Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets
Date: 2018-05-24
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: bond, capital market, economic growth, financial instrument, investment company, investment protection, issue of securities, small and medium-sized enterprises, start-up, stock-exchange listing

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   EUROPEAN COMMISSION  Brussels, 24.5.2018 COM(2018) 331 final 2018/0165 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets (Text with EEA relevance) {SEC(2018) 247 final} - {SWD(2018) 243 final} - {SWD(2018) 244 final}  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Broadening  access  to  market-based  sources  of  financing  for  European  companies  at  each 
stage  of  their  development  is  at  the  heart  of  the  Capital  Markets  Union  (CMU).  Since  the 
launch of the Capital Markets Union Action Plan, the EU has made considerable progress to 
increase the sources of funding as firms gradually scale up, and make market-based finance 
more  widely  available  across  the  EU.  New  rules  are  already  in  place  to  boost  EU  venture 
capital  funds’  (EuVECA)  investment  in  start-ups  and  medium-sized  companies.  Together 
with  the  European  Investment  Fund,  the  Commission  has  also  launched  a  Pan-European 
Venture  Capital  Funds-of-Funds programme (VentureEU) to  boost investment in innovative 
start-up and scale-up companies across Europe. New rules on prospectuses have already been 
adopted to support companies raising money on public markets for equity and debt. For small 
companies and mid-caps wishing to raise money across the EU, a new EU growth prospectus 
is being created. In addition, to increase access to finance for start-ups and entrepreneurs, the 
Commission  has  proposed  a  European  label  for  investment-based  and  lending-based 
crowdfunding platforms ('European Crowdfunding Service Providers for Business'). 

However,  more  needs  to  be  done  to  develop  a  more  conducive  regulatory  framework 
supporting access to public funding for Small and Mid-sized Enterprises (SMEs). This should 
be achieved in particular by promoting the SME Growth Market label created by the Markets 
in  Financial  Instrument  Directive  II  (MiFID  II)1  and  striking  the  right  balance  between 
investor  protection  and  market  integrity  on  the  one  hand,  and  avoiding  unnecessary 
administrative burdens on the other. 
In  the  Mid-term  Review  of  the  Capital  Markets  Union  Action  Plan2  of  June  2017,  the 
Commission  strengthened  the  focus  on  SME  access  to  public  markets.  In  this  context,  the 
Commission  committed  to  publishing  'an  impact  assessment  that  will  explore  whether 
targeted  amendments  to  relevant  EU  legislation  could  deliver  a  more  proportionate 
regulatory environment to support SME listing on public markets'.  

Newly listed Small and Mid-sized Enterprises (SMEs) are a key motor of investment and job 
creation.  Recently  listed  companies  often  outstrip  privately-owned  companies  in  terms  of 
annual  growth  and  workforce  increase.  Listed  companies  are  less  dependent  on  bank 
financing  and  benefit  from  a  more  diversified  investment-base,  easier  access  to  additional 
equity  capital  and  debt  finance  (through  secondary  offers),  and  a  higher  public  profile  and 
brand recognition. 

However,  despite  the  benefits,  EU  public  markets  for  SMEs  are  struggling  to  attract  new 
issuers. The number of Initial Public Offerings on SME-dedicated markets steeply declined in 
the  European  Union  in  the  wake  of  the  crisis,  and  did  not  significantly  pick  up  since.  As  a 
result,  Europe  is  producing  only  half  of  the  SME  Initial  Public  Offerings  that  it  generated 
before the financial crisis (478 Initial Public Offerings on average per year in 2006-2007 vs. 
218 between 2009 and 2017 on EU SME MTFs). Between 2006 and 2007, an average of EUR 
13.8  billion  was  raised  annually  on  European  SME-dedicated  MTFs  through  Initial  Public 
Offerings. This amount fell to EUR 2.55 billion on average from 2009 to 2017.  

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Directive  2014/65/EU  of  the  European  Parliament  and  of  the  Council  of  15 May  2014  on  markets  in 
financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU 
Communication from the Commission on the mid-term review of the capital markets union action plan 
({SWD(2017) 224 final} and {SWD(2017) 225 final} – 8 June 2017) 

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There are many factors driving SMEs' decision to go public and investors' decision to invest 
in  SME financial  instruments. The  impact assessment3 shows that  public  markets  for SMEs 
face two groups of regulatory challenges: (i) on the supply side, issuers face high compliance 
costs  to  list  on  public  markets;  (ii)  on  the  demand  side,  insufficient  liquidity  can  weigh  on 
issuers (due to higher costs of capital), on investors (that can be reluctant to invest in SME in 
the  first  place  due  to  low  liquidity  levels  and  related  volatility  risks)  and  on  market 
intermediaries (whose business models rely on customers order flow in liquid markets).  

