threshold  in  article  2.1(m)(ii)  will  extend  this  possibility  to  issuers  of  non-equity 
securities regardless of the denomination of the offer . Such a change would have a 
positive impact in terms of efficiency in cross border offers for two reasons: first, the 
issuer will not have to depend on the denomination of the offer to choose the home 
Member  State  that  better  suits  an  offer  in  terms  of  commercial  strategy;  second, 
issuers of securities that are not denominated (like structured securities) will be able 
to benefit from this possibility.  

The  abolition  of  the  threshold  has  no  impact  in  terms  of  investor  protection:  the 
choice of home Member State does not mean less control or relaxed supervision. The 
prospectus  will  be  in  any  event  approved  by  the  competent  authority  of  an  EU 
Member State. This competent authority will be responsible for the application of the 
European standards of investor protection stemming from the Prospectus Directive. 

Investor protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 
quo 

Delete the 1000 
€ threshold 

0 

0 

0 

0 

0 

+ 

0 

0 

0 

++ 

For  reasons  of  reduction  of  administrative  burden  and  effectiveness,  the  preferred 
option is to extend the possibility to choose home Member State to all the issuers of 
non-equity securities.  

EN 

35 

   EN 

 
 
7.2.4.  Policy options for facilitating the raise of capital through the issuance of rights  

Option 1. No action at EU level: the option of keeping the status quo (the "baseline 
scenario")  would  imply  that  the  competent  authorities  should  apply  individually 
Articles 8.2 of the Prospectus Directive and 23.4 of the Prospectus Regulation on a 
case by case basis (the "improved policy implementation option"). In this case the 
competent authorities could permit issuers to reduce the amount of the information in 
the  prospectus  for  right  issues.  This  option  is  positive  in  terms  of  reducing 
administrative  burden  as  the  cost  of  producing  a  lighter  prospectus  would  decrease 
(the  cost  of  performing  the  due  diligence  would  be  less  than  in  a  case  of  a  full 
prospectus). However, it would not favour certainty as the decisions of the individual 
competent authorities would not be necessarily consistent in the 27 Member States. 
The  lack  of  a  harmonised  approach  in  this  regard  could  hamper  consumer 
confidence.  

Option  2.  Share  offerings  to  existing  shareholders  by  the  way  of  a  rights  issue 
could  be  exempted  from  the  prospectus  requirement:  the  issuer  would  save  the 
cost of producing a prospectus if there was a total exemption from the obligation to 
publish  a  prospectus  in  the  case  of  rights  issues.  Stakeholders  are  already  familiar 
with the company issuing the rights (they have already taken in the past the decision 
to invest in this company). Taking into account the cost of producing a fully fledged 
prospectus, this might not be the most appropriate way to inform shareholders about 
a  right  issue.  Shareholders  do  not  need  the  special  protection  provided  for  by  a 
prospectus  as  they  should  be  familiar  with  and  confident  in  the  company  in  which 
they have already invested. First, companies are required by company law to report 
to their shareholders72; second, a traded company discloses information to the market 
on  a  continuing  basis,  so  that  the  public  and  shareholders  know  the  essential  and 
fundamental  information  regarding  the  new  shares.  Issuers  would  find  it  easier  to 
launch this type of offers. However, taking into account that in some countries rights 
issues  are  not  limited  to  existing  shareholders  (and  therefore  new  investors  could 
participate in the offer), such exemption would significantly reduce information that 
the  investors  that  are  not  shareholders  would  receive.  Investor  protection  and 
consumer confidence would therefore be diminished by such an option.  

Option 3. The principle of a "proportionate" prospectus for right issues could 
be introduced: the option of providing a reduced disclosure regime for rights issues 
seems to provide more certainty to this type of offers (as it would be a harmonised 
solution). Such a solution would improve the efficiency of cross border rights issues 
and would help to build consumer confidence, as the content of the prospectus would 
be better tailored for this type of the offer. A reduction of the amount of information 
to  be  included  in  the  prospectus  would  help  to  reduce  significantly  the  cost  of 
publishing a prospectus by decreasing due diligence costs.  

Investor protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 

0 

0 

0 

0 

0 

72 

Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of 
certain rights of shareholders in listed companies. OJ L 184 , 14/07/2007 P. 0017 - 0024 

EN 

36 

   EN 

 
 
                                                 
quo 

Total 
exemption 

Reduced 
disclosure 
requirements 

-- 

0 

-- 

+ 

+++ 

++ 

- 

+ 

+ 

+ 

For  reasons  of  consumer  confidence,  reduction  of  administrative  burden,  certainty 
and  effectiveness,  the  preferred  option  is  to  introduce  the  principle  of  a  reduced 
disclosure  regime  for  prospectuses  for  rights  issues  in  the  Directive;  this  regime 
should  be  supplemented  through  implementing  measures,  i.e.  a  modification  in  the 
implementing regulation.  

7.2.5.  Policy options for providing proportionate disclosure requirements for small quoted 

companies73 

Option 1. No action at EU level: by keeping the status quo the problems identified 
for  companies  with  small  market  capitalization  raising  capital  on  financial  markets 
will not be solved. According to Article 8.2 of the Prospectus Directive and 23.4 of 
the  Prospectus  Regulation,  national  competent  authorities  have  the  power  to  omit 
certain  information  from  prospectuses.  However  they  can  use  it  in  a  discretionary 
manner  affecting  the  final  aim  of  the  Prospetus  Directive  to  create  a  level  playing 
field for all issuers in the single market. It could be argued that such option could be 
positive in terms of reducing administrative burden (the cost of producing a lighter 
prospectus  would  be  more  affordable  than  producing  a  fully  fledged  prospectus). 
However, such option does not ensure sufficient certainty given the possible different 
interpretations by the competent authorities in each single case.  

Option  2.  Small  quoted  companies  could  be  exempted  from  the  obligation  to 
publish a prospectus by raising the threshold in Article 1(2)(h) of the Prospectus 
Directive:  an  exemption  from  the  obligation  to publish  a  prospectus  by  raising  the 
threshold of €2,5 million in Article 1.2(h) of  the Prospectus Directive would reduce 
significantly  the  cost  of  raising  capital  for  small  quoted  companies  and  therefore 
would provide these companies with a more effective way to raise capital. However, 
the  impact  of  such  a  measure  would  be  detrimental  in  terms  of  investor  protection 
(investors would be deprived from the basic information that is needed for making an 
informed  investment  decision)  and  consumer  confidence  (some  respondents  of  the 
public  consultation  argued  that  investing  in  small  quoted  companies  is  often  more 
risky than investing in the big well-known issuers). 

73 

Figure 5 in Annex V shows that a specific treatment would be justified for small quoted companies in 
terms  of  disclosure  requirements.  It  provides  details  on  market  capitalisation  for  companies  listed  in 
Cyprus, Finland, France, Germany, Greece, Italy and UK. The figures illustrate that 80 percent of the 
smallest  firms  only  account  for  4  percent  of  the  market  capitalisation.  Specifically,  the  4,559  listed 
companies  with  a  market  capitalisation  of  less  than  €  500  million  have  total  market  capitalisation  of 
€421  bn.  This  is  contrasted  by  the  total  of  5,721  listed  companies  with  a  market  capitalisation  of 
€10,166bn. The obligations that companies have to m eet are very similar irrespective of the size of the 
companies.  Assuming  that  the  capital  typically  raised  through  an  offer  is  proportional  to  the  current 
market  capitalisation  it  is  clear  that  cost  related  to  the  production  of  the  prospectus  attributes  to  a 
significantly larger increase in the funding costs for smaller companies than for larger companies. 

EN 

37 

   EN 

 
                                                 
Option  3.  The  principle  of  a  "proportionate"  prospectus  for  small  quoted 
companies  could  be  introduced:  the  option  of  providing  a  reduced  disclosure 
regime  to  small  quoted  companies  combines  the  positive  effects  of  reducing  the 
administrative  burden  of  these  companies  with  a  more  effective  system  for  raising 
capital.  Investor  protection  will  not  be  harmed  because  investors  would  be  able  to 
base their investment decisions on tailored information about these companies. Such 
a  proportionate  solution  could  also  favour  the  general  consumer  confidence,  as  the 
market  would  approve  a  disclosure  regime  that  better  reflects  the  reality  of  these 
companies. 

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 
quo 

Exemption by 
raising the 
threshold  

Reduced 
disclosure 
requirements 

0 

-- 

0 

0 

-- 

+ 

0 

++ 

+ 

0 

0 

+ 

0 

+ 

+ 

For  reasons  of  consumer  confidence,  reduction  of  administrative  burden,  certainty 
and  effectiveness  the  preferred  option  is  to  introduce  the  principle  of  a  reduced 
disclosure regime for prospectuses of companies with reduced market capitalization 
in  the  Directive;  this  regime  should  be  supplemented  through  implementing 
measures, i.e. a modification in the implementing regulation. 

7.2.6.  Policy options for providing proportionate disclosure requirements for small credit 

institutions 

The  analysis  in  the  previous  point  applies  also  to  the  policy  options  related  to  the 
credit  entities  and  the  offer  of  the  securities  mentioned  in  Article  1.2(j)  of  the 
Prospectus Directive74.  

Option 1. No action at EU level: t baseline scenario would imply that the situation 
would remain unchanged as described in section 3.2.4.3: Competent authorities could 
be expected to use the powers referred to in Articles 8.2 of the Prospectus Directive 
and 23.4 of the Prospectus Regulation. Like in the previous case, on one hand, such 
option  could  imply  a  reduction  of  the  administrative  burden;  on  the  other  hand,  it 
would  not  be  effective  in  terms  of  consumer  confidence  given  the  uncertainty 
deriving from the different interpretations by the competent authorities of each single 
case.  

Option  2.  Small  credit  institutions  could  be  exempted  from  the  obligation  to 
publish a prospectus by raising the threshold in Article 1(2)(j) of the Prospectus 
Directive:  a  total  exemption  from  the  obligation  to  publish  a  prospectus  could  be 

74 

The comparison in Figure 6 in Annex V between an offer of €50 and an offer of €500 million might 
help to illustrate the problem: the impact of the additional costs for the prospectus in the offer of €50 
million (0.3%) is considerably higher than in the offer of €500 million (0.03%).  

EN 

38 

   EN 

 
 
                                                 
implemented  by  raising  the  threshold  of  €50  million  in  Article  1.2(j)  of  the 
Prospectus  Directive.  On  the  one  hand,  such  a  change  would  reduce  the  cost  of 
raising  funds  for  these  entities  (because  they  would  not  have  to  produce  a 
prospectus). On the other hand, the impact of such a measure would be detrimental in 
terms of investor protection and consumer confidence.  

Option  3.  The  principle  of  a  "proportionate"  prospectus  for  small  credit 
institutions  could  be  introduced:  the  option  of  providing  a  reduced  disclosure 
regime to small credit institutions for the type of offers mentioned in Article 1.2(j) of 
the Prospectus Directive, at or above the threshold therein, has the positive effect of 
reducing  the  administrative  burden  of  these  companies  and  provides  for  a  more 
efficient  system  for  raising  funds.  Investor  protection  will  not  be  harmed  because 
investors  would  be  able  to  base  their  investment  decisions  on  tailored  information 
about the offers of securities described in Article 1.2(j) of the Prospectus Directive. 

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 
quo 

Exemption by 
raising the 
threshold 

Reduced 
disclosure 
requirements 

0 

-- 

0 

0 

-- 

+ 

0 

++ 

+ 

0 

0 

+ 

0 

+ 

+ 

For  reasons  of  consumer  confidence,  reduction  of  administrative  burden,  certainty 
and  effectiveness  the  preferred  option  is  to  introduce  the  principle  of  a  reduced 
disclosure  regime  only  for  offers  of  securities  described  in  Article  1.2(j)  of  the 
Prospectus Directive at or above the threshold therein. Below this threshold, offers of 
securities  described  in  Article  1.2(j)  of  the  Prospectus  Directive  remain  outside  the 
scope  of  the  Directive.  This  regime  should  be  supplemented  through  implementing 
measures, i.e. a modification in the implementing regulation.  

7.2.7.  Policy  options  in  relation  to  the  prospectus  disclosures  in  case  of  government 

guarantee schemes  

Option 1. No action at EU level: the option of keeping the status quo (the "baseline 
scenario") in relation to information that has to be included in a prospectus in case 
of  an  offer  of  securities  guaranteed  by  a  Member  State  has  similar  implications  in 
terms of certainty and consumer confidence as in the previous two points. 

Option 2. Issuers of securities guaranteed by the government of a Member State 
could  be  exempted  from  the  obligation  to  provide  information  about  the 
guarantor in the prospectus: sources like Eurostat provide to the public sufficient 
data  on  government  revenue,  government  expenditure,  government  deficit, 
transactions  in  assets,  transactions  in  liabilities,  other  economic  flows,  and  balance 

EN 

39 

   EN 

 
 
sheets75.  Therefore  the  option  of  waiving  issuers  from  the  obligation  of  including 
information  about  the  State  guarantor  would  reduce  the  administrative  burden  for 
these  issuers  (at  least  it  should  have  a  positive  impact  in  relation  to  the  cost  of 
performing the due diligence).  

Option  3.  The  same  policy  option  could  be  extended  to  cover  the  information 
not only about the guarantor, but also about the guarantee: , information on the 
guarantee  (scope,  conditions,  etc.)  is  a  key  element  of  an  investment  decision. 
Availability  of  this  type  of  information  will  improve  certainty  in  the  securities 
markets.  Therefore,  while  the  issuer  could  omit  the  information  on  the  State  as 
guarantor, information on the guarantee should be at least included in the prospectus 
for reasons of certainty in the securities markets.  

Investor protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 
quo 

Exclude 
information 
only on 
guarantor  

Exclude 
information on 
guarantor and 
guarantee 

0 

0 

-- 

0 

0 

-- 

0 

+ 

++ 

0 

+ 

+ 

0 

+ 

+ 

For  reasons  of  reduction  of  administrative  burden,  certainty  and  effectiveness,  the 
preferred option is to amend the Prospectus Directive and clarify that in case an offer 
of  securities  is  guaranteed  by  a  Member  State,  there  is  no  need  to  include  in  the 
prospectus  the  information  on  the  guarantor  State  (though  it  should  contain 
information about the guarantee).  

7.2.8.  Policy options in relation to the printed form (paper copy) of the prospectus 

Option 1. No action at EU level: the option of keeping the status quo would imply 
that, in the situations where the prospectus has been published in electronic form, the 
persons  obliged  to  deliver  the  prospectus  would  have  to  provide  a  paper  copy  if 
requested to do so by the investor (the "baseline scenario").  

