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 - Summary of the impact assessment {COM(2009) 491 final} {SEC(2009) 1223}
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) 1222 

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  

SUMMARY OF THE IMPACT ASSESSMENT  

{COM(2009) 491  final}  
{SEC(2009) 1223}  

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1. 

PROBLEM DEFINITION  

There is evidence about some burdens and legal uncertainties that increase cost and 
create  ineffectiveness  hampering  the  process  of  fundraising  for  companies  and 
financial intermediaries in the EU. These problems could be divided in two groups:  

1.1. 

Ineffectiveness derived from the lack of legal clarity 

1.1.1.  Obligations  in  case  of  placement  of  securities  through  financial  intermediaries 
(retail cascade): the lack of clarity in Article 3.2 of the Prospectus Directive seems 
to be causing problems for issuers in some markets where securities are distributed 
by "retail cascade".  

1.1.2.  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 MiFID1.  

1.1.3.  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  leaves 
room for divergent application in the Member States because the time frame for the 
exercise  of  the  right  of  withdrawal  is  not  harmonised  and  Member  States  have  set 
different periods through national implementing legislation.  

1.1.4.  Lack of harmonised rules on liability: article 6.2 of the Prospectus Directive does not 

provide for a harmonised liability regime under the Prospectus Directive.  

1.1.5.  Functioning  of  the  summary  of  the  prospectus:  the  primary  aim  of  the  Prospectus 
Directive to inform investors may actually be hampered by the limitation imposed by 
recital 21. Moreover, there are significant inconsistencies in the form and the content 
of the summary disclosures for broadly comparable products.  

1.2. 

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

1.2.1.  Divergent  regime  for  Employee  Shares  Schemes:  the  exemption  in  Article  4.1(e) 
creates a less advantageous situation for employees of 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.  

1.2.2.  Overlap of transparency obligations: 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 

1 

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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Directive because the Transparency Directive2 has made the disclosure requirement 
for  issuer  with  listed  securities  redundant,  generating  a  duplication  of  the  same 
requirement for issuers.  

1.2.3.  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.  

1.2.4.  Burdensome disclosure requirements in some cases 

1.2.4.1.  Rights  issues:  stakeholders  have  expressed  concerns  in  relation  to  the  obligation  to 
publish a full prospectus for rights issues, notably because the cost for producing a 
full prospectus might not be justified.  

1.2.4.2. 

Small  quoted  companies:  concerns  have  been  expressed  by  some  industry 
stakeholders that the disclosure requirements linked to the issuance of a prospectus 
could  be  overly  burdensome  and  costly  for  companies  with  smaller  market 
capitalization.  This  is  mostly  related  to  the  exemption  for  offers  with  a  total 
consideration below €2.5 million set in Articl e 1.2(h) of the Prospectus Directive.  

1.2.4.3.  Small credit institutions: the exemption in Article 1.2(j) was designed for the funding 
of  small  credit  institutions.  However,  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.  

1.2.5.  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.  

1.2.6.  Printed form (paper form) of 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  in  Article 
14.2 for the person asking for the admission to trading or the financial intermediaries 
placing  or  selling  the  securities  to  deliver  a  paper  copy  of  the  prospectus  free  of 
charge, upon request of the investor to the offeror, because according to a group of 
industry  stakeholders  the  obligation  would  have  no  added  value  and  the  electronic 
provision of information would be sufficient for effective supervision.  

2 

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.  

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1.2.7.  Translation  of  the  summary  of  the  prospectus:  in  the  same  opinion  the  High  Level 
Group advised to consider the suppression of the obligation to provide the translation 
of  the  summary  in  case  of  cross-border  offers  according  to  Article  19.3  because  a 
group  of  stakeholders  considers  that  this  requirement  is  unnecessary  and  advocates 
for the harmonisation of the language regime for the whole internal market.  

2. 

THE BASELINE SCENARIO, SUBSIDIARITY AND PROPORTIONALITY  

If  no  action  is  taken  at  EU  level  the  problems  defined  in  section  1  will  remain 
without a response. The European Commission considers that the solutions proposed 
respect the principle of subsidiarity and proportionality. On the one hand, 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. On the other hand, all solutions 
brought forward aim at ensuring effective product disclosure and investor protection.  