Scope of the initiative: SME Growth Markets 
This  initiative  is  strictly  confined  to  SME  Growth  Markets4  and  companies  listed  on  those 
trading  venues.  SME  Growth  Markets  are  a  new  category  of  multilateral  trading  venues 
(MTFs) that were introduced by the Markets in Financial Instruments Directive II in January 
2018.  

When assessing whether SME issuers admitted to trading on regulated markets should benefit 
from equivalent regulatory alleviations, the decision was made to limit the beneficiaries of the 
relief  to  issuers  admitted  to  trading  on  SME  Growth  Markets.  Requirements  imposed  on 
regulated market issuers should apply in a similar way regardless of the size of the company. 
Different requirements for SMEs compared to large caps are likely to confuse stakeholders (in 
particular investors).  

Current regulatory context 

Companies  listed  on  an  SME  Growth  Market  are  required  to  comply  with  some  EU  rules, 
especially the Market Abuse Regulation5 (MAR) and the Prospectus Regulation6. 

Since  its  entry  into  application  on  1  July  2016,  the  Market  Abuse  Regulation  has  been 
extended to MTFs, including SME Growth Markets. This regulation aims to increase market 
integrity  and  investor  confidence.  It  prohibits  from:  (i)  engaging  or  attempting  to  engage  in 
insider  dealing;  (ii)  recommending  that  another  person  engage  in  insider  dealing  or  induce 
another person to engage in insider dealing; (iii) unlawfully disclosing inside information7; or 
(iv) engaging in  or  attempting to  engage  in  market manipulation. Issuers are also subject to 
several  disclosure  and  record-keeping  obligations  under  the  regulation.  In  particular, 
concerned issuers are under a general obligation to disclose inside information to the public as 
soon as possible. By strengthening market integrity and by extending the market abuse regime 
to  MTFs,  the  Market  Abuse  Regulation  was  crucial  in  restoring  investor  confidence  in 
financial markets.  

However, this piece of legislation is a 'one-size-fits-all' regulation. Almost all its requirements 
apply in the same manner to all issuers irrespective of their size or the trading venues where 
their financial instruments  are admitted to  trading. The regulation contains only two limited 
adaptations  to  issuers  listed  on  SME  Growth  Markets.  The  first  allows  trading  venues 

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Impact Assessment {SWD(2018)243} and {SWD(2018)244} 
In order to qualify as an SME Growth Market, at least 50% of the issuers whose financial instruments 
are  traded  on  an  SME  Growth  markets  shall  be  SMEs,  defined  by  MIFID  II  as  companies  with  an 
average  market  capitalisation  of  less  than  EUR  200  million  on  the  basis  of  end-year  quotes  for  the 
previous three calendars years.  
Regulation  (EU)  No 596/2014  of  the  European  Parliament  and  of  the  Council  of  16 April  2014  on 
market abuse (market abuse regulation) 
Regulation  (EU)  2017/1129  of  the  European  Parliament  and  of  the  Council  of  14  June  2017  on  the 
prospectus  to  be  published  when  securities  are  offered  to  the  public  or  admitted  to  trading  on  a 
regulated market 
This  arises  if  any  natural  or  legal  person  discloses  inside  information  in  a  situation  other  than  the 
normal course of their employment, profession or duties 

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operating an SME Growth Market to post inside information on the trading venue's website 
(instead of the issuer's website). The second allows issuers listed on SME Growth Markets to 
produce insider lists only upon request from a national competent authority (NCA). However, 
the effect of this alleviation is limited because companies are still required to gather and store 
all relevant information to be able to produce insider lists on request.  

A  prospectus  is  a  legally  required  document  presenting  information  about  a  company  when 
securities  are  offered  to  the  public  or  admitted  to  trading  on  a  regulated  market.  Under  the 
CMU  Action  Plan,  the  European  Union  has  already  made  it  easier  and  cheaper  for  smaller 
companies  to  access public markets, notably  with  the creation of the alleviated 'EU  Growth 
Prospectus' in the revised Prospectus Regulation. An issuer may seek an admission to trading 
on  a  regulated  market  after  having  floated  its  shares  on  an  SME  Growth  Market  for  a  few 
years. It may do so to  benefit from greater liquidity and a larger investor  pool. However, if 
that issuer wants to transfer its shares from an SME Growth Market to a regulated market, it 
needs  to  produce  a  full  prospectus  as  no  alleviated  prospectus  schedule  is  available  for 
companies in such a situation.  