Option 2. Abolish the obligation to deliver a paper copy of the prospectus: the 
option  of  abolishing  this  obligation  would  be  positive  in  terms  of  reducing  the 
administrative burden for the person obliged to handle the prospectus to the investor 
(be  it  the  offeror,  the  person  asking  for  the  admission  to  trading  or  the  financial 
intermediaries placing or selling the securities). However, it will reduce notably the 
level  of  investor  protection  because  of  the  existing  digital  divide,  namely  in  cases 
where the investor has no access to internet. The abolition of this obligation would 

75 

See http://ec.europa.eu/eurostat/ 

EN 

40 

   EN 

 
 
 
                                                 
have a negative impact in the confidence of the consumers because it would create 
discrimination between investors depending on whether they have internet access or 
not. 

Investor 
protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the 
status quo 

Abolish the 
paper copy 
obligation 

0 

-- 

0 

-- 

0 

++ 

0 

0 

0 

0 

For reasons of investor protection and consumer confidence the preferred option is to 
maintain  the  obligation  of  providing  a  copy  paper  of  the  prospectus  in  the  case 
described in Article 14.7 of the Prospectus Directive. 

7.2.9.  Policy options in relation to the translation of the summary of the prospectus 

Option 1. No action at EU level: the option of keeping the status quo would imply 
that the issuer or the person responsible for drawing up the prospectus would have to 
provide the translations of the summary of the prospectus into the languages of the 
Member States included in the scope of the cross-border offer or admission to trading 
(the "baseline scenario"). 

Option 2. Abolish the obligation to translate the summary of the prospectus: the 
option of abolishing this obligation would reduce the administrative burden for this 
type  of  offers,  because  the  person  responsible  for  drawing  up  the  prospectus  could 
save  the  cost  of  the  translations.  However,  this  solution  would  be  seriously 
detrimental for investor protection. In accordance with Article 5.2 of the Prospectus 
Directive,  the  summary  of  the  prospectus  reflects  the  essential  characteristics  and 
risks associated with the issuer, any guarantor and the securities. In cases where the 
prospectus is "passported" to countries where the investors do not speak the language 
in which the prospectus is drawn up it is essential that investors receive at least the 
summary  of  the  prospectus  in  a  language  that  they  can  understand.  The  option  of 
abolishing  this  obligation  would  undermine  consumer  confidence  because  it  would 
be  contrary  to  the  main  objective  of  the  Prospectus  Directive:  to  provide  investors 
with information necessary to enable them to make an informed investment decision 
(Article 5 of the Prospectus Directive). 

Investor protection 

Consumer 
confidence 

Reduction of 
administrative 
burden 

Certainty 

Effectiveness 

Keep the status 
quo 

Abolish the 
translation of 
the summary  

0 

-- 

0 

-- 

0 

++ 

0 

0 

0 

0 

EN 

41 

   EN 

 
 
 
For reasons of investor protection and consumer confidence the preferred option is to 
maintain the obligation of translating the summary of the prospectus as required by 
Article 18.1 of the Prospectus Directive. 

8. 

ANALYSIS OF IMPACTS 

8.1. 

Impact on stakeholders 

The following table shows the impact of the changes comprising the preferred policy 
options in relation to the main stakeholders.  

    Impact on 
stakeholders 

Investors 

Companies 
raising capital 

Financial 
intermediaries 

Supervisors 

Other stakeholders 

Scenario 

Clarification of 
the retail cascade 
regime 

Alignment of 
qualified 
investors and 
professional 
clients 

Investors to benefit 
from the fact that a 
prospectus will be 
required in case of 
subsequent offers of 
securities through 
financial 
intermediaries (in 
case the offer is not 
exempted in 
accordance with the 
PD).  

Investors that are 
considered 
professional clients 
under MiFID will 
benefit from the 
treatment of 
qualified investors 
under the Prospectus 
Directive. They will 
have more 
investment 
opportunities as they 
will have easier 
access to private 
placements. 

No impact 

Companies 
raising capital 
through private 
placements will 
benefit from a 
wider spectrum 
of potential 
investors. 

Supervisors 
will have a 
common and 
clear legal 
framework for 
dealing with 
retail cascade 
issues. 

A reduction of 
the use of the 
registers of 
qualified 
investors is 
expected. 
Supervisors 
may devote less 
resources to the 
maintenance of 
such registers 

Intermediaries 
acting in 
association with 
the issuer will 
benefit from the 
fact that they will 
not have to draw 
up a new 
prospectus for the 
subsequent offers 
as they could rely 
on the existing 
prospectus of the 
issuer, if updated. 

Financial 
intermediaries 
will be able to 
prepare private 
placements in a 
more effective 
manner as they 
will be entitled to 
use their list of 
professional 
clients for the 
purposes of 
private 
placements.  

EN 

42 

   EN 

 
 
 
    Impact on 
stakeholders 

Investors 

Companies 
raising capital 

Financial 
intermediaries 

Supervisors 

Other stakeholders 

Financial 
intermediaries 
acting as offeror 
will have the 
same benefits as 
the issuers.  

Supervisors 
will find easier 
to supervise 
whether the 
right of 
withdrawal ahs 
been respected, 
as there will be 
only one period 
governing each 
offer. 

Scenario 

Harmonisation of 
the time frame for 
the right of 
withdrawal 

Issuers will be 
able to set the 
period. 
Therefore they 
will have 
certainty at 
every moment 
on when the 
right of 
withdrawal 
could be 
exercised, 
regardless the 
Member State 
where the 
investors are 
based. 

Investors will benefit 
from the clarity of 
having a common 
time frame in the EU 
for the exercise of 
the right of 
withdrawal 
governing a cross 
border offer. 
Investors from 
countries where 
currently longer 
deadlines are applied 
would be less 
protected and their 
confidence could 
decrease. However, 
this risk is mitigated 
by the fact that the 
issuer or offeror will 
be entitled to extend 
the deadline in 
accordance with 
national consumer 
protection traditions  

No impact 

Employees will be 
protected by 
receiving tailored 
information for the 
type of offer 
according to the 
document provided 
in article 4.1 (e). 

Companies will 
save the cost of 
producing a 
prospectus 
when offering a 
financial 
participation to 
their employees 

Supervisors 
will not have to 
devote 
resources to 
approve 
prospectusses 
for this type of 
offers. 

Exemption for 
employee shares 
schemes 

No impact 

No impact 

No impact 

Standardized 
summary 

A standardized 
summary will 
enhance investor 
protection and 
consumer 
confidence. 
Moreover, investors 
will be will be able 
to compare with 
other products and 
make more efficient 
investment decisions.  

EU employees 

As a consequence 
of the exemption, 
some companies are 
likely to be 
encouraged to offer 
financial 
participation to 
their employees. 
These schemes are 
notably addressed 
to non-executives 
employees. 
Therefore many EU 
workers will benefit 
from these type of 
schemes. 

EN 

43 

   EN 

 
 
 
    Impact on 
stakeholders 

Investors 

Companies 
raising capital 

Financial 
intermediaries 

Supervisors 

Other stakeholders 

Scenario 

Deletion of 
Article 10 

No impact  

No impact. Investors 
have already access 
to the regulated 
information in 
accordance to the 
Transparency 
Directive 

Companies will 
save the cost of 
producing the 
annual 
document 
referred in 
Article 10 

Supervisors 
will not need to 
devote 
resources to 
oversight the 
fulfilment by 
the issuers of 
the requirement 
in Article 10 

No impact. Investors 
will be protected 
because all the EU 
competent authorities 
apply the same 
standards of investor 
protection when 
approving 
prospectuses. 

Permit the choice 
of home Member 
State to all non-
equity offers 

Investors will benefit 
from the fact that the 
prospectus will be 
tailored for rights 
issues. The fact that 
the cost for such a 
prospectus decreases 
will permit more 
public offers of 
rights.  

Proportionate 
prospectus for 
rights issues 

Issuers will be 
able to arrange 
cross-border 
offers 
according to the 
strategy that 
better suits their 
needs. 

Issuers of 
securities that 
are not 
denominated 
(like structured 
securities) will 
benefit from the 
possibility to 
choose the 
competent 
authority. 

Companies will 
find more 
attractive and 
easier to raise 
capital via 
rights issues as 
a consequence 
of the reduction 
of the cost of 
producing a 
rights 
prospectus. 

No impact 

No impact  

No impact 

No impact 

Shareholders 

The fact that the 
cost for such a 
prospectus 
decreases will 
permit more public 
offers of rights. 
Issuers may be less 
inclined to 
circumvent the 
costs of making a 
public offer of 
rights by using the 
exemptions of the 
Directive to carry 
out private 
placements (where 
shareholders are as 
a consequence 
excluded from the 
increase of capital 
and their share of 
capital diluted) 

EN 

44 

   EN 

 
 
 
 
    Impact on 
stakeholders 

Investors 

Companies 
raising capital 

Financial 
intermediaries 

Supervisors 

Other stakeholders 

Scenario 

Proportionate 
prospectus for 
small quoted 
companies/credit 
institutions. 

Proportionate 
prospectus for 
offers of 
securities 
mentioned in Art. 
1.2(j) (small 
credit institutions)  

No need to 
include 
information about 
the State 
guarantor 

Small quoted 
companies will be 
encouraged to raise 
capital in the 
securities markets. 
Investors will benefit 
from the wider range 
of investment 
opportunities. 
Investors would also 
receive a tailored 
prospectus in case 
they want to invest in 
small quoted 
companies 

Small credit 
institutions will be 
encouraged to raise 
capital in the 
securities markets. 
Investors will benefit 
from the wider range 
of investment 
opportunities. 
Investors would also 
receive a tailored 
prospectus in case 
they want to invest in 
these securities 

No impact. There is 
already sufficient 
information about 
the States available 
to the public. 

Small quoted 
companies can 
be expected to 
have better 
access to 
finance. The 
cost of 
producing a 
prospectus will 
be balanced 
with the 
benefits of 
going public. 

Small credit 
institutions can 
be expected to 
have better 
access to 
finance. The 
cost of 
producing a 
prospectus will 
be balanced 
with the 
benefits of 
going public. 

The cost of 
producing the 
prospectus will 
be reduced and 
therefore it will 
be less costly to 
raise capital for 
this type of 
offers. 

No impact 

No impact 

SMEs 

The special 
treatment for small 
quoted companies 
can be expected to 
facilitate SME the 
fundraising in the 
securities markets 

No impact 

No impact  

No impact 

Supervisors 
will no need to 
examine that 
part of the 
prospectus. 

8.2. 

Other impacts 

8.2.1. 

Impacts on the environment, employment and third countries 

It is not expected that the changes in the Prospectus Directive are going to have any 
direct  impact  on  the  natural  environment  or  on  the  gender  policy  of  the  EU  or  on 
third  countries.  Environmental  benefits  may  increase  by  repealing  the  obligation  to 
provide on investors' request printed version of the prospectus. However this will be 
detrimental to investors' protection.  

The extension of the employee share scheme exemption is likely to have a positive 
impact in terms the social and employment policy of the EU. As explained in section 
3.2.1,  under  the  existing  regime  companies  are  penalised  if  they  offer  financial 
participation schemes to common employees, because they have to produce a costly 
prospectus; this is not the case for offers addressed to employees with executive level 

EN 

45 

   EN 

 
 
 
and  directors,  because  in  this  case  the  company  can  use  the  exemption  of  Article 
3.2(b)  of  the  Prospectus  Directive76.  The  change  proposed  by  the  European 
Commission  will  eliminate  this  discrimination  for  the  ordinary  employees  and  it  is 
expected that many EU workers will benefit from this type of schemes in the future. 
The benefits of financial participation are highlighted in the Communication from the 
Commission on a framework for the promotion of employee financial participation77. 

The  flexibility  provided  by  the  extension  of  the  home  Member  State  choice  for  all 
offers  of  non-equity  securities  (deletion  of  €1.000  threshold  in  Article  2.1.m  (ii)  of 
the  Prospectus  Directive)  will  make  EU  markets  more  attractive  for  third  country 
issuers offering non-denominated non-equity securities or non-equity securities with 
a  denomination  per  unit  below  €1.000  threshold.  Under  the  current  regime,  the 
determination  of  the  home  Member  State  for  the  issuers  offering  such  securities  is 
governed by a rigid system set out in Article 2.1.(m) (iii)78. Apart from that, no major 
impact  on  third  countries  is  expected  from  the  changes  proposed  by  the  European 
Commission. 

8.2.2. 

Impacts on small and medium size enterprises  

The  short  form  disclosure  regime  described  in  section  7.2.5  could  have  a  positive 
impact  for  those  small  and  medium  size  enterprises  (SMEs)  searching  to  finance 
their  business  in the  securities markets. The cost of producing  a  prospectus  will be 
reduced for these SMEs. In a similar way, the short form disclosure regime described 
in section 7.2.6 will facilitate the raise of capital for small credit institutions. Easier 
access  to  funding  will  enhance  the  development  of  the  small  entities  and  will 
promote the emergence of new local and regional actors competing in the financial 
markets. 

Non-quoted  SMEs  willing  to  launch  financial  participation  schemes  with  their 
employees  will  also  benefit  from  the  extension  of  the  employee  share  schemes 
exemption described in section 7.2.1. The estimation  of reduction  in administrative 
burden of both measures is detailed in the next section. 

The  rest  of  the  changes  suggested  by  the  European  Commission  are  not  likely  to 
have any direct impact on SME. 

76 

77 

78 

Offers of securities addressed to less than 100 natural or legal persons per Member State are exempted 
from the obligation to publish a prospectus. 
'The main reasons for enterprises to introduce financial participation are to encourage employees to take 
a greater interest in the success of the company, to create a feeling of belonging to the company and 
sharing common goals, and to encourage a greater alignment of employees’ interests with those of the 
shareholders. Financial participation is also an important instrument for recruiting and retaining staff. In 
addition, it improves the motivation of employees, enhances their loyalty and long-term commitment, 
increases  productivity,  and  improves  competitiveness  and  profitability.  Finally,  financial  participation 
can  also  be  an  important  instrument  for  raising  capital,  in  particular  in  the  case  of  start-up  firms'. 
Communication  from  the  Commission  on  a  framework  for  the  promotion  of  employee  financial 
participation. COM(2002) 364, page 6. 
The  home  Member  State  for  third  country  issuers  offering  equity  securities  and  non-equity  securities 
with a denomination below €1.000 is the one where the  securities are offered for the first time after the 
entry into force of the Prospectus Directive. 

EN 

46 

   EN 

 
                                                 
8.3. 

Estimation of reduction in administrative burden 

This table shows the identifiable reductions of administrative burdens on an annual 
basis.  The  methodology  for  calculating  the  administrative  burden  can  be  found  in 
Annex VI79.  