3. 

OBJECTIVES  

The  review  of  the  Prospectus  Directive  aims  at  (i)  increasing  effectiveness  in  the 
prospectus  regime;  and  (ii)  reducing  the  burdens  for  EU  companies  when  raising 
capital in the European securities markets.  

4. 

POLICY OPTIONS  

With  the  intention  to  meet  the  objectives  set  out  in  the  previous  section,  the 
Commission services have analysed different policy options:  

4.1. 

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

4.1.1.  Policy  options  in  case  of  subsequent  placements  of  securities  through  financial 
intermediaries (retail cascade): (i) no action at EU level; (ii) 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; (iii) amend 
Article  3.2  of  the  Prospectus  Directive  to  clarify  that  whenever  an  intermediary 
offers securities to the public the intermediary should put at the disposal of the public 
a valid prospectus.  

4.1.2.  Policy  options  in  relation  to  the  divergent  definitions  for  qualified  investors  and 
professional clients: (i) no action at EU level; (ii) 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;  (iii)  in 
addition to the alignment proposed in option 2, remove the system of central registers 
from the Prospectus Directive.  

4.1.3.  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):  (i)  no 
action at EU level; (ii) harmonize the different periods of time for the exercise of the 
right of withdrawal; (iii) harmonize the different periods of time with possibility for 

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issuer  to  grant  longer  time;  (iv)  harmonize  the  different  periods  of  time  at  the 
settlement of the securities.  

4.1.4.  Policy options in relation to the lack of harmonised rules on liability: (i) no action at 
EU level; (ii) harmonize the liability standards applicable to the prospectus.  

4.1.5.  Policy options in relation to the summary of the prospectus: (i) no action at EU level; 
(ii) provide retail investors with appropriate information in an easily analyzable and 
comprehensible  form  in  order  to  make  investment  decisions  in  full  knowledge  of 
facts.  

4.2. 

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

4.2.1.  Policy  options  for  bringing  forward  a  level  playing  field  for  Employee  Shares 
Schemes:  (i)  no  action  at  EU  level;  (ii)  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); (iii) amend 
the Directive and extend the exemption in Article 4.1.(e) to companies that are listed 
in a non-regulated market and to companies that are not listed.  

4.2.2.  Policy options in relation to the overlapping of transparency obligations (Article 10 
of the Prospectus  Directive): (i) no action at EU level; (ii) eliminate the obligation 
established in Article 10 of the Directive.  

4.2.3.  Policy options in relation to the restriction for the choice of home Member State for 
the issuers of debt: (i) no action at EU level; (ii) provide for the choice of the home 
Member State for issues of non-equity securities below the €1000 threshold.

4.2.4.  Policy options for facilitating the raise of capital through the issuance of rights: (i) 
no  action  at  EU  level  and  let  CESR  members  agree  on  a  short-form  disclosure 
regime  for  rights  issues;  (ii)  exempt  rights  issues  from  the  prospectus  requirement; 
(iii) introduce a "proportionate" prospectus" for right issues.  

4.2.5.  Policy options for providing proportionate disclosure requirements for small quoted 
companies: (i) no action at EU level; (ii) exempt small quoted companies from the 
obligation  to  publish  a  prospectus  by  raising  the  threshold  in  Article  1(2)(h)  of  the 
Directive; (iii) introduce a "proportionate" prospectus for small quoted companies.  

4.2.6.  Policy options for providing proportionate disclosure requirements for small credit 
institutions:  (i)  no  action  at  EU  level;  (ii)  exempt  small  credit  institutions  from  the 
obligation  to  publish  a  prospectus  by  raising  the  threshold  in  Article  1(2)(j)  of  the 
Directive; (iii) introduce a "proportionate" prospectus for small credit institutions.  

4.2.7.  Policy  options  in  relation  to  the  prospectus  disclosures  in  case  of  government 
guarantee  schemes  should  be  rationalised:  (i)  no  action  at  EU  level;  (ii)  exempt 
issuers  of  securities  guaranteed  by  the  government  of  a  Member  State  from  the 
obligation to provide information about the guarantor in the prospectus; (iii) exempt 
issuers  of  securities  guaranteed  by  the  government  of  a  Member  State  from  the 
obligation to provide information about the guarantor and also about the guarantee in 
the prospectus.  