The  take-up  of  the  SME  Growth  Market  'brand'  is  constrained  by  the  limited  number  of 
alleviations  currently  envisaged  in  EU  legislation  for  the  issuers  listed  on  this  new  type  of 
trading  venues.  The  overall  objectives  of  this  initiative  is  therefore  to  introduce  technical 
adjustments  to  the  EU  rulebook  in  order  to:  (i)  reduce  the  administrative  burden  and  the 
regulatory compliance costs faced by SMEs when their financial instruments are admitted to 
trading  on  an  SME  Growth  Market,  while  ensuring  a  high  level  of  investor  protection  and 
market integrity;  and (ii) increase the liquidity of equity  instruments listed on SME Growth 
Markets. 

These  targeted  regulatory  changes  foreseen  in  this  proposal  will  not  fully  revive  access  to 
public markets for SMEs on their own. Nevertheless, they address regulatory barriers flagged 
by various stakeholders as inhibiting capital-raising by SMEs on public markets. They do so 
whilst  preserving  the  highest  standards  of  investor  protection  and  market  integrity.  Any 
changes should therefore be understood as a first step in the right direction, and not as a single 
remedy  in  itself.  Besides,  this  proposal  for  a  Regulation  is  not  an  overhaul  of  the  Market 
Abuse Regulation (which has been into application for less than two years) or the Prospectus 
Regulation  (which  has  been  recently  agreed  by  the  co-legislators  and  which  will  enter  into 
application as of July 2019). This proposal (together with the modifications envisaged in the 
Commission  Delegated  Regulation  (EU)  2017/565)  only  brings  technical  amendments  to 
make the EU legal framework applying to listed SMEs more proportionate. It will ensure that 
the  'SME  Growth  Market'  label,  created  by  MiFID  II  as  of  January  2018,  is  used  by  the 
various MTFs with a focus on SMEs across the EU.  

• 

Consistency with existing policy provisions in the policy area 

This  initiative  is  consistent  with  the  existing  legal  framework.  MiFID  II  states  that  the 
objective of SME Growth Markets should be to 'to facilitate access to capital for smaller and 
medium-sized  enterprises'  and  that  'Attention  should  be  focused  on  how  future  regulation 
should  further  foster  and  promote  the  use  of  that  market  so  as  to  make  it  attractive  for 
investors, and provide a lessening of administrative burdens and further incentives for SMEs 
to  access  capital  markets  through  SME  Growth  Markets'8.  Recitals  6  and  55  of  the  Market 
Abuse Regulation explicitly call for administrative cost alleviations for smaller issuers listed 
on SME Growth Markets.  

8 

MiFID II, recital 132  

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Several EU Acts already include specific provisions for this new form of trading venues, such 
as  the  recent  Prospectus  Regulation9  and  the  Central  Securities  Depositaries  Regulation 
(CSDR)10. The objectives of these provisions are to lower the administrative burden placed on 
SME Growth Market issuers and to enhance liquidity of financial instruments traded on those 
markets.  

As  the  costs  of  drawing  up  a  prospectus  can  be  disproportionately  high  for  SMEs,  the 
Prospectus  Regulation  has  introduced  an  alleviated  'EU  Growth  Prospectus'.  It  is  notably 
available  to  SMEs  traded  on  an  SME  Growth  Markets  and  to  non-SMEs  with  a  market 
capitalisation of less than EUR 500  million whose  securities are traded on an SME  Growth 
Market11. In addition, issuers that have had securities already admitted to trading on an SME 
Growth  Market  continuously  for  at  least  the  last  18  months  will  be  able  to  benefit  from  a 
simplified disclosure regime for secondary issuances12. 

CSDR imposes a mandatory buy-in process on any financial instrument which has not been 
delivered within a set period from the intended settlement date (i.e. two days after trading, so 
called 'T+2' rule). At the same time, CSDR includes rules adapted to the specificities of SME 
Growth  Markets.  The  buy-in  process  is  triggered  after  a  period  of  up  to  15  days  for 
transactions on SME Growth Markets, compared to up to four days for liquid securities and 
up  to  seven  days  for  other  illiquid  securities.  Those  specific  rules  for  SME  Growth  Market 
financial instruments were introduced to 'take into account the liquidity of such markets and 
to allow, in particular, for activity by market-makers in those less liquid markets'13.  