Obligation  

Wage costs 
reduction per 
occurrence  

Overhead 
by 
occurrence 
(25% of 
wage 
costs) 

Frequency  

Administrative 
burden by 
occurrence 

Number of 
companies 
affected by 
the changes 

TOTAL admin burden 

Deletion of 
Article 10 of the 
Prospectus 
Directive, to 
avoid duplication 
of transparency 
requirement 

Exemption of all 
kinds of 
Employee Shares 
Schemes 
launched in the 
EU from the 
obligation to 
publish a 
prospectus 

Reduction of 
disclosure 
requirements for 
rights offers 

Reduction of 
disclosure 
requirements for 
small quoted 
companies 

Exclude 
information on 
guarantor in case 
of government 
guarantee 
schemes 

€ 2,000 

€ 500 

1 

€ 2,500 

12,000 

€ 30,000,000 

€ 392,000 

€ 98,000 

1 

€ 490,000 

37 

€ 18,130,000 

€ 186,400 

€ 46,600 

1 

€233,000 

343 

€ 79,919,000 

€ 39,200 

€ 9,800 

0.5 

€ 24,500 

7056 

€ 172,872,000 

€ 23,200 

€ 5,800 

1 

€ 29,000 

28 

€ 812,000 

Total € 

€ 301,733,000 

79 

For  the  purpose  estimating  the  reduction  of  administrative  burdens  for  the  preferred  policy  options, 
different elements in the calculations are provided. The wage cost is the estimated direct average wage 
cost of performing the relevant tasks. In addition an overhead of 25% is added to the calculation of the 
reduction of the administrative burden. In cases where only the total cost of relevant tasks have been 
obtained  an  identical  proportionate  distribution  between  the  wage  cost  and  the  overhead  has  been 
assumed and used for the calculation presented in the table in section 8.3. The frequency refers to the 
number of times per year the task is undertaken by the firms included in the calculation. The number of 
companies  refers  to  the  number  of  entities  that  are  assumed  to  benefit  from  the  reduction  in  the 
administrative burden in a given year.  

EN 

47 

   EN 

 
 
 
 
 
 
 
 
                                                 
The  identifiable  reduction  of  administrative  burdens  from  the  preferred  options 
amounts to approximately € 302 million  on an annual basis.  

8.4. 

Summary of the final outcome 

In  view  of  the  conclusions  reached  in  this  impact  assessment,  the  European 
Commission  considers  appropriate  to  present  a  proposal  amending  the  Prospectus 
Directive80. The proposal should aim at solving the problems identified in this impact 
assessment:  

–  Article  3.2  of  the  Prospectus  Directive  should  be  amended  to  clarify  that 
intermediaries  should  not  be  obliged  to  produce  a  new  prospectus  for  each 
subsequent offer as long as they have the possibility to use the initial prospectus 
of the issuer (with the condition that such a prospectus is valid).  

–  The  definition  of  qualified  investor  in  Article  2.1(e)  should  be  modified  to 

encompass the persons that are considered professional clients under MiFID. 

–  The time frame for the exercise of the right of withdrawal in Article 16.2 of the 
Prospectus Directive should be harmonised in all EU Member States; nevertheless 
issuers should have the possibility to expand the time frame voluntarily. 

–  The content of the summary of the prospectus should be standardised in line with 
the  packaged  retail  investment  products  approach  to  be  set  up  in  spring  by  the 
European Commission. The limit of 2.500 words should be deleted from recital 21 
of the Prospectus Directive. 

–  All  employees  in  the  EU  should  have  the  same  opportunities  of  financial 
participation.  The  exemption  for  employee  shares  schemes  should  be  extended 
accordingly in Article 4.1(e) of the Prospectus Directive. 

–  The  disclosure  requirements  of  Article  10  of  the  Prospectus  Directive  should  be 

abolished. 

–  Issuers  of  non-equity  should  choose  the  home  Member  State  regardless  of  the 
denomination  per  unit  of  the  offer.  The  threshold  of  €1.000  should  be  deleted 
from Article 2.1(m) of the Prospectus Directive. 

–  The  raise  of  capital  through  the  issuance  of  rights  should  be  subject  to 
proportionate  disclosure  requirements,  likewise  the  raise  of  capital  of  small 
quoted  companies  and  small  credit  institutions.  Article  5  of  the  Prospectus 
Directive  should  reflect  this  principle  and  the  European  Commission  should  be 
empowered  to  put  in  place  implementing  legislation  specifying  the  disclosure 
requirements in this regard. 

80 

For further additional minor changes see Annex IX.  

EN 

48 

   EN 

 
 
                                                 
–  Article  1.3  of  the  Prospectus  Directive  should  clarify  that  issuers  of  securities 
guaranteed  by  a  Member  State  are  not  obliged  to  include  in  the  prospectus 
information about the State guarantor.  

9. 

MONITORING AND EVALUATION 

The  Commission  is  the  guardian  of  the  Treaty  and  therefore  will  monitor  how 
Member  States  have  implemented  the  changes  of  the  Prospectus  Directive.  Where 
needed,  the  Commission  services  will  offer  assistance  to  Member  States  for  the 
implementation  of  the  legislative  changes  in  the  form  of  transposition  workshops 
with all the Member States or bilateral meetings at the request of any of them. When 
necessary,  the  Commission  will  pursue  the  procedure  set  out  in  Article  226  of  the 
Treaty  in  case  any  Member  State  fails  to  respect  its  duties  concerning  the 
implementation and application of Community Law.  

The  evaluation  of  the  consequences  of  the  application  of  the  legislative  measure 
could take place three years after the entry into force of the legislative measure in the 
form  of  a  Commission  report  to  the  Council  and  the  European  Parliament.  The 
Commission  will  be  monitoring  the  application  of  the  Prospectus  Directive,  as 
amended, through CESR, ESME and an extensive and continuous dialogue with all 
major  stakeholders,  including  market  participants  (issuers,  intermediaries  and 
investors),  and consumers. It may  also use  of  the  findings  of  studies  carries  out  by 
stakeholders. The assessment will be carried out along the following criteria: investor 
protection,  consumer  confidence,  effectiveness,  market  efficiency,  legal  certainty, 
administrative burdens. The main elements that would be used during the evaluation 
would be the following:  

–  investor satisfaction with the functioning of the prospectus, in particular with the 

summary of the prospectus. 

–  evolution  of  the  functioning  of  the  prospectus  for  the  placement  of  securities 

through financial intermediaries in the EU;  

–  evolution of the functioning and number of qualified investors and issuers/offerors 

using the national register of qualified investors;  

–  times that issuers choose a home Member State different than the one where they 
have their registered office for offers of non-equity securities with a denomination 
below €1.000;  

–  number of employee share schemes launched in the EU;  

–  evolution of rights issues in the EU;  

–  number of small quoted companies raising capital in the EU;  

–  number of credit institutions offering the securities mentioned in Article 1.2.(j) of 

the Prospectus Directive;  

–  evolution of the private placements versus public offers.  

EN 

49 

   EN 

 
ANNEX I  

1. 

CESR Report  

Based on the findings presented in the report, it seems that most market participants 
are satisfied with the new European legislation on prospectuses. Although they have 
highlighted a few obstacles in the practical application of the passport, they consider 
that the passport mechanism envisaged in the Prospectus Directive is working much 
better than the previous mutual recognition process and has lead to an increase in the 
number  of  pan-European  offers.  Nevertheless,  they  have  also  identified  certain 
provisions  in  the  Prospectus  Directive  and  Prospectus  Regulation  that  are  causing 
some practical difficulties.  

The report identifies those aspects where CESR considers there is a need to further 
assess whether legislative action would be necessary. Among others, concerns have 
been  raised  in  respect  to  the  limited  scope  of  the  exemption  of  publishing  a 
prospectus  for  offers  or  admissions  to  trading  on  regulated  markets  of  securities  to 
employees;  the  lack  of  specific  regulation  in  relation  to  the  registration  document 
(passport,  supplements,  etc.);  the  need  to  assess  the  usefulness  of  the  annual 
document to be published in accordance with Article 10 of the PD; the circumstances 
when a supplement should be published (linked to the withdrawal right granted for 
investors in such cases); and the interpretation of the “re-sale” provisions in Article 
3.2 of the PD.  

2. 

ESME Report  

Based on the findings presented in the report, ESME is convinced that the Prospectus 
Directive should be amended in order to facilitate the achievement of the following 
objectives:  

–  to  promote  retail  investors  and  employees  with  an  access  to  the  full  range  of 

investment opportunities;  

–  to  promote  market  efficiency  in  public  offerings,  trading  and  listing  securities 

within a single European capital market;  

–  to increase the use of a prospectus by investors for effectively analyzing prospects 

and risks of a security prior to the investment decision;  

–  to disburden issuers from requirements that provide no significant added value in 

information to investors;  

–  to  achieve  a  better  balance  in  some  respects  of  the  allocation  of  risk  between 

issuers and investors;  

–  to reflect changes in the structure of international securities markets since the time 

when the Directive was negotiated in 2001 to 2003;  

–  to strengthen harmonization by achieving a common understanding of the rules by 

the national competent authorities.  

EN 

50 

   EN 

 
3. 

CSES Study 

The  study  suggests  that  any  review  of  the  prospectus  regime  should  focus  on 
reducing the cost burdens of specific requirements that are particularly burdensome 
and  that  only  marginal  changes  should  be  made  to  the  Prospectus  Directive.  The 
most important issues for change that were identified were the abolition of Article 10 
and  clarifications  to  the  definition  of  a  “public  offer”  to  reduce  legal  uncertainty 
surrounding the retail cascade.  

EN 

51 

   EN 

 
ANNEX II – OUTCOME OF THE CONSULTATION  

The  majority  of  the  contributors  welcomed  the  changes  suggested  by  the  European 
Commission. The outcome of the consultation could be summarised as follows: 

–  Respondents are very keen about the abolition of the annual document required in Article 

10 and the €1.000 threshold set Article 2.1.(m )(ii) of the Prospectus Directive.  

–  The  proposal  concerning  employees  share  schemes  is  generally  supported,  with  a  clear 
preference  for  a  wide  exemption  (i.e.  exempt  all  offers  of  securities  to  employees).  A 
minority  suggests  that  the  exemption  should  only  be  granted  to  third  country  companies 
that are listed in a market whose disclosure requirements are similar to those required in a 
regulated market in the EU. 

–  The suggestion for the alignment of the definitions of qualified investors and professional 
clients  is  generally  welcomed,  with  some  minor  technical  comments.  There  is  no 
consensus  among  stakeholders  on  whether  the  national  register  of  qualified  investor 
mentioned in Article 2.3 of the Prospectus Directive has to be suppressed or not. 

–  The majority of respondents favour the harmonisation of the time frame for the exercise of 
the right of withdrawal in two days, though there is no common position on whether the 
issuer should be entitled to extend the period for the exercise of such a right.  

–  The  majority  of  respondents  are  in  favour  of  exempting  issuers  from  the  obligation  to 
provide information about the State guarantor. However, some respondents made clear that 
the prospectus should contain the information about the guarantee. 

–  There were different approaches in relation to the issue of the retail cascade. A number of 
respondents agree with the suggestion of the deletion of the last sentence in Article 3.2 of 
the  Prospectus  Directive.  Some  others  consider  that  such  deletion  would  create  more 
uncertainty and advocate for a clarification of the functioning of the prospectus in relation 
to the placement of securities through financial intermediaries.  

–  Divergent  views  have  been  expressed  concerning  rights  issues.  A  significant  number  of 
respondents  are  against  the  total  exemption.  There  is  some  support  for  a  short  form 
disclosure  regime  for  rights  issues.  A  minority  expressed  disagreement  with  a  special 
treatment for rights issues. 

–  There are divergent views concerning the treatment of small quoted companies. A number 
of respondents are in favour of raising the threshold of 2,5 Million €  of Article 1.2(h) of 
the Prospectus Directive. Others are sympathetic with the idea of a short form disclosure 
regime  for  the  prospectus  of  the  small  quoted  companies.  Finally,  some  others  point  out 
that  the  small  quoted  companies  imply  higher  risk  and  therefore  should  produce  a  full 
prospectus in case they want to raise capital in the securities markets.  

–  There  is  agreement  on  the  need  of  improvement  in  relation  to  the  summary  of  the 

prospectus. Stakeholders provided different ideas about how it could be improved. 

–  Some respondents took the opportunity to raise other issues that were not included in the 

consultation. 

EN 

52 

   EN 

 
ANNEX III – SUMMARY OF DISCUSSIONS AND LIST OF PARTICIPANTS IN THE MEETING HELD 
IN BRUSSELS ON 12 MARCH 2009 ON THE CONSULTATION OF THE PROSPECTUS DIRECTIVE 

DG MARKT services held a meeting with a number of stakeholders associations on 12 March 
2009. The aim of the meeting was to have an exchange of views on the Prospectus Directive 
review.  The  meeting  was  attended  by  representatives  from  issuers,  intermediaries,  investors 
and consumers (see list attached). 

1.  Investor  protection  and  market  efficiency:  what  elements  of  the  Prospectus  Directive 

would you improve in order to enhance investor protection and market efficiency?  

–  Stakeholders expressed general support to the initiative of the Commission.  
–  A  number  of  participants  signalled  that  there  are  still  differences  in  the  way 

the directive has been implemented and applied by Member States. 

2.  Measures to facilitate the raising of capital: 

•  Do you see benefits in the proposed alignment of the definition of professional clients 
in  MiFID  and  qualified  investors  in  the  Prospectus  Directive  (Paragraph  3.1  of  the 
background document)?  

–  Participants supported the alignment of both definitions. 

•  Do you see any benefit in the proposed suppression of the threshold of 1000€ for the 

free  determination  of  the  Home  Member  State  for  issues  of  non-equity  securities 
(Paragraph 3.6 of the background document)?  

–  The  majority  of  the  participants  supported  the  Commission  proposal.  The 
change  proposed  by  the  Commission  allows  issuers  to  choose  the  competent 
authority that is more familiar with the product and extends the choice of home 
Member State to derivative securities (which are not denominated).  

•  Do you consider that the deletion of Article 10 of the Prospectus Directive will help to 
reduce  administrative  burdens  in  the  European  Union  (Paragraph  3.4  of  the 
background document)? 

–  There was unanimous support for the deletion of Article 10 of the Prospectus 

Directive. 

•  Will  the  proposed  harmonisation  of  the  time  frame  for  the  exercise  of  the  right  of 
withdrawal (Paragraph 3.5 of the background document) facilitate cross-border offers?  

EN 

53 

   EN 

 
 
 
 
 
 
 
 
 
 
 
Participants expressed various views: 

–  support of the Commission approach to harmonise this deadline to two days; 
–  harmonisation of the deadline – however a longer period than two days should 

be envisaged; 

–  harmonisation  of  the  deadline  but  possible  extension  by  the  issuer  or  the 

– 

Member State; 
the  right  of  withdrawal  should  not  be  permitted  after  the  settlement  of  the 
security; 

–  positive events should not trigger the right of withdrawal. 

3.  Measures to reduce the cost of raising capital: 

•  How small quoted companies will be affected by the two alternative proposals of the 
European Commission (Paragraph 4.3 of the background document)? Which solution 
will be more effective in reducing administrative burdens and raising capital? Do you 
have any other suggestion?  

