COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading
Date: 2015-11-30
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: advertising, capital market, consumer information, disclosure of information, official market, publication, securities, single market, trade information

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   EUROPEAN COMMISSION  Brussels, 30.11.2015  SWD(2015) 256 final   COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading {COM(2015) 583 final} {SWD(2015) 255 final}  
 
 
EXECUTIVE SUMMARY SHEET 

Impact assessment on the Review of the Prospectus Directive (2003/71/EC) as amended 

A. Need for action  

What is the problem and why is it a problem at EU level?  

The Prospectus Directive establishes a cross-border "passport" for approved prospectuses. Reform of the prospectus 
rules  are  closely  linked  to  the  Capital  Markets  Union  (CMU).  Prospectus  reform  aims  to  complement  the  CMU 
objectives  of  reducing  fragmentation  in  financial  markets,  diversifying  financing  sources  and  strengthening  cross 
border capital flows. Although the prospectus regime functions well overall, certain requirements of the Prospectus 
Directive  might  still  be  improved  to  alleviate  administrative  burden  for  companies  which  draw  up  a  prospectus 
(especially  SMEs)  and  to  make  the  prospectus  a  more  valuable  information  tool  for  potential  investors.  Further 
alignment of the prospectus rules with other EU disclosure rules (e.g. the Transparency Directive and the Regulation 
on key information documents for packaged retail and insurance-based investment products (PRIIPs)) could enhance 
the efficiency of the prospectus. The IA builds on the findings of an  evaluation, the latter originally linked to the 
REFIT programme (COM(2014)368). 

What should be achieved?  

The proposed measures should (i) reduce the administrative burden of drawing up of prospectus, both for SMEs and 
for  frequent  issuers  of  securities;  (ii)  make  the  prospectus  a  more  relevant  disclosure  tool  for  potential  investors, 
especially in SMEs; and (iii) achieve more convergence between the EU prospectus and other EU disclosure rules.  

What is the value added of action at the EU level (subsidiarity)?  

The  harmonised  EU  prospectus  is  an  essential  tool  to  integrate  capital  markets  throughout  the  Union.  Once  a 
prospectus is approved by the competent authority of an EEA Member State, this prospectus can be used to raise 
capital by means of a public offer or admission to a regulated market in other Member States. Making the prospectus 
more  accessible  for  SMEs  and  for  companies  that  have  frequent  recourse  to  capital  markets  (frequent  issuers) 
constitutes a key plank of establishing a CMU. 

B. Solutions  

What are the various options to achieve the objectives? Is there a preferred option or not? If not, why?  

The  impact  assessment  discusses  various  options  for  six  issues  identified  as  problematic.  Most  options  aim  at 
reducing  administrative  burden  for  issuers  through  designing  appropriate  disclosure  requirements  which  avoid 
unnecessary replications and provide investors with targeted information which is easy to understand.   

What are different stakeholders' views? Who supports which option?  

Stakeholders are supportive of the review and the proposed options. The general aim of alleviating the prospectus 
for  frequent  issuers  and  that  for  SMEs  of  unnecessary  and  repetitive  information  is  shared  by  all  stakeholders, 
including Member States. Creating a new form of prospectus summary following the PRIIPS KID is also endorsed 
by the stakeholder community.  

C. Impacts of the preferred option  

What are the benefits of the preferred option (if any, otherwise of main ones)?  

The revised Directive should provide issuers with disclosure rules which are tailored to the specific needs of three 
major  groups  of  issuers:  issuers  that  are  already  listed  on  a  regulated  market  or  MTF,  (around  70%  of  all 
prospectuses approved in a given year), SMEs and bond issuers.  
The  envisaged  "universal  registration  document"  (URD)  for  frequent  issuers  should  result  in  considerable  cost 
reductions and shorten prospectus approval processes from currently 10 to 5 days.  
The reformed proportionate disclosure rules (PDRs) for frequent issuers are expected to reduce the cost of drawing 
up prospectuses and of making the resulting PDR prospectuses more relevant for potential investors.  
The new optional "question and answer" format for SME PDRs is expected to help SMEs in drawing up their own 
prospectus, thus saving considerable legal fees.   
The reform of denomination sizes for bond issuances should increase opportunities to raise capital for all issuers and 
in also SMEs.  

What are the costs of the preferred option (if any, otherwise of main ones)?  

On  balance,  the  preferred  options  will  reduce  the  compliance  burden  for  frequent  issuers  and  for  SMEs.  Making 
prospectuses  more  user-friendly  and  targeted  to  the  specific  situation  of  the  issuer  has  the  double  advantage  of 
decreasing cost and increasing the relevance of the prospectus for potential investors.  

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The  impact  assessment  contains  initial  estimations  on  cost  savings,  based  on  factual  and  realistic  assumptions 
concerning the "take up" of the URD and the two proposed PDRs.  
Advantages  resulting  from  the  reform  of  the  prospectus  summary  and  the  introduction  of  a  searchable  prospectus 
database  are  more  difficult  to  quantify:  the  impact  assessment  relies  on  a  more  qualitative  assessment  in  these 
respects. Nevertheless, the rationale for reforming the prospectus summary builds on the work already carried out, 
including  consumer  testing,  in  the  context  of  the  key  information  document  for  packaged  investment  products. 
(PRIIPS KID).     

What are the impacts on SMEs and competitiveness?  

SMEs:  SMEs  which  wish  to  raise  capital  by  means  of  a  public  offer  or  a  listing  on  a  multilateral  trading  facility 
(MTF) or SME growth market will benefit from the revamped PDR, as this format will lower the cost of preparation 
of a prospectus. Additional savings are expected for those SMEs which are listed on a regulated market and benefit 
from the PDR governing secondary issuances (see below). Recourse to the PDR for SMEs could, according to rough 
estimates, result in SMEs collectively saving around 45 million euro per year.  
Competitiveness for large and small issuers: Competitiveness would be enhanced because data provided by Member 
States indicates that 70% of all prospectuses approved in a given reference year pertains to a secondary issuance of 
securities by companies already admitted to trading on a regulated market or an MTF. Extrapolating from available 
data  on  equity  prospectuses  approximately  700  prospectuses  per  year  could  benefit  from  the  PDR  for  secondary 
issuances. Figures on the cost of drawing up a prospectus as derived from the public consultation indicate that this 
could translate into savings of about 130 million euro per year.   
Furthermore, increased recourse to a universal registration document for equity and non-equity prospectuses could 
result in faster prospectus approvals, increasing annual fast track approvals by 150% (equity) and 70% (non-equity). 
A uniform prospectus requirement for bond issuances, irrespective of denomination sizes, provides an incentive for 
all issuer of debt to choose denomination sizes that make their bonds more attractive for a wider range of investors. 
A wider range of investors, in turn, is expected to increase buying and selling interest in bonds, thus increasing the 
liquidity of corporate bond markets in the EU.  

Will there be significant impacts on national budgets and administrations?  

The proposed alleviations should not trigger relevant costs for national budgets and administrations. On the contrary, 
competent national authorities should benefit from the simplifications of the prospectus as this would also render the 
approval process for prospectuses easier. The adaptation of IT tools necessary to make all prospectuses searchable 
online could trigger incremental IT-related costs. 

Will there be other significant impacts?  

No  

Proportionality?  

The measures are designed to achieve the greatest effectiveness without unduly disturbing the market. 

D. Follow up  

When will the policy be reviewed?  

A review clause will be proposed to determine, five years after the revised rules enter into application, the extent to 
which the above objectives have been achieved. 

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