This  proposal  for a regulation is therefore consistent  with the above-mentioned existing EU 
regulations, as it aims to alleviate the burden on SME Growth Markets and promote liquidity 
in equity instruments admitted to trading on those trading venues.  

This  proposal  for  a  Regulation  is  also  coherent  with  some  envisaged  amendments  to  the 
delegated  Commission  Delegated  Regulation  (EU)  2017/565  for  the  purpose  of  Directive 
2014/65/EU  (MiFID  II).  These  amendments  were  also  included  in  the  same  impact 
assessment and aim at: (i) modifying the definition of a non-equity SME issuer on an SME 
Growth  Market;  (ii)  making  the  obligation  for  non-equity  SME  Growth  Market  issuers  to 
produce  a  half-yearly  report  optional;  (iii)  imposing  a  free  float  requirement  on  issuers 
seeking an admission to trading on an SME Growth Market. Those measures will: (i) increase 
the number of debt-only issuers that would qualify as SMEs, which would in turn enable more 
MTFs  to  register  as  SME  Growth  Markets  and  issuers  on  these  markets  to  benefit  from 
alleviated  regulatory  requirements;  (ii)  allow  market  operators  to  better  adapt  their  listing 
rules to local conditions; and (iii) ensure that shares listed on SME Growth Markets are not 
too illiquid at the admission stage. 

• 

Consistency with other Union policies 

This legislative proposal aims to complement the objectives of the Capital Markets Union to 
reduce the overreliance on bank funding and diversifying market-based sources of financing 
for European companies. Since the publication of the Capital Markets Union Action Plan in 
2015,  the  Commission  has  implemented  a  comprehensive  package  of  legislative  and  non-

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Regulation  (EU)  2017/1129  of  the  European  Parliament  and  of  the  Council  of  14  June  2017  on  the 
prospectus  to  be  published  when  securities  are  offered  to  the  public  or  admitted  to  trading  on  a 
regulated market. 
Regulation  (EU)  No 909/2014  of  the  European  Parliament  and  of  the  Council  of  23 July  2014  on 
improving securities settlement in the European Union and on central securities depositories 
Art.15 of the Prospectus Regulation 
Art.14 of the Prospectus Regulation 
Recital 18 of CSDR Regulation  

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legislative  measures  to  scale  up  Venture  Capital  financing  in  Europe.  These  include  the 
creation of a venture capital fund-of-funds supported by the EU budget and the review of the 
regulation  on  European  Venture  Capital  Funds  (EuVECA)  and  European  Social 
Entrepreneurship Funds (EuSEF)14. In particular, the review expanded the ability of EuVECA 
funds to invest in SMEs listed on SME Growth Markets.  
In  March 2018,  as  part  of  its  Fintech  Action  Plan15,  the  European  Commission  presented  a 
proposal for a regulation on crowdfunding service providers16. Once agreed at EU level, the 
new regulation will allow platforms to apply for an EU passport based on a single set of rules. 
This  will  make  it  easier  for  them  to  offer  their  services  across  the  EU.  While  the 
European market  for  crowdfunding  is  underdeveloped  compared  to  other  major  world 
economies, these new rules should improve access to this innovative form of finance for small 
investors  and  businesses  in  need  of  funding,  particularly  start-ups  and  help  the  EU  market 
grow more rapidly. 

In  the  context  of  the  Capital  Markets  Union  the  Commission  is  also  promoting  private 
placement  markets,  which  enable  companies  to  raise  capital  by  issuing  debt  instruments  to 
institutional  or  other  experienced  investors.  A  recent  study  on  'Identifying  market  and 
regulatory obstacles to the development of private placement of debt in the EU'17 (carried out 
on  behalf  of  the  Commission)  showed  that  the  market  sounding  regime  under  the  Market 
Abuse Regulation can impede the development of this source of financing across the EU. This 
regulatory  obstacle  deters  both  institutional  investors  and  issuers  from  entering  into 
negotiations for such transactions.  