–  General  support  for  a  proportionate  disclosure  regime;  another  alternative 
in  Article  1.2(h)  of  the  Prospectus 

suggested:  the  threshold  of  €2.5  million 
Directive should be raised to €10 million. 

•  Do  you  think  the  proposal  on  the  rights  issues  (Paragraph  4.5  of  the  background 
document) will reduce administrative burdens and facilitate business by boosting the 
raise of capital?  

Various views expressed: 

–  a total exemption for rights issues from the prospectus requirements would not 

be acceptable; 

–  rights issues should be exempted from the obligation to publish a prospectus in 

– 

case the offer is addressed to existing shareholders; 
 a short form disclosure regime ("mini-prospectus") could be requested in case 
of increase of capital not reserved in exclusive to shareholders. 

4.  Measures to clarify liability: 

•  With reference to the distribution by "retail cascade", do you see any improvement in 
terms  of  legal  certainty  and  business  facilitation  coming  from  the  clarification 
proposed by the European Commission (Paragraph 3.2 of the background document)? 
Do you see any negative unintended consequence? Do you have any other suggestion?  

–  The majority of the participants opposed the deletion of last sentence in Article 

3.2 of the Prospectus Directive as proposed by the Commission. 

–  Some  participants  suggested  an  exemption  from  the  obligation  to  publish  a 
prospectus  for  the  subsequent  offers  of  intermediaries  that  are  not  acting  in 

EN 

54 

   EN 

 
 
 
 
 
 
 
 
concert with the issuer. Moreover it was suggested that issuers should not be 
obliged  (and  therefore  held  liable)  for  updating  the  prospectus  for  these 
subsequent offers. 

• 

In your view, what should be the priorities for a harmonized liability regime under the 
Prospectus Directive (Paragraph 4.7 of the background document)?  

–  Some participants called for the harmonisation of the rules of conflicts of law. 
It was mentioned that the lack of harmonised rules on liability produces high 
cost for issuers and financial intermediaries. 

5.  Measures to enhance investor protection:  

•  How would you improve the effectiveness of the Prospectus and its summary in terms 
of investor protection and completeness and accuracy of information? Would the "Key 
Investor  Information  approach"  be  a  suitable  alternative  for  the  summary  of  the 
prospectus (Paragraph 4.1 of the background document)?  

–  All participants agreed that the summary is not functioning effectively and it 

does not provide suitable information to retail investors.  

–  The  "Key  Investor  Information  approach"  (KII)  was  considered  useful  for 
various  financial  products  but  not  for  equity.  However,  some  participants 
warned  that  KII  approach  should  not  be  applied  as  such  to  the  securities 
covered by the Prospectus Directive. 

•  Do  you  envisage  any  negative  effects  in  the  exemption  of  issuers  from  providing 
additional information in cases where Member States act as guarantors (Paragraph 4.4 
of the background document)?  

– 

It was suggested that in these cases the prospectus should include a warning 
inviting  the  investors  to  look  at  the  creditworthiness  of  the  Member  State 
guarantor. 

6.  Measures  to  promote  level  playing  field  in  employee  financial  participation:  Do  you 
consider pertinent to create a level playing field for non-listed companies and companies 
listed  in  a  non-regulated  market  and  widen  consequently  the  scope  of  the  Employee 
Shares  Schemes  exemption  to  cover  these  companies  (Paragraph  3.3  of  the  background 
document)?  

–  All  participants  expressed  general  satisfaction  with  the  proposal  by  the 

Commission in relation to this issue. 

7.  Any other issue.  

EN 

55 

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Some  of  the  participants  raised  other  technical  issues  not  included  in  the 
consultation: 

–  The threshold in 1.2(j) should be raised from €50 million to €500 million. 
– 

Issuers should be able  to passport  and supplement the registration  document 
of the prospectus. 
It  should  be  clarified  how  to  supplement  information  contained  in  the  final 
terms. 

– 

–  The validity of the base prospectus should be extended form 12 to 24 months. 
–  The summary of the prospectus should include information about the rating of 

the securities.  

List of participants 

Name  

Burn 

First Name  

Company  

Lachlan 

ICMA 

Büscher 

Patrick 

European Savings Banks Group 

Byrne 

Daryl 

FESE 

Charlton 

Lorraine 

SIFMA - EPMD 

Content 

Cooper 

Dariosecq 

Ewing 

Fischer zu 
Cramburg 

Jean-Michel 

International Association for Financial Participation 

Janet 

Sylvie 

Ruari 

Linklaters 

Association Française des Marchés Financiers 

ICMA 

Ralf 

Eusipa 

Fiedler 

Larissa 

European Fund and Asset Management Association 

Gugliotta 

Gianluigi 

European Forum of Securities Associations 

Hemetsberger 

Walburga 

EAPB 

Inel 

Jalbert 

Kohl 

Marras 

Maysey 

Meeus 

Burçak 

FESE 

Kate 

Ulrike 

Quoted Companies Alliance 

European Savings Banks Group - MS 

Graziella 

European Fund and Asset Management Association 

Andy 

Luc 

IMA 

Baker & McKenzie 

EN 

56 

   EN 

 
 
Misasi 

Luca 

European Forum of Securities Associations 

Neundoerfer 

Nikolaus 
Dominik 

Eusipa 

Piller 

Lee 

CESR 

Pina Da Silva 

Paulo 

EuropeanIssuers 

Prache 

Preuße 

Priester 

Ruari 

Spatola 

Stonefield 

Guillaume 

FAIDER 

Thomas 

VÖB 

Robert 

Ewing 

Paola 

Greg 

EBF's Banking Supervision 

ICMA 

EuropeanIssuers 

White & Case 

Verplancke 

Marnix 

KBC Securities 

Warken 

François 

Arendt & Medernach 

EN 

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ANNEX IV – ASSESSMENT OF THE PROSPECTUS DIRECTIVE  

1. 

BACKGROUND  

The  Prospectus  Directive  was  adopted  in  November  2003  in  the  context  of  the 
Financial  Services  Action  Plan  proposed  by  the  European  Commission  in  May 
199981.  The  Directive  lays  down  the  rules  governing  the  prospectus  to  be  made 
available to the public in case a public offer or an admission to trading of transferable 
securities  in  a  regulated  market  takes  place  in  the  EU.  The  prospectus  contains 
information about the offer, the issuer and the securities, and has to be approved by 
the  competent  authority  of  a  Member  State  before  the  launch  of  the  offer  or  the 
admission to trading of the securities. Particular aspects of the Prospectus Directive 
are  developed  in  the  Prospectus  Regulation82.  Two  major  principles  inspire  the 
Prospectus  Directive  which  applies  since  2005:  investor  protection  and  market 
efficiency.  One  of  the  major  achievements  of  the  Prospectus  Directive  is  the 
introduction  of  a  "passporting  mechanism":  the  prospectus  approved  by  the 
competent authority of one Member State (the "home Member State") is valid for the 
entire Community without additional scrutiny by the authorities of the other Member 
State  (the  "host  Member  States").  This  is  considered  to  be  a  major  achievement  in 
terms of integration of the securities markets in the EU.  

10. 

GENERAL ASSESSMENT OF THE PROSPECTUS DIRECTIVE  

All inputs referred to under section 2 of the impact assessment are positive in their 
general assessment of the overall effect of the Prospectus Directive. In particular the 
Directive has introduced a new mechanism for notification; created a harmonised and 
coherent  structure  of  disclosure  requirements  (able  to  take  into  account  the 
specificity  of  various  financial  instruments  as  a  result  of  a  system  of  different 
building blocks and schedules) and set in place a simplified language regime.  

The  prospectus  regime  appears  to  have  made  it  easier  to  offer  securities  and  admit 
them to trading, either in one country or in several countries at the same time. The 
survey  conducted  by  CSES,  as  part  of  its  study,  shows  that  a  large  majority  of 
respondents  are  satisfied  with  the  way  the  prospectus  regime  works.  Many 
interviewees  mentioned  that,  after  some  initial  difficulties,  both  regulators  and 
market  participants  are  gaining  experience  of  the  prospectus  regime.  Most  of  the 
early  problems  have  been  overcome,  progressively  generating  better  quality 
prospectuses  and  reducing  the  average  approval  time83.  Similarly,  the  cost  of 
compliance decreased once participants had become used to the regime.  

81 

82 

83 

Communication  of  the  Commission  "Financial  Services:  Implementing  the  framework  for  financial 
markets. Action Plan" COM(1999)232, 11.05.99 
Commission  Regulation  No  809/2004  of  29  April  2004  implementing  Directive  2003/71/EC  of  the 
European Parliament and of the Council as regards information contained in prospectuses as well as the 
format,  incorporation  by  reference  and  publication  of  such  prospectuses  and  dissemination  of 
advertisements. OJ L149/1, 30.4.2004, p. 1-187 
This  is  confirmed  by  data  on  IPOs  in  the  EU.  According  to  the  PricewaterhouseCoopers  IPO  Watch 
Europe Survey, the third quarter of 2005 saw a significant drop in terms of value and number of IPOs, 

EN 

58 

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The principal concerns expressed focused on the lack of uniform implementation in 
Member States and the divergent supervisory practices.   

10.1. 

Investor protection  

One  of  the  principal  objectives  of  the  Prospectus  Directive  is  investor  protection84. 
This  entails  the  need  to  ensure  that  complete  and  accurate  information  is  provided 
concerning  the  issuer  and  the  relevant  financial  instruments  so  that  investors  can 
make appropriate and informed investment decisions. To achieve this objective, the 
Directive  and  its  Implementing  Regulation  take  into  consideration,  among  other 
elements, the nature of the investors, notably the needs of retail investors.  

On  the  one  hand,  Article  5  of  the  Directive  prescribes  the  overriding  standard  that 
each  prospectus  should  attain:  a  prospectus  is  required  to  contain  all  information 
necessary to assess the assets and liabilities, financial position, profits and losses and 
prospects of the issuer and any guarantor, and the rights attaching to the securities. 
That  information  must  be  presented  in  a  form  that  is  easily  analysable  and 
comprehensible.  The  minimum  content  of  a  prospectus  is  further  specified  by  the 
Implementing  Regulation  and  is  intended  to  reflect  the  nature  of  the  issue  and  the 
securities,  including  information  on  whether  they  are  traditionally  aimed  at  the 
wholesale or the retail market. The Prospectus Regulation takes close account of the 
standards  approved  by  the  International  Organisation  of  Securities  Commissions 
(IOSCO)85.  

On  the  other  hand,  the  requirement  for  a  summary  as  an  integral  part  of  the 
prospectus86  for  "retail"  securities  was  intended  to  ensure  that  the  content  of  a 
prospectus  is  more  easily  accessible  to  retail  investors87.  This  provision  aims  at 
striking  a  balance  between  the  provision  of  comprehensive  information  and 
accessibility to non-professionals, as well as at counterbalancing the increasing trend 
to add detailed pieces of information in the prospectus as a way of shielding issuers 
from potential civil liability in relation to incomplete or inaccurate disclosure.  

In a survey conducted by CSES88 on investor protection under the prospectus regime 
(Figure 7), the majority of respondents considered that the Prospectus Directive has 
had a significant positive impact on the quality of information available to investors. 
However,  due  to  the  length  and  complexity  of  prospectuses,  concerns  have  been 

which  is  mainly  attributed  to  the  fresh  implementation  of  the  Prospectus  Directive.  Both  value  and 
volume of IPOs increased in the following quarters, suggesting ceteris paribus a progressive adaptation 
of the market to the new disclosure regime for issues. 
Recital 10 of the Prospectus Directive: "The aim of this Directive and its implementing measures is to 
ensure investor protection and market efficiency, in accordance with high regulatory standards adopted 
in the relevant international fora." See also recitals 16, 18, 19 and 21. 
The members of the International Organization of Securities Commissions (IOSCO) are generally the 
supervisory authorities of the countries that are parties to the organisation. The IOSCO counts a total of 
191 members, of whom 109 are ordinary, 11 associate and 71affiliate. They meet regularly to cooperate 
in promoting high standards of regulation; to exchange information on their respective experiences; to 
establish  standards  and  effective  surveillance  of  international  securities  transactions;  and  to  provide 
mutual assistance to promote the integrity of the markets through rigorous application of the standards 
and effective enforcement against offences. 
Article 5 (2) of the Prospectus Directive. 
With this in view, recital 21 limits the summary to 2 500 words.  
CSES Study, page 52.  

84 

85 

86 
87 
88 

EN 

59 

   EN 

 
                                                                                                                                                         
raised  by  market  participants  that  the  primary  aim  of  informing  investors  may  not 
actually be achieved.  

Fig. 7. Impact on the quality of information available to investors 

Options 
Positive Impact 
No Impact 
Negative Impact 
DK/No response 
Total 

Quality of information for 
investors 

Number of 
respondents 
47 
29 
4 
1 
81 
 Source: CSES study 

Percentage 
58.0 
35.8 
4.9 
1.2 
100.0 

Furthermore,  the  CSES  survey89  shows  that,  unlike  institutional  investors,  small 
retail  investors  do  not  on  average  make  use  of  prospectuses  for  their  investment 
decisions. However, the survey shows also that the prospectus has an important role 
to play as a legal document for investors and for issuers (62.9%). On the one hand, 
the  CSES  study  points  out  that  there  are  long  and  complex  prospectuses  because 
there are no limits to the overall length of the documents (other than the summary) 
and  there  are  potentially  very  severe  sanctions  if  information  are  omitted.  On  the 
other  hand,  the  legal  function  of  prospectuses  indicates  that  most  issuers  would 
probably  produce  a  prospectus  even  in  the  absence  of  mandatory  disclosure 
requirements because the benefits in terms of legal protection outweigh the costs of 
drafting the document.  

In addition, issuers (especially small and medium-sized companies) may be subject 
to  disproportionate  costs  and  burdens  that  are  not  justified  by  the  aim  of  effective 
investor protection90.  

10.2.  Market efficiency 

Recital  10  of  the  Prospectus  Directive  clearly  indicates  that  the  Directive  is  also 
aimed  at  ensuring  market  efficiency.  From  the  viewpoint  of  issuers,  this  can  be 
translated  into  a  reduction  of  costs  and  other  administrative  burdens  when  raising 
capital  across  the  EU.  The  passport  regime  has  facilitated  cross-border  offers  and 
listings  delivering  a  real  benefit  to  issuers:  the  Directive  has  generated  a  legal 
framework for cross-border transactions in European capital markets that goes well 
beyond the previous mutual recognition system established by its predecessor91. Data 
collected in the last three years on the number of passports sent and received show a 
steady increase in the number of pan-European offers, especially for debt issues92. In 
particular, the wide circulation of passports received across Member States seems to 

89 
90  
91 

92 

CSES Study, page 51.  
This issue is described and analysed more in detail in section 3.2.4 of this impact assessment.  
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. 
See Annex VIII.  