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4.2.8.  Policy options in relation to the printed form (paper copy) of the prospectus: (i) no 
action at EU level; (ii) abolish the obligation to deliver a printed form (paper copy) 
of the prospectus.  

4.2.9.  Policy options in relation to the translation of the summary of the prospectus: (i) no 
action  at  EU  level;  (ii)  abolish  the  obligation  to  translate  the  summary  of  the 
prospectus.  

5. 

ASSESSMENT AND COMPARISON OF THE OPTIONS  

The  different  policy  options  are  tested  against  the  criteria  of  investor  protection, 
consumer  confidence,  effectiveness,  clarity  and  reduction  of  administrative  burden. 
In  view  of  the  conclusions  reached  in  the  impact  assessment,  the  European 
Commission  considers  appropriate  to  present  a  proposal  amending  the  Prospectus 
Directive in order to address the following issues:  

–  Retail cascade: for reasons of investor protection, consumer confidence, reduction 
of  administrative  burden,  certainty  and  effectiveness  the  preferred  option  is  to 
amend Article 3.2 of the Prospectus Directive 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 in accordance with Article 9).  

–  Definition  of  qualified  investor/professional  client:  for  reasons  of  reduction  of 
administrative  burden,  certainty  and  effectiveness,  the  definition  of  qualified 
investor  in  Article  2.1(e)  should  be  modified  to  encompass  the  persons  that  are 
considered professional clients under MiFID.  

–  Exercise of the right of withdrawal: for reasons of investor protection, consumer 
confidence,  reduction  of  administrative  burden,  certainty  and  effectiveness,  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.  

–  Lack of harmonised rules on liability: the harmonisation of the liability standards 
is a goal that exceeds the Prospectus Directive. The preferred option is to keep the 
status quo. 

–  Summary  of  the  prospectus:  for  reasons  of  investor  protection,  consumer 
confidence,  certainty  and  effectiveness,  the  content  of  the  summary  of  the 
prospectus  should  be  standardised  following  the  approach  adopted  by  the 
European  Commission  in  its  Communication  on  Packaged  Retail  Investment 
Products.  

–  Employee shares schemes: for reasons of effectiveness, certainty and reduction of 
administrative  burdens,  the  exemption  for  employee  shares  schemes  in  Article 
4.1(e) of the Prospectus Directive should be extended to employees of companies 
listed in markets other than EU regulated markets and non-listed companies.  

–  Duplication  of  transparency  obligations:  for  reasons  of  investor  protection, 
consumer  confidence,  reduction  of  administrative  burden  and  effectiveness,  the 

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disclosure  requirements  of  Article  10  of  the  Prospectus  Directive  should  be 
abolished.  

–  Choice of home Member State for the issuers of non-equity securities: for reasons 
of  reduction  of  administrative  burden  and  effectiveness,  issuers  of  non-equity 
should be entitled to choose a 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.  

–  Rights  issues:  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.  

–  Small  quoted  companies  and  small  credit  institutions:  for  reasons  of  consumer 
confidence,  reduction  of  administrative  burden,  certainty  and  effectiveness,  the 
raise of capital of small quoted companies and small credit institutions should be 
subject  to  "proportionate"  disclosure  requirements.  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.  

–  Government  Guarantee  Schemes:  for  reasons  of  reduction  of  administrative 
burden, certainty and effectiveness, 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 (though it should 
contain information about the guarantee).  

6. 

IMPACTS OF THE PREFERRED OPTIONS 

The  impact  assessment  shows  that  the  preferred  options  will  have  positive  impacts 
for  investors,  companies  raising  capital,  financial  intermediaries,  employees  and 
small  and  medium  size  enterprises.  The  identifiable  reduction  of  administrative 
burdens  from  the  preferred  options  amounts  to  approximately  €  302  million  on  an 
annual basis.  

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 

€ 2,000 

€ 500 

1 

€ 2,500 

12,000 

€ 30,000,000 

€ 392,000 

€ 98,000 

1 

€ 490,000 

37 

€ 18,130,000 

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

Exemption of all 
kinds of 
Employee Shares 
Schemes 

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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 

€ 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 

7. 

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.  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.  

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