By  making  it  easier  for  companies  to  list  on  SME  Growth  Markets,  this  initiative  will 
contribute to facilitating capital-raising by European companies. It will help build a funding 
escalator  that  provides  diversified  funding  channels  for  firms  at  each  stage  of  their 
development.  Vibrant  public  markets  are  essential  to  complete  the  above-mentioned  actions 
of the Capital Markets Union. Dynamic public markets for small and mid-capitalisation firms 
can  foster  the  development  of  private  equity  and  venture  capital,  by  providing  smooth  exit 
opportunities.  Without  this  possibility  to  exit  their  investments,  venture  capital  and  private 
equity  funds  will  be  less  willing  to  lock  in  their  money  during  the  growth  period  of  a 
company.  Public  equity  markets  for  SMEs  can  also  stimulate  equity  crowdfunding 
investments. Like venture capitalists, equity crowdfunding investors also seek an exit for their 
investment  and  therefore  require  well-functioning  and  liquid  equity  markets  to  be  used  as 
exit-routes for the growth companies they back at an earlier stage. This initiative also aims at 
removing the regulatory hurdles resulting from the application of the market sounding regime 
under  the  Market  Abuse  Regulation  to  the  private  placements  of  bonds  with  institutional 
investors by listed SMEs.  

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Regulation (EU) 2017/1991 of 25 October 2017, amending Regulation (EU) No 345/2013 on European 
venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds 
FinTech Action plan: For a more competitive and innovative European financial sector – COM (2018) 
109 final 
Proposal for a Regulation of the European Parliament and of the Council on European Crowdfunding 
Service Providers (ECSP) for Business – COM(2018)113 
BCG and Linklaters, Study on Identifying the market and regulatory Obstacles to the Development of 
Private Placements of Debt instruments in the EU, 2017 

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2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The legal basis of the Market Abuse Regulation and of the Prospectus Regulation is Article 
114  of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  which  confers  to  the 
European  institutions  the  competence  to  lay  down  appropriate  provisions  that  have  as  their 
objective the establishment and functioning of the single market. Those Regulations can only 
be amended by the Union legislator, in this case on the basis of Article 114 of the Treaty. 

Under Article 4 of TFEU, EU action for completing the internal market has to be appraised in 
light  of  the  subsidiarity  principle  set  out  in  Article  5(3)  of  the  Treaty  on  European  Union. 
According to the principle of subsidiarity, action on EU level should be taken only when the 
objectives of the proposed action cannot be achieved sufficiently by Member States alone and 
thus mandates action on an EU level. 

• 

Subsidiarity (for non-exclusive competence)  

Under Article 4 of TFEU, EU action for completing the internal market has to be appraised in 
light  of  the  subsidiarity  principle  set  out  in  Article  5(3)  of  the  Treaty  on  European  Union. 
According to the principle of subsidiarity, action at EU level should be taken only when the 
objectives of the proposed action cannot be achieved sufficiently by Member States alone and 
thus mandate action on an EU level. 

It  has  to  be assessed  whether the issues  at  stake  have  transnational  aspects  and  whether  the 
objectives  of  the  proposed  actions  cannot  be  sufficiently  achieved  by  Member  States  in  the 
framework of their national constitutional system (the so-called 'necessity test'). In this regard, 
it should be noted that MTFs with a focus on SMEs (and potential SME Growth Markets) are 
more local in nature compared to regulated markets. At the same time, these trading venues 
have  a  clear  cross-border  dimension,  both  because  investors  may  invest  in  trading  venues 
outside their Member States of origin and because issuers often list their shares or bonds on a 
trading venue located in another Member State.  

The first objective of this initiative is to remove undue administrative burden to enable SMEs 
to  have  easier  access  to  public  markets  for  shares  and  bonds  and  thereby  diversify  their 
sources of capital coming from anywhere in the EU (while preserving a high level of market 
integrity and investor protection). The second objective is to increase the liquidity of shares 
issued  by  SME  Growth  Market  issuers.  Achieving  these  objectives  will  result  in  increased 
cross-border  flows  of  capital  and  ultimately  in  economic  growth  and  job  creation  in  all  EU 
Member States. 

Administrative requirements placed on SMEs result from the application of the Market Abuse 
Regulation  and  the  Prospectus  Regulation.  Those  European  regulations  have  direct  binding 
legal force throughout all Member States. They leave almost no flexibility for Member States 
to  adapt  the  rules  to  local  conditions  or  to  the  size  of  issuers  or  investments  firms.  The 
problems  arising  from  those  provisions  can  only  be  effectively  addressed  via  legislative 
amendments  at  the  European  level18.  The  possible  alternatives,  i.e.  non-legislative  action  at 
Union level (e.g. guidelines by the European Securities and Markets Authority, and action at 

18 

Vodafone  case  C-58/08:  ' Where  an  act  based on  Article  95  EC has  already  removed any  obstacle  to 
trade  in  the  area  that  it  harmonises,  the  Community  legislature  cannot  be  denied  the  possibility  of 
adapting that