EN 

60 

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indicate that the passporting system succeeded in opening capital markets to a wider 
range of European countries compared to the previous system93.  

The language regime, which allows a prospectus drafted in a "language customary in 
the  sphere  of  international  finance"  to  be  used  across  Europe  and  requires  a 
translation  only  for  the  summary,  is  also  considered  as  an  improvement  that  has 
considerably reduced costs for issuers interested in accessing a wider pool of capital. 
According to the CSES survey, translation costs are no longer a significant issue in 
the  preparation  of  prospectuses,  although  there  were  initial  problems  in  the 
introduction of the language regime94.  

There  is  evidence  that  the  introduction  of  the  prospectus  regime  has  increased  the 
preparation costs of prospectuses to a certain extent, although much depends on the 
original prospectus legislation applicable in the Member States before the entry into 
force  of  the  Directive.  Nevertheless,  they  tend  to  decrease  over  time  as  a  result  of 
specialisation and economies of scale. On the whole, the evidence gathered seems to 
indicate that cost considerations are a substantial issue only for a minority of market 
participants,  mainly  small  and  medium-sized  issuers,  which  raise  capital  less 
frequently and for smaller amounts.  

The costs associated with the elaboration of a prospectus are part of the direct costs 
of a capital issue. The CSES study found that there were no significant differences in 
regulatory requirements and compliance costs that would motivate issuers to choose 
one  venue  over  another  in  Europe.  Additional  costs  of  preparing  a  prospectus  vary 
from issue to issue depending on the work that has already been done.  

Costs  include  both  in-house  costs  incurred  by  the  issuer  as  a  result  of  time  spent 
preparing  the  document  and  dealing  with  administrative  questions,  and  the  fees  of 
auditors  and  accountants,  legal  and  financial  advisers,  regulatory  fees,  translation 
fees, etc. all varying from issue to issue. The greatest expenses are accountancy and 
auditing  fees:  pro-forma  financial  statements,  forward-looking  statements  and 
historical  financial  information,  all  to  be  approved  by  auditors,  constitute  the  most 
significant cost.  

The CSES study provided the following estimates of the total costs of prospectuses, 
by type of prospectus (Fig. 8).  

Fig. 8. Total costs of prospectus by type of prospectus 

Average amount 
(€ thousand) 

Average amount 
(€ thousand) 

Equity Prospectus 
Legal Costs 
Accounting Costs 
Administrative Costs 
Translation 
Other costs 

Base Prospectus 
(continuous issue) 
Legal Costs 
Accounting Costs 
Administrative Costs 
Translation 
Other costs 

339 
409 
62 
16 
39 

73 
17 
10 
8 
32 

93 
94 

See Annex VIII.  
See CSES report, chapter 5.  

EN 

61 

   EN 

 
 
 
 
 
                                                 
Publication Costs(i.e.  
electronic publication) 
Total 

Non-Equity Prospectus 
Legal Costs 
Accounting Costs 
Administrative Costs 
Translation 
Other costs 
Publication Costs (i.e. 
 electronic publication) 
Total 

47 
912 

33 
11 
4 
6 
3 

6 
63 

Publication Costs(i.e. 
electronic publication) 
Total 
Supplemental 
Questionnaire  
Legal Costs 
Accounting Costs 
Administrative Costs 
Translation 
Other costs 
Publication Costs (i.e. 
electronic publication) 
Total 

Source : CSES survey 

4 
145 

11 
0 
6 
2 
0 

0 
19 

In addition, it should be taken into account that the costs are different for an initial 
public  offering  and  for  a  rights  issue.  A  member  of  ESME  provided  us  with  an 
estimation of costs and tasks involved in the preparation of a prospectus for an initial 
public  offering  in  Germany.  This  cost  estimate  can  be  considered  a  reasonable 
approximation of the average cost across all EEA member states. (Fig. 9)95.  

Fig. 9 Estimation of costs and tasks involved in the preparation of a prospectus for an IPO in Germany and other 
EEA member countries.  

Party 

Task 

Cost (in euro) 

External 
auditors 

Due Diligence (financial and tax) by external auditors on behalf of the 
lead manager 

75,000 to 125,000 

Transaction 
counsel 

Preparation of prospectus including relevant legal opinions (except for 
the prospectus the transaction counsel takes care of legal due diligence, 
legal and disclosure opinions which could not really separated from the 
prospectus work. The full cost for the transaction counsel could range 
from  350,000  to  450,000  euro).  If  the  underwriters  ask  for  their  own 
counsels  additional  cost  should  be  150,000  to  200,000  euro  (all 
inclusive, including prospectus) 

200,000 to 300,000 

“Publication”  Printing, distribution, publication 

40,000 to 60,000 

Lead 
Manager 

Issuer 

Normally  the  preparation  of  a  prospectus  lasts  for  about  three  to  four 
months with three to five prospectus meetings with the representatives 
of  the  lead  manager,  the  transactions  counsels  and  the  issuer.  In 
addition, the lead manager has to take into account for at least 80 hours 
per person of reading, analyzing and commenting the various versions 
of  the  prospectus  drafts  as  well  as  the  contacting  of  the  authorities. 
Normally  the  prospectus  team  of  the  lead  manager  consists  of  two  to 
three people with an average daily rate of 1,500 euro.  

The preparation of a prospectus comprises senior management, officers 
from  the  financial  and  the  investor  relation  departments.  It  comprises 
internal  sessions  of  preparing  and  coordinating  the  material  for  the 
transaction  counsels,  the  prospectus  sessions,  the  proof  reading, 
commenting  and  amending  of  the  various  drafts.  In  most  cases 

50,000 to 75,000 

100,000 to 150,000 

95 

Data provided by the member of ESME Dr. Wolfgang Gerhardt in his reply to a questionnaire sent by 
Commission services for the impact assessment of the Prospectus Directive.  

EN 

62 

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coordination and final proof reading is done by a senior level. The time 
request for this task could be at least the double of the time for the lead 
manager.  

Auditors  of 
the issuer 

Comfort  letter  for  the financial  statements  to  the banks. In  most  cases 
the auditors of the issuer are involved in the preparation and checking 
of prospectus material by the issuer. 

25,000 to 50,000 

Insurance 

For  the  comfort  letter.  The  insurance  premium  is  calculated  on  the 
volume to be placed. The premium per 1 million euro varies from 5,000 
to 7,000 euro. As the amount of coverage varies from issue to issue no 
figure  is  included  in  the  table.  An  amount  of  500,000  euro,  however, 
has frequently been observed in the market. 

Sum 

Except for insurance of comfort letter 

490,000 to 760,000 

Source: Dr. Wolfgang Gerhardt, member of ESME 

10.3.  Costs of compliance, administrative costs and administrative burden 

A precise figure for the overall costs of compliance at EU level with the Prospectus 
Directive is not available, as the figures above only refer to compliance cost elements 
(costs of publishing different types of prospectus; number of prospectuses approved). 
Data  is  not  available  however  on  the  breakdown  of  prospectuses  into  different 
categories for which costs are different. 

Currently  there  is  no  expert  estimate  to  delineate  administrative  costs  (business  as 
usual costs) and administrative burden (those burdens that would not be incurred in 
the  absence  of  legislation).  It  is  reasonable  assumption  that  a  large  part  of  the 
compliance costs are business as usual costs. 

The  impacts  of  the  options  examined  in  this  impact  assessment  however  belong  to 
the  sphere  of  reducing  administrative  burden,  as  it  is  expected  that  firms  are  not 
likely to maintain those practices for which currently existing legal obligations will 
be eliminated. 

There  is  therefore  wide-ranging  consensus  among  market  participants  that  any 
review  of  the  Prospectus  regime  should  focus  on  reducing  the  burdens  of  specific 
requirements  that  are  particularly  burdensome  and  which  would  only  require 
marginal changes to the Directive96.  

10.4.  Range of investment opportunities 

Recital  41  of  the  Prospectus  Directive  expressly  states  that  the  disclosure  regime 
under the Directive should respect "the need to provide investors with a wide range 
of competing investment opportunities", as well as "the importance of reducing the 
cost  of,  and  increasing  access  to,  capital".  Statistical  data  gathered  suggest  that  the 
passporting  of  prospectuses  between  Member  States  has  increased  since  the 
Prospectus Directive came into force (see number of passports sent in Annex VIII). 
This is likely to have extended the choice of investments available as well.  

96  

See the CSES study, page 50.  

EN 

63 

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The  graphic  below  (Fig.  10)  shows  that  after  the  implementation  of  the  Prospectus 
Directive  (1  July  2005)  the  number  of  prospectuses  approved  increased  until  the 
second  half  of  2007,  where  the  trend  turned  down,  reflecting  the  market  sentiment 
created after the burst of the subprime crisis.  

Prospectuses Approved (Trend)

2955

2835 2761

2381

2415

2236 2289

2115

1846

1380

1951

1973

1690

1285

3500

3000

2500

2000

1500

1000

500

0

Q3
2005

Q4
2005 

Q1
2006

Q2
2006

Q3
2006

Q4
2006

Q1
2007

Q2
2007

Q3
2007

Q4
2007

Q1
2008

Q2
2008

Q3
2008

Q4
2008

3.5  years in quarters

Fig.10. Prospectuses approved from 1 July 2005 to 31 December 2008. Source: CESR data. 

EN 

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ANNEX V – FIGURES  

FIGURE 1 – NUMBER OF QUALIFIED INVESTORS REGISTERED PER MEMBER STATE  

Member 
State 

Austria 

Belgium 

Bulgaria 

Cyprus 

Czech Rep. 

Denmark 

Estonia 

Finland 

France 

  Member 
State 

Number of 
qualified 
investors 
registered 

Number of 
qualified 
investors 
registered 

  Member 
State 

Number of 
qualified 
investors 
registered 

  Germany 

204 

  Netherlands 

0 

26 

44 

0 

0 

0 

0 

2 

  Greece 

  Hungary 

Iceland 

Ireland 

Italy 

Latvia 

Lithuania 

1 

1 

139 

0 

  Norway 

Poland 

  Romania 

No register 

Slovenia 

Portugal 

No register 

23 

31 

15 

1 

60 

1 

0 

Spain 

No register 

Sweden 

No register 

526 

Luxembourg 

11 

  UK 

245 

Source: Questionnaires sent via CESR to competent authorities of the Member States 

Figure  2  –  Number  of  days  for  the  exercise  of  the  right  of  withdrawal  after  the 
supplement of a prospectus per Member State  

 Member 
State 

Austria 

Belgium 

Bulgaria 

Czech Rep. 

Denmark 

Estonia 

Finland 

France 

Germany 

Number of 
days for 
withdrawal 

  Member State 

Number of 
days for 
withdrawal 

  Member 
State 

Number of 
days for 
withdrawal 

2 

2 

2 

2 

2 

2 

2 

2 

2 

Iceland 

Ireland 

Italy 

Latvia 

Luxembourg 

Netherlands 

Norway 

Poland 

Portugal 

2 

2 

2 

2 

2 

2 

2 

2 

2 

Slovenia 

Spain 

  UK 

Cyprus 

  Greece 

Romania 

Lithuania 

Sweden 

2 

2 

2 

3 

3 

3 

5 

5 

  Hungary 

15 

Source: Questionnaires sent via CESR to competent authorities of the Member States 

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65 

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Figure 3 – Number of prospectuses approved for purpose of ESS  

Member State 
Belgium 
France 
Germany 
Netherlands 
Sweden 
UK 

Figure 3 

Non-EU listed  Non-RM in EU 

24 
59 
11 
2 
- 
- 

0 
0 
1 
0 
- 
- 

EU non-listed 
7 
0 
0 
1 
- 
- 

Other/ 
Not specified 
NA 
NA 
NA 
NA 
5 
approx. 4 

Source: Questionnaire sent via CESR to competent authorities 

Figure 4 – Number of rights issues in the EU  

Year 
2006 
2007 
2008 

Rights issues in EU  
309 
399 
320 

Source: Thomson Reuters 

Figure  5  –  Market  capitalization  for  companies  listed  in  Cyprus,  Finland,  France, 
Germany, Greece, Italy and UK  

Market 
capitalisation, m€

 0 - 10 
10 - 50 
50 - 100 
100 - 200 
200 - 300 
300 - 400 
400 - 500 
500 - 600 
600 - 700 
700 - 800 
800 - 900 
900 - 1,000 
1,000 - 3,000 
3,000 - 10,000 
> 10,000 
Not available 
Total 

Number 
of companies 
1,193 
1,492 
726 
570 
284 
172 
122 
98 
86 
74 
47 
29 
343 
198 
139 
148 
5,721 

Total market 
cap. m€ 
6,498 
49,350 
54,509 
80,318 
71,496 
61,787 
97,134 
102,047 
55,822 
55,009 
43,596 
25,652 
711,934 
1,294,725 
7,418,885 
37,112 
10,165,872 

 Source: MiddleNext, Paris 

Turnover 
m€ 
15,750 
45,089 
49,038 
102,577 
55,423 
55,571 
41,064 
31,592 
47,445 
64,212 
34,995 
45,172 
607,682 
1,028,579 
4,723,321 
0 
6,947,510 

Figure 6 – Comparison between the cost of an offer of €50 million and an offer of €500 
million  

Offer of €50 million  Offer of €500 million 

Minimum fixed costs of prospectus 
(lawyer, consultant, internal) 

100,000 € 

100,000 € 

EN 

66 

   EN 

 
 
 
Minimum running expenses 
(publication, supplements, internal 
like permanent monitoring) 

Additional costs for prospectus per 
year 

Increase in the funding cost in 
relation to the capital raised 

50,000 € 

50,000 € 

150,000 € 

150,000 € 

0.3 % 

0.03 % 

Source: European Association of Co-operative Banks 

EN 

67 

   EN 

 
ANNEX VI – ESTIMATION OF REDUCTION IN ADMINISTRATIVE BURDEN 

The  preferred  options  presented  in  section  7  are  likely  to  reduce  considerably  the 
administrative  burden  in  some  areas97.  In  most  cases  it  is  possible  to  provide  a  reasonable 
estimate of the reduction of the administrative burdens. However, in some cases no data are 
available  to  provide  such  an  estimate  and  instead  a  qualitative  description  of  the  impact  is 
provided.  Although  disclosing  information  towards  investors  is  considered  as  necessary  to 
raise capital, and firms would have to provide some information to their investors even in the 
absence  of  regulation  (i.e.  it  is  business  as  usual,  an  administrative  cost),  there  are  certain 
provisions  in  the  Prospectus  Directive  that  were  identified  as  posing  additional  disclosure 
requirements  that  firms  will  almost  certainly  not  maintain  without  the  regulatory  obligation 
(administrative burdens). Here only this latter aspect, administrative burden is discussed. Not 
all  of  the  measures  addressed  above  in  this  impact  assessment  relate  to  an  administrative 
burden and those are consequently excluded from the following analysis. 

The quantification of the administrative burden reduction in this Impact Assessment is done 
in  line  with  the  EU  Standard  Cost  Model.  For  the  purpose  estimating  the  reduction  of 
administrative burdens  for the  preferred policy options, as provided in section 8.3, different 
elements in the calculations are provided. The wage cost is the estimated direct average wage 
cost  of  performing  the  relevant  tasks.  In  addition  an  overhead  of  25%  is  added  to  the 
calculation of the reduction of the administrative burden. In cases where only the total cost of 
relevant tasks have been obtained the an identical proportionate distribution between the wage 
cost and the overhead has been assumed and used for the calculation presented in the table in 
section 8.3. The frequency refers the number of times per year the task is undertaken by the 
firms included in the calculation. The number of companies refers to the number of entities 
that are assumed to benefit from the reduction in the administrative burden in a given year.    

Amend  the  Prospectus  Directive  to  clarify  that  the  intermediary  could  use  the  initial 
prospectus if it is still valid and updated (retail cascade) 

The policy option to clarify that the intermediary could use the initial prospectus if it is still 
valid  and  updated  will  reduce  the  administrative  burden  in  relation  to  retail  cascades.  The 
impact will depend on the amount of times a new prospectus will not be produced and on the 
saved  associated  costs.  The  way  retail  cascades  work  and  the  obligations  of  intermediaries 
participating in a retail cascade vary considerably among Member States. Five Member States 
have  pointed  out  that  retail  cascades  do  not  occur  in  their  jurisdiction  while  it  is  common 
practice in other Member States. Consequently the reduction of the administrative burden will 
vary among Member States. The cost of producing a non-equity prospectus is estimated to an 
average of € 63,000 in the CSES study. 

97 

As it was referred to above, there is no expert estimate available on what is the administrative burden 
part  of  compliance  costs.  The  impacts  of  the  options  examined  in  this  impact  assessment  however 
belong  to  the  sphere  of  reducing  administrative  burden,  as  it  is  expected  that  firms  are  not  likely  to 
maintain those practices for which currently existing legal obligations will be eliminated. 

EN 

68 

   EN 

 
                                                 
Align  definitions  of  qualified  investors/professional  clients  and  keep  the  register  of 
qualified investors 

The  alignment  of  the  definitions  of  qualified  investors  and  professional  clients  is  likely  to 
reduce to some extent the administrative burdens. First, in some cases intermediaries will save 
the costs of access to the national registers. Second, a number of clients may decide not to use 
the register and instead rely on their classification as a professional client. Third, competent 
authorities  may  benefit  from  the  reduction  of  the  administrative  burdens  to  maintain  such 
registers. The reduction of the administrative burdens is likely to be larger in those countries 
where the registers are actively used.  

Deletion of Article 10 of the Prospectus Directive, to avoid duplication of transparency 
requirement  

The deletion of Article 10 of the Prospectus Directive would clearly reduce the administrative 
burden for issuers with securities admitted to trading on a regulated market. The number of 
companies with listed shares is estimated to at least 12,000 and a reasonable estimate of the 
average cost of complying with such obligation on an annual basis is €2,500 98. This implies a 
possible annual reduction of administrative burden of €30 million. 

Exemption  of  all  kinds  of  Employee  Shares  Schemes  launched  in  the  EU  from  the 
obligation to publish a prospectus 

An exemption of Employee Shares Schemes from the obligation to public a prospectus will 
clearly  reduce  the  administrative  burden  for  companies  wishing  to  enter  into  such 
arrangements.  The  number  of  prospectuses  from  2006  to  2008  that  could  have  come  under 
such an exemption was at least 111 (37 on average on a yearly basis). Using the lower range 
of  the  estimate  for  the  cost  of  producing  a  prospectus  (€  490.000)  the  total  reduction  in 
administrative  costs  is  estimated  to  be  €  490.000  saved  in  37  cases  annually,  i.e.  €  18.13 
million.  

Reduction of disclosure requirements for rights offers 

A  reduction  of  the  disclosure  requirements  in  relation  to  rights  offers  is  likely  to  provide  a 
significant reduction of the administrative burden for companies issuing rights. The number 
of  offers  in  the  EU  in  the  period  2006  to  2008  across  Europe  was  1028,  averaging  343  per 
year.  Based  on  an  analysis  of  the  elements  that  should  not  necessarily  be  disclosed  in  right 
issues,  it  is  estimated  that  the  reduction  of  the  costs  compared  to  producing  a  regular 
prospectus (that would otherwise cost € 490,000) would be approximately € 233,000 99. The 

98  

99  

The  cost  estimate  of  €  2,500  to  5,000  was  provided  for  Germany,  but  it  is  comparable  for  all  EEA 
member countries. . The lower end of the range (€ 2,500) is used in the estimation in an attempt to take 
into account that the reduction in administrative costs will take place in high-cost as well as low-cost 
countries.  
Figure 9 presents a breakdown of the cost of producing a prospectus. The estimation provided assumes 
that the costs related to external auditors are reduced by 100%, transaction counsel is reduced by 30%, 
publication is reduced by 20%, lead manager is reduced by 50%, issuer is reduced by 50% and auditors 
of issuer is reduced by 100%. These figure are broad estimates based on indications of elements to be 
excluded  in  'A  Report  to  the  Chancellor  of  the  Exchequer:  by  the  Rights  Issues  Review  Group', 
published  November  2008,  as  well  as  on  general  considerations.  The  actual  reduction of  costs  would 
depend on, among other things, the legal advice from the CESR in the event that this policy option was 
implemented. 

EN 

69 

   EN 

 
                                                 
calculation  is  based  on  an  estimated  reduction  of  the  various  costs  elements  provided  in 
Figure 8100. Based on these figures the administrative costs saved should be € 233,000 in an 
average of 343 cases annually in the EU, i.e. in the magnitude of € 80 million.  

Reduction of disclosure requirements for small quoted companies 

Reducing  disclosure  requirements  for  small  quoted  companies  is  likely  to  provide  a 
significant reduction of the administrative burden for small quoted companies wishing to raise 
capital.  Based  on  an  analysis  of  the  elements  that  should  not  necessarily  be  disclosed,  it  is 
estimated that the reduction of the costs compared to producing a regular prospectus would lie 
in the range of 10 to 20 percent101. A conservative estimate of the reduction of administrative 
costs for small quoted companies would be € 49,000. Small quoted companies may be defined 
as companies with a market capitalisation of less than € 500 million. In addition, a company 
would, in order to get a reduction of the administrative burden, need to issue more than € 2.5 
million a year. For the purpose of estimating the number of companies which would benefit 
from reduced disclosure requirement we may exclude companies with a market capitalisation 
below  €  10  million,  assuming  that  generally  comp anies  with  a  higher  market  capitalisation 
raise  capital  exceeding  the  €  2.5  million  threshold.  Figure  5  provides  the  number  of 
companies  with  a  market  capitalisation  between  €  10  and  500  m illion  as  well  as  the  total 
number of companies in a subset of Member States. Based on these assumption 58.8% of the 
companies may benefit from the reduced disclosure requirements. Although data set in Figure 
5  only  cover  a  limited  number  of  Member  States  it  is  reasonable  to  assume  that  the 
distribution of market capitalisation is representative and 58.8% of all quoted companies will 
benefit from reduced disclosure requirements. As mentioned in section 3.2.4.2 the number of 
companies listed on a regulated market exceeds 12,000. In addition it is reasonable to assume 
that  new  capital  is  raised  once  every  two  years.  In  other  words  the  reduction  of  the 
administrative  burden  is  approximated  €  49,000  saved  bi-annually  by  7056  companies,  or 
approximately € 173 million. 

Exclude information on guarantor in case of government guarantee schemes  

Securities  for  which  the  government  would  provide  a  guarantee  would  typically  be  bonds. 
According to the CSES  study  the  cost of producing a non-equity prospectus is  significantly 
lower  than  for  an  equity  prospectus.  The  CSES  estimate  the  total  cost  of  a  non-equity 
prospectus  to  €63,000 102.  In  the  case  of  a  guarantor  of  the  security  a  significant  amount  of 
information  needs  to  be  provided.  The  cost  of  providing  this  information  in  the  case  of  a 
government  guarantor  can  be  estimated  by  considering  the  various  cost  elements  of  a  non-
equity prospectus. The cost is estimated to approximately €29,000 103, which can consequently 
be saved by excluding information on the guarantor in case of a government guarantee. The 

100  
101  

102  

103  

See Annex IV.  
The estimate is based on general considerations on the composition of a prospectus. However, there are 
considerable uncertainties in relation to this estimate and the advice from the CESR would be needed to 
provide more reliable figures. 
The  costs  presented  in  the  CSES  study  are  distributed  as  follows:  33,000  for  legal  costs,  11,000  for 
accounting  costs,  4,000  for  administrative  costs,  12,000  for  translation  and  publication  and  3,000  for 
other costs. 
The  estimate  is  based  on  a  reduction  in  the  cost  of  producing  the  prospectus  by  30%  for  legal  costs, 
100% for accounting costs, 50% for administrative costs, 80% reduction for translation and publication 
and 50% reduction for other costs. 

EN 

70 

   EN 

 
                                                 
total  number  of  prospectuses  involving  a government  guarantor  is  estimated  to  85104  during 
the last 3 years (28 on average on a yearly basis). Based on these figures the annual reduction 
of the administrative burden is estimated to € 812,000.  

104  

Information  provided  by  Germany,  Ireland,  Italy,  Luxembourg,  Poland,  Portugal  and  Spain  indicates 
that  a  total  of  49  prospectuses  have  been  approved  in  those  countries  within  the  last  3  years.  17365 
prospectuses were approved in these Members States during the last three years, compared to a total of 
30112.  Extrapolating  the  number  of  prospectuses  involving  a  government  guarantee  provides  us  with 
the very rough estimate of 85. 

EN 

71 

   EN 

 
                                                 
ANNEX VII – POLICY OPTIONS 

With  the  intention  to  meet  the  objectives  set  out  in  the  previous  section,  the  Commission 
services  have  analysed  different  policy  options.  The  first  section  reflects  the  most  relevant 
policy  options  that  have  been  considered  in  relation  to  the  increase  of  effectiveness  in  the 
prospectus  regime.  The  second  section  contains  the  list  of  policy  options  that  have  been 
analysed  in  relation  to  the  situations  of  unjustified  burdensome  requirements  imposed  to 
companies raising funding in securities markets and to the intermediaries involved.  

1. 

POLICY  OPTIONS  FOR  THE  INCREASE  OF  LEGAL  CLARITY  AND  EFFECTIVENESS  IN 
THE PROSPECTUS REGIME.  

10.5. 

Policy  options  in  case  of  subsequent  placements  of  securities  through  financial 
intermediaries (retail cascade).  

(1)  Option 1 – No action at EU level. This would leave scope for the industry 
and  supervisors  to  apply  the  common  interpretation  adopted  by  the  CESR 
members105.  (For  an  overview  of  how  the  situation  may  evolve  without  EU 
level action, please see section 7.1.1 describing the "baseline scenario").  

(2)  Option  2  –  Clarify  that  the  further  resale  of  the  securities  to  retail 
investors through financial intermediaries following the initial issue does 
not  qualify  as  a  public  offering  of  the  initial  issuer106.  In  this  case  the 
further resale of the securities is almost beyond the control of the issuer. The 
issuer therefore should not be responsible for publishing a prospectus in cases 
where the initial public offering is exempt, or remain responsible for updating 
the prospectus when the initial offers of the cascade have closed. This could 
be  achieved  by  deleting  the  final  sentence  in  Article  3(2)  of  the  Prospectus 
Directive.  

(3)  Option 3 – Amend Article 3(2) of the Prospectus Directive to clarify that 
whenever  an  intermediary  offers  securities  to  the  public  (i.e.,  makes  a 
non-exempted  offer)  the  intermediary  should  put  at  the  disposal  of  the 
public a valid prospectus. A valid prospectus, drawn up by the issuer or the 
offeror and available to the public in the final placement of securities through 
financial  intermediaries  or  in  any  subsequent  resale  of  securities,  shall 
provide  sufficient  information  for  investors  to  make  informed  investment 
decisions.  Therefore,  financial 
intermediaries  placing  or  subsequently 
reselling  the  securities  should  be  entitled  to  rely  upon  the  initial  prospectus 
published  by  the  issuer  or  the  offeror  as  long  as  this  is  valid  and  duly 
supplemented  in  accordance  with  Article  9  and  the  issuer  or  the  offeror 
responsible for drawing up such prospectus consents to its use. In this case no 
other  prospectus  should  be  required.  However,  in  case  the  issuer  or  the 
offeror responsible for drawing up such initial prospectus does not consent to 

105 

106 

See  question  number  56  "Retail  cascade  offers"  of  the  frequently  asked  questions  regarding 
prospectuses at www.cesr.eu. (Document reference CESR/09-103). 
This option was suggested by ESME. See ESME report on the Prospectus Directive, September 2007, 
p. 15. 

EN 

72 

   EN 

 
                                                 
its  use,  the  financial  intermediary  should  be  required  to  publish  a  new 
prospectus.  The  financial  intermediary  could  use  the  initial  prospectus  by 
incorporating the relevant parts by reference into its new prospectus.  

10.6. 

Policy option in relation to the divergent definitions for qualified investors and 
professional clients  

(1)  Option 1 – No action at EU level.  

(9)  Option  2  –  Amend  the  Directive  and  align  the  definitions  of  qualified 
investors  in  Article  2.1(e)(i)  and  (ii)  of  the  Prospectus  Directive  and  of 
professional clients and eligible counterparties in MiFID. This alignment 
would  reduce  complexity  and  cost  for  investment  firms  in  the  event  of  a 
private  placement:  the  firm  will  be  able  to  define  the  persons  to  whom  the 
placement is to be addressed relying on its own list of professional clients.  

This  policy  option  could  be  implemented  by  extending  the  definition  of 
qualified  investors  in  article  2.1(e)(i)  and  (ii)  of  the  Prospectus  Directive  to 
include  the  definitions  of  professional  clients  and  eligible  counterparties  as 
defined in Annex II of MiFID. 

(10)  Option 3 – In addition to the alignment proposed in option 2, the system 
of central registers could be removed from the Prospectus Directive. The 
system  of  central  registers  has  met  limited  interest  in  the  Member  States 
because private investors are concerned by the dissemination of information 
regarding their wealth and experience. This policy could be implemented by 
deleting Article 2.1(e)(iv) and (v), Article 2.2 and Article 2.3 of the Directive.  

10.7. 

Policy  options  in  relation  to  the  obligation  of  supplementing  a  prospectus  and 
the exercise of the right of withdrawal (Article 16 of the Prospectus Directive) 

(1)  Option 1 – No action at EU level.  

(2)  Option 2 – Harmonize the different periods of time for the exercise of the 
right  of  withdrawal.  This  policy  option  could  be  implemented  by  setting  a 
common period of time in all Member States for the exercise of the right of 
withdrawal under Article 16.  

(11)  Option  3  –  Harmonize  the  different  periods  of  time  with  possibility  for 
issuer  to  grant  longer  time.  This  option  would  amend  Article  16  of  the 
Prospectus  Directive  by  setting  a  common  period  of  time  in  all  Member 
States for the exercise of the right of withdrawal after the publication of the 
prospectus supplement and by allowing the issuer to grant a longer time limit 
for the exercise of such right of withdrawal.  

(12)  Option 4 – Harmonize the different periods of time at the settlement of 
the securities. This policy option would amend Article 16 of the Prospectus 
Directive  by  setting  a  common  period  of  time  in  all  Member  States  but 
subject  to  the  settlement  of  the  securities.  The  time  limit  for  withdrawal  of 
investors'  acceptances  after  the  publication  of  the  prospectus  supplement  in 
all Member States will expire at the settlement of the securities. The aim of 
this additional limit is to limit the risks of the issuer when offering securities.  

EN 

73 

   EN 

 
10.8. 

Policy options in relation to the lack of harmonised rules on liability 

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Harmonize  the  liability  standards  applicable  to  the 
prospectus.  One  policy  option  is  to  harmonize  the  liability  standards 
applicable  to  the  prospectus in  order to  avoid  liability  arbitrage and  provide 
issuers with legal certainty in cross-border offerings This policy option could 
be  implemented  by  defining  common  liability  standards  in  Article  6  of  the 
Prospectus Directive.  

10.9. 

Policy options in relation to the summary of the prospectus  

(1)  Option 1 – No action at EU level. This policy option would imply that the 
current  limitation  of  2,500  words  and  Annex  I  and  IV  of  the  Prospectus 
would be maintained.  

(2)  Option  2  –  Provide  retail  investors  with  appropriate  information  in  an 
easily analyzable and comprehensible form in order to make investment 
decisions  in  full  knowledge  of  facts.  This  policy  option  could  be 
implemented  by  deleting  the  limitation  of  2,500  words  in  recital  21  of  the 
Prospectus  Directive  and  all  indicative  items  for  the  summary  in  Annexes  I 
and IV of the Directive, and by developing new standards in the Prospectus 
Regulation on the basis of the Key Investor Information approach under the 
UCITS IV Directive. This policy option should follow the approach adopted 
by  the  European  Commission  in  its  Communication  on  Packaged  Retail 
Investment  Products.  A  logical  consequence  of  having  a  more  substantial 
summary  document  would  be  to  attach  civil  liability  on  the  basis  of  the 
summary  not  only  if  it  is  misleading,  inaccurate  or  inconsistent,  when  read 
together with the other parts of the prospectus, but also if it does not provide 
key information enabling investors to take informed investment decisions and 
to compare the securities with other investment products. 

11. 

SITUATIONS OF DISPROPORTIONATE OR BURDENSOME REQUIREMENTS IMPOSED TO 
COMPANIES  RAISING  CAPITAL 
IN  SECURITIES  MARKETS  AND  TO  THE 
INTERMEDIARIES INVOLVED.  

11.1. 

Policy  options  for  bringing  forward  a  level  playing  field  for  Employee  Shares 
Schemes  

(1)  Option 1 – No action at EU level.  

(2)  Option  2  –  Amend  the  Directive  and  extend  the  exemption  in  Article 
4.1(e)  to  the  employee  share  schemes  launched  by  companies  that  are 
listed in a non-regulated market (third country and EU issuers). Taking 
into account that the securities of these companies are negotiated in a trading 
venue, there is already information on these companies available in the public 

EN 

74 

   EN 

 
domain107.  The  cost  of  producing  a  prospectus  for  this  type  of  offers  is  not 
justified.  This  policy  option  could  be  implemented  by  deleting  in  Article 
4.1(e) of the Prospectus Directive the word "regulated". 

(3)  Option  3  –  Amend  the  Directive  and  extend  the  exemption  in  Article 
4.1.(e) including not only the employee share schemes of companies that 
are  listed  in  a  non-regulated  market  ("exchange-regulated"  market  or 
third  country  securities  markets)  as  proposed  in  option  2,  but  also 
encompass companies that are not listed. Even if the securities of the issuer 
are not negotiated in a trading venue, the employees should not be treated as 
common investors in terms of their information needs; they already work for 
the  company  and  therefore  are  more  familiar  with  its  assets,  liabilities, 
financial  position,  profit,  losses  and  prospects  (Article  5  of  the  Prospectus 
Directive)  than  the  outside  investor108.  This  policy  option  could  be 
implemented by deleting the sentence "which has securities already admitted 
to  trading  on  a  regulated  market"  from  Article  4.1(e)  of  the  Prospectus 
Directive. 

11.2. 

Policy options in relation to the overlapping of transparency obligations (Article 
10 of the Prospectus Directive)  

(1)  Option 1 – No action at EU level. Maintain the disclosure requirement under 
Article 10 of the Prospectus Directive which provides annually and at glance 
investors  with  a  historical  overview  on  all  available  information  published 
according to various laws.  

(2)  Option  2  –  Eliminate  the  obligation  established  in  Article  10  of  the 
Directive.  This  policy  option  implies  the  abolition  of  the  requirement  for 
issuers  whose  securities  are  admitted  to  trading  on  a  regulated  market  to 
provide  and  file  with  the  competent  authorities  a  document  containing  or 
referring  to  all  information  they  have  published  or  made  public  in  the 
previous  twelve  months  according  to  their  obligations  with  regard  to 
companies  and  securities  legislation  at  European  community  or  national 
levels and third country levels. This policy option could be implemented by 
deleting Article 10 of the Prospectus Directive109.  

107 

108 

109  

The high standards of transparency laid down in the Transparency and Market Abuse Directives are not 
compulsory for issuers traded in non-regulated markets. However, issuers asking for the admission to 
trading  in  an  "exchange  regulated"  market  have  to  comply  with  the  internal  rules  on  disclosure 
requirements  set  up  by  the  market  operator  aiming  at  achieving  the  flow  of  sufficient  and  adequate 
information for the functioning of the market. 
This policy option is inspired by the suggestions included in the report from ESME. See pages 17 and 
18 and the Annex of the report 
As a consequence of the proposed amendment, Article 11 of the Prospectus Directive needs also to be 
amended, inasmuch as it makes reference to Article 10, and the reference to Article 10(1) in Article 9(4) 
needs to be replaced by Article 16(1).  

EN 

75 

   EN 

 
                                                 
11.3. 

Policy options in relation to the restriction for the choice of home Member State 
for the issuers of debt  

(1)  Option  1  –  No  action  at  EU  level.  Maintain  the  €1000  threshold  below 
which  issuers  of  non-equity  securities  cannot  choose  their  home  Members 
State and the competent authority that is to approve their prospectus.  

(13)  Option 2 – Provide for the choice of the home Member State for issues of 
non-equity securities below the €1000 threshold.  This policy option could 
be  implemented  by  deleting  the  €1000 
threshold  and  amending  Article 
2(1)(m)(ii) of the Prospectus Directive.  

11.4. 

Policy options for facilitating the raise of capital through the issuance of rights 

(1)  Option  1  –  No  action  at  EU  level.  Within  the  current  framework  of  the 
Prospectus  Directive  competent  authorities  have  the  possibility  to  limit  the 
disclosure requirements in a prospectus for rights issues: in accordance with 
Article 8.2 of the Prospectus Directive, the competent authorities are entitled 
to  authorise  the  omission  of  information  from  the  prospectus  when  it  is  of 
minor importance. Second, in accordance with Article 23.4 of the Prospectus 
Regulation,  the  information  that  is  not  pertinent  to  the  offer  to  which  the 
prospectus  relates  could  be  omitted.  Taking  into  account  that  the  offer  of 
rights  is  addressed  to  existing  shareholders,  there  is  no  need  for  the 
prospectus to contain all the information that is required in case of an initial 
public  offering.  The  issuer  planning  a  rights  issue  could  decide  with  its 
competent  authority  which  of  the  information  items  required  by  the 
Prospectus  Regulation  can  be  omitted  from  the  prospectus.  A  coordinated 
approach among supervisors could be enhanced by CESR guidelines. 

(2)  Option 2 – Share offerings to existing shareholders by the way of a rights 
issue  could  be  exempted  from  the  prospectus  requirement.  This  type  of 
offers  could  be  covered  by  including  a  new  exemption  in  Article  4.  The 
document  currently  required  for  shares  offered  free  of  charge  in  Articles 
4.1(d) and 4.2(e) of the Prospectus Directive should also be adequate in such 
cases.110 

(3)  Option 3 – The prospectus disclosure requirements for right issues could 
be reduced: existing shareholders already have access to a range of financial 
and  other  information  about  the  issuer  from  the  periodic  and  episodic 
statements  and  disclosures  made  in  accordance  with  the  Transparency  and 
Market Abuse Directives111. If the prospectus disclosure obligation is reduced 
the processes for the preparation and approval of the prospectus would speed 
up and the issuer will have to face less costs.  

This  policy  option  could  be  achieved  by  introducing  in  the  Prospectus 
Directive  the  principle  of  a  reduced  disclosure  regime  for  prospectus  for 
rights issues and the possibility for the European Commission to put in place 

110 
111 

This policy option is inspired by the suggestions included in ESME report. See pages 16 and 17. 
Directive  2003/6/EC  of  the  European  Parliament  and  of  the  Council  of  28  January  2003  on  insider 
dealing and market manipulation (market abuse) OJ L 96, 12.4.2003, p. 16–25.  

EN 

76 

   EN 

 
                                                 
a  special  "proportionate"  regime  for  rights  issues  through  implementing 
legislation. The implementing Regulation could be amended subsequently in 
order  to  establish  a  "proportionate"  disclosure  regime  and  define  the 
information items to be included in the prospectus for a rights issue.112  

11.5. 

Policy  options  for  providing  proportionate  disclosure  requirements  for  small 
quoted companies  

(1)  Option  1  –  No  action  at  EU  level.  The  amount  of  information  of  the 
prospectus  could  be  reduced  by  virtue  of  Articles  8.2  of  the  Prospectus 
Directive and 23.4 of the Prospectus Regulation. The disclosure requirements 
that have to be included in a prospectus for small quoted companies could be 
reduced (i) if the competent authorities authorise the omission of information 
from  the  prospectus  when  it  is  of  minor  importance  (Article  8.2  Prospectus 
Directive) and (ii) by omitting the information that is not pertinent to the offer 
to which the prospectus relates (Article 23.4 of the Prospectus Regulation). In 
this case there is no need to change the Directive or the Regulation. It will be 
less costly for small quoted companies to produce a reduced prospectus. 

(2)  Option  2  –  Small  quoted  companies  could  be  exempted  from  the 
obligation  to  publish  a  prospectus  by  raising  the  threshold  in  Article 
1(2)(h)  of  the  Prospectus  Directive.  Increasing  the  threshold  for  the 
exempted offers could facilitate fundraising for these companies. This could 
be  achieved  by  raising  the  €2.5  million  th reshold  in  Article  1.2(h)  of  the 
Prospectus Directive. 

(3)  Option  3  –  The  principle  of  a  "proportionate"  prospectus  for  small 
quoted  companies  could  be  introduced.  This  policy  option  could  be 
achieved by introducing in the Prospectus Directive the principle of a reduced 
disclosure  regime  for  prospectus  for  small  quoted  companies  and  the 
possibility  for  the  European  Commission  to  put  in  place  a  special 
"proportionate"  regime  for  small  quoted  companies  through  implementing 
legislation. The implementing Regulation could be amended subsequently in 
order  to  establish  a  "proportionate"  disclosure  regime  and  define  the 
information  items  to  be  included  in  the  prospectus  for  small  quoted 
companies.  

11.6. 

Policy  options  for  providing  proportionate  disclosure  requirements  for  small 
credit institutions 

(1)  Option  1  –  No  action  at  EU  level.  Like  in  the  previous  two  cases,  the 
amount  of  information  of  the  prospectus  for  offers  above  the  limit  of  €50 
million  could  be  reduced  by  the  competent  authorities  by  virtue  of  Articles 
8.2 of the Prospectus Directive and 23.4 of the Prospectus Regulation. 

112 

This policy option is inspired by the suggestion included in the Report to the Chancellor of Exchequer 
by  the  Rights Issue  Review Group,  published  in  the  UK by  the  FSA  and  HM  Treasury  in  November 
2008.  The  Annex  E  of  the  document  contains  a  very  detailed  analysis  of  the  information  items  that 
could be omitted in a rights issue prospectus. 

EN 

77 

   EN 

 
                                                 
(2)  Option  2  –  Small  credit  institutions  could  be  exempted  from  the 
obligation  to  publish  a  prospectus  by  raising  the  threshold  in  Article 
1(2)(j)  of  the  Prospectus  Directive..  Increasing  the  threshold  for  the 
exempted offers could facilitate fundraising for these companies. This could 
threshold  in  Article  1.2(j)  of  the 
be  achieved  by  raising  the  €50  million 
Prospectus Directive. 

(3)  Option  3  –  The  principle  of  a  "proportionate"  prospectus  for  small 
quoted  companies  could  be  introduced.  This  policy  option  could  be 
achieved by introducing in the Prospectus Directive the principle of a reduced 
disclosure  regime  for  prospectus  for  small  credit  institutions  and  the 
possibility  for  the  European  Commission  to  put  in  place  a  special 
"proportionate"  regime  for  small  credit  institutions  through  implementing 
legislation. The implementing Regulation could be amended subsequently in 
order  to  establish  a  "proportionate"  disclosure  regime  and  define  the 
information  items  to  be  included  in  the  prospectus  for  small  credit 
institutions. 

11.7. 

Policy  options  in  relation  to  the  prospectus  disclosures  in  case  of  government 
guarantee schemes should be rationalised 

(1)  Option  1  –  No  action  at  EU  level.  The  amount  of  information  of  the 
prospectus  related  to  securities  guaranteed  by  a  Member  State  could  be 
reduced by virtue of Articles 8.2 of the Prospectus Directive and 23.4 of the 
Prospectus  Regulation:  as  described  in  the  first  policy  option  of  the  points 
related  to  the  rights  issues,  the  small  quoted  companies  and  small  credit 
institutions, the information about the State guarantor required in Annex XVI 
of the Prospectus Regulation could be reduced if it is considered not pertinent 
or of minor importance.113  

(2)  Option  2  –  Issuers  of  securities  guaranteed  by  the  government  of  a 
Member  State  could  be  exempted  from  the  obligation  to  provide 
information  about  the  guarantor  in  the  prospectus.  This  option  could  be 
implemented  by  including  at  the  end  of  Article  1.3  of  the  Prospectus 
Directive  a  specific  derogation  for  Member  States  and  possibly  for  regional 
and local authorities.  

(3)  Option  3  –  The  same  policy  option  could  be  extended  to  cover  the 
information not only about the guarantor, but also about the guarantee. 
In this case, this option could be implemented by (i) including at the end of 
Article 1.3 of the Prospectus Directive a specific derogation. 

113 

This policy option is inspired in the common interpretation provided by CESR in the question number 
70  of  the  frequently  asked  questions  regarding  prospectuses:  "Disclosure  requirements  for  securities 
which are unconditionally and irrevocably guaranteed by a Member State or by one of a Member State's 
regional or local authorities" (See CESR Q&A on Prospectus in www.cesr.eu)  

EN 

78 

   EN 

 
                                                 
11.8. 

Policy options in relation to the printed form (paper copy) of the prospectus  

(1)  Option  1  –  No  action  at  EU  level.  Maintain  the  obligation  of  delivering  a 
paper copy of the prospectus free of charge if the prospectus is published in 
electronic form and in case is requested by the investor. 

(2)  Option  2  –  Abolish  the  obligation  to  deliver  a  paper  copy  of  the 
prospectus.  This  option  could  be  implemented  by  deleting  paragraph  7  of 
Article 14 of the Prospectus Directive.  

11.9. 

Policy options in relation to the translation of the summary of the prospectus 

(1)  Option  1  –  No  action  at  EU  level.  Maintain  the  obligation  of  providing  a 
translation of the summary of the prospectus together with the notification of 
the approval of the prospectus. 

(2)  Option  2  –  Abolish  the  obligation  to  translate  the  summary  of  the 
prospectus.  This  option  could  be  implemented  by  deleting  the  second 
sentence in Article 18.1 of the Prospectus Directive.  

EN 

79 

   EN 

 
ANNEX VIII – NUMBER OF PROSPECTUSES APPROVED AND PASSPORTS SENT – SOURCE: CESR DATA 

Prospectuses 
Approved 

AUSTRIA 
BELGIUM 
BULGARIA 
CYPRUS 
CZECH REPUBLIC
DENMARK 
ESTONIA 
FINLAND 
FRANCE 
GERMANY 
GREECE 
HUNGARY 
ICELAND 
IRELAND 
ITALY 
LATVIA 
LITHUANIA 
LUXEMBOURG 
MALTA 
NETHERLANDS 
NORWAY 
POLAND 
PORTUGAL 
ROMANIA 
SLOVAKIA 
SLOVENIA 
SPAIN 
SWEDEN 
UK 
TOTAL 

Q3 
2005 

Q4 
2005  

Q1 
2006 

Q2 
2006 

Q3 
2006 

Q4 
2006 

Q1 
2007 

Q2 
2007 

Q3 
2007 

Q4 
2007 

Q1 
2008 

Q2 
2008 

25 
8 
12 
37 
43 
29 
0 
0 
0 
4 
1 
2 
25 
16 
6 
12 
3 
11 
2 
1 
0 
14 
6 
12 
93 
42 
70 
159 
142 
141 
8 
2 
3 
12 
3 
7 
39 
11 
8 
523 
265 
469 
22 
21 
10 
0 
3 
5 
0 
0 
0 
134 
359 
332 
N/A  N/A 
N/A 
77 
68 
64 
51 
60 
68 
4 
4 
13 
12 
12 
16 
0 
0 
0 
5 
13 
10 
4 
9 
6 
35 
94 
74 
68 
99 
55 
423 
422 
423 
1380  2115  1846

26 
46 
0 
4 
7 
17 
3 
22 
91 
238 
7 
16 
35 
536 
35 
2 
0 
409 
N/A 
76 
42 
16 
10 
0 
5 
4 
89 
78 
422 
2236

19 
18 
0 
4 
4 
8 
3 
4 
60 
231 
2 
15 
6 
718 
265 
4 
12 
368 
N/A 
66 
44 
17 
2 
1 
2 
5 
88 
47 
276 
2289

23 
35 
0 
2 
6 
24 
1 
9 
99 
175 
3 
21 
17 
739 
483 
6 
3 
433 
N/A 
70 
62 
38 
16 
7 
7 
5 
131 
81 
459 
2955

17 
44 
17 
5 
5 
24 
1 
11 
67 
160 
7 
21 
9 
640 
186 
5 
10 
465 
N/A 
50 
76 
34 
7 
1 
5 
7 
120 
63 
324 
2381

18 
39 
16 
1 
5 
24 
5 
20 
74 
194 
9 
24 
29 
821 
220 
5 
8 
479 
N/A 
55 
94 
32 
6 
4 
7 
2 
120 
67 
457 
2835

21 
14 
31 
31 
19 
27 
5 
2 
6 
8 
20 
20 
4 
0 
7 
16 
46 
81 
205 
141 
10 
13 
18 
14 
10 
51 
842 
494 
437 
318 
2 
1 
1 
2 
450 
429 
N/A 
N/A 
66 
52 
50 
69 
41 
23 
4 
8 
1 
7 
7 
14 
7 
11 
82 
107 
37 
60 
402 
332 
2761  2415

5 
12 
35 
4 
3 
15 
0 
4 
30 
116 
6 
17 
19 
344 
168 
2 
4 
448 
0 
16 
47 
44 
0 
6 
6 
6 
55 
37 
241 
1690 

16 
16 
20 
6 
0 
17 
2 
16 
38 
151 
2 
20 
39 
381 
132 
2 
6 
421 
2 
31 
61 
19 
17 
3 
15 
7 
68 
61 
328 
1951

Total 
first 
year  
71 
155 
0 
11 
54 
43 
6 
54 
296 
680 
20 
38 
93 
1793 
88 
10 
0 
1234 
0 
285 
221 
37 
50 
0 
33 
23 
292 
300 
1690 
7577 

Total 
second 
year 
77 
136 
33 
12 
20 
80 
10 
44 
300 
760 
21 
81 
61 
2918 
1154 
20 
33 
1745 
0 
241 
276 
121 
31 
13 
21 
19 
459 
258 
1516 
10460 

Total 
third 
year 
56 
90 
101 
17 
17 
72 
6 
43 
195 
613 
31 
69 
119 
2061 
1055 
7 
13 
1748 
2 
165 
207 
127 
29 
17 
42 
31 
312 
195 
1357 
8817 

EN 

80 

EN 

 
  
Passports Sent 

Q3 
2005 

Q4 
2005 

Q1 
2006

Q2 
2006

Q3 
2006

Q4 
2006

Q1 
2007

Q2 
2007

Q3 
2007 

Q4 
2007

Q1 
2008

Q2 
2008 

AUSTRIA 
BELGIUM 
BULGARIA 
CYPRUS 
CZECH REPUBLIC
DENMARK 
ESTONIA 
FINLAND 
FRANCE 
GERMANY 
GREECE 
HUNGARY 
ICELAND 
IRELAND 
ITALY 
LATVIA 
LITHUANIA 
LUXEMBOURG 
MALTA 
NETHERLANDS 
NORWAY 
POLAND 
PORTUGAL 
ROMANIA 
SLOVAKIA 
SLOVENIA 
SPAIN 
SWEDEN 
UK 
TOTAL 

11 
5 
7 
6 
- 
- 
1 
0 
0 
0 
1 
0 
0 
1 
1 
0 
15 
1 
60 
46 
0 
0 
0 
0 
0 
0 
14 
20 
0 
1 
0 
0 
- 
- 
45 
78 
N/A  N/A 
N/A 
N/A 
0 
0 
0 
0 
0 
0 
- 
- 
0 
0 
0 
0 
0 
0 
3 
0 
45 
71 
262 
170 

13 
3 
- 
1 
0 
0 
0 
1 
12 
107 
0 
0 
0 
19 
0 
0 
- 
92 
N/A 
N/A 
1 
0 
0 
- 
0 
0 
1 
1 
76 
327 

23 
7 
- 
1 
0 
1 
1 
0 
8 
118 
1 
0 
2 
23 
1 
0 
- 
103 
N/A 
N/A 
1 
0 
0 
- 
1 
0 
2 
5 
93 
391 

27 
3 
- 
1 
0 
1 
0 
- 
5 
109 
0 
0 
1 
55 
0 
0 
0 
86 
N/A 
29 
0 
0 
0 
0 
0 
0 
0 
3 
111 
431 

14 
6 
- 
1 
1 
0 
0 
- 
9 
103 
0 
0 
1 
67 
0 
0 
0 
86 
N/A 
25 
0 
0 
0 
0 
0 
0 
0 
2 
134 
449 

EN 

29 
2 
0 
0 
0 
0 
2 
1 
8 
197 
0 
0 
0 
63 
0 
0 
0 
108 
N/A 
56 
4 
0 
0 
0 
0 
0 
1 
4 
116 
591 

8 
7 
0 
0 
0 
2 
0 
1 
14 
150 
0 
0 
1 
65 
0 
0 
1 
132 
N/A 
32 
6 
0 
0 
0 
0 
0 
2 
10 
131 
562 

4 
1 
1 
0 
0 
2 
0 
0 
8 
70 
0 
0 
0 
57 
0 
0 
0 
137 
0 
6 
5 
0 
0 
0 
0 
1 
1 
8 
164 
465 

22 
4 
0 
2 
0 
0 
0 
0 
13 
87 
0 
0 
2 
37 
0 
0 
0 
138 
0 
15 
5 
0 
1 
0 
2 
4 
1 
4 
170 
507 

24 
4 
0 
0 
0 
1 
0 
1 
7 
86 
0 
0 
0 
76 
1 
0 
1 
121 
N/A 
20 
0 
0 
0 
0 
0 
0 
0 
4 
159 
505 

23 
4 
0 
0 
0 
0 
1 
1 
11 
113 
0 
0 
3 
75 
0 
0 
1 
152 
N/A 
21 
5 
0 
0 
0 
0 
0 
1 
9 
175 
595 

81 

Total 
first 
year 
52 
23 
- 
3 
0 
2 
2 
2 
36 
331 
1 
0 
2 
76 
2 
0 
- 
318 
0 
N/A 
2 
0 
0 
- 
1 
0 
3 
9 
285 
1150 

Total 
second 
year 
88 
17 
0 
2 
1 
2 
1 
2 
32 
411 
0 
0 
5 
273 
1 
0 
2 
445 
0 
95 
5 
0 
0 
0 
0 
0 
1 
18 
579 
1980 

Total 
third 
year 
63 
14 
1 
2 
0 
4 
2 
2 
43 
504 
0 
0 
3 
222 
0 
0 
1 
515 
0 
109 
20 
0 
1 
0 
2 
5 
5 
26 
581 
2125 

EN 

 
  
 
ANNEX IX – ADDITIONAL MINOR CHANGES  

In  addition,  the  European  Commission  will  include  some  minor  technical  suggestions  that 
were  suggested  by  stakeholders  during  the  consultation  for  the  review  of  the  Prospectus 
Directive and for which no major impacts are expected:  

–  Article 1.2 (h) and (j) and Article 3.1 (e) – Threshold of maximum offering amounts: the 
Prospectus Directive is not clear as to whether the maximum offering amounts set out in 
Article 1.2 (h) and (j) and Article 3.1 (e) should be computed on a EEA-wide basis or on a 
country-by-country basis. This legislative ambiguity has lead to varying interpretations of 
the  relevant  thresholds  in  the  different  Member  States  that  restrict  availability  of  the 
exemptions. As clarified in the common positions agreed by the CESR114, these thresholds 
should be calculated on an EEA-wide basis, thus Article 1.2 (h) and (j) and Article 3.1 (e) 
would be amended accordingly.  

–  Article  9.1,  9.2  and  9.3  –  Validity  of  the  prospectus,  base  prospectus  and  registration 
document: a number of stakeholders considered that the validity period of 12 months of the 
prospectus, base prospectus and registration document in Article 9.1, 9.2 and 9.3 should be 
extended  to  24  months,  as  the  regular  approval  process  imposes  some  administrative 
burden  for  issuers.  Provided  they  are  supplemented  in  accordance  with  Article  16,  this 
amendment  will  not  impair  investor  protection,  but  enhance  administrative  burden 
reduction for issuers.  

–  Article  9  (4)  –  Supplement  to  the  registration  document:  a  number  of  stakeholders 
considered that the registration document, which contains information on the issuer, should 
be supplemented in accordance with Article 16 and no longer updated in accordance with 
Article 10.1 or by the securities note, which instead contains information on the securities. 
Article 9.4 should be amended inasmuch it makes reference to Article 10 (to be deleted). 
Accordingly the first sentence of Article 12.2 should also be deleted.  

–  Article 16 – Supplements to the prospectus: respondents to the consultation claim that the 
current  wording  of  Article  16.1  of  the  Prospectus Directive  is not  sufficiently clear  as to 
when the requirements to publish a supplement to the prospectus ends in cases where the 
securities  are  to  be  admitted  to  trading  on  a  regulated  market.  In  particular,  it  is  unclear 
how the two alternatives "start of trading of the securities on a regulated market" and "final 
closing  of  the  offer  to  the  public"  relate  to  each  other  and  whether  the  requirement  to 
publish a prospectus ends with the start of trading of the securities on a regulated market 
irrespective of whether the offer to the public has closed. In order to avoid any uncertainty, 
Article 16.1 should be amended as follows: "Every significant new factor, material mistake 
or  inaccuracy  relating  to  the  information  included  in  the  prospectus  which  is  capable  of 
affecting  the  assessment  of  the  securities  and  which  arises  or  is  noted  between  the  time 
when  the  prospectus  is  approved  and  the  earlier  of  the  final  closing  of  the  offer  to  the 
public or, as the case may be, the time when trading on a regulated market begins, shall be 
mentioned in a supplement to the prospectus."  

114 

See question number 26 "Way of calculation of limit of 2.500.000 EUR set in Article 1.2.h) Directive" 
of  the  frequently  asked  questions  regarding  prospectuses  at  www.cesr.eu.  (Document  reference 
CESR/09-103). 

EN 

82 

   EN 

 
                                                 
–  Article 18 – Notification of the approval of the prospectus to the issuer: in accordance with 
Article 18 of the Prospectus Directive the competent authority of the home Member State 
shall provide to the host competent authorities the certificate of approval attesting that the 
prospectus  has  been  drawn  up  in  accordance  with  the  Prospectus  Directive.  In  practice, 
uncertainty has arisen as to whether and when a notification has actually been effected. To 
avoid  confusion,  the  notification  procedure  of  Article  18  of  the  Prospectus  Directive 
should be amended so that the competent authority of the home Member State provides the 
certificate to the issuer in addition to the host competent authorities.  This will reduce costs 
and  risks  for  the  issuers  who  will  have  certainty  that  they  have  not  inadvertently 
contravened  the  law  by  offering  securities  to  the  public  in  a  Member  State  where  the 
passport is not yet effective due to an oversight or error on the part of competent authority 
of the home Member State. 

EN 

83 

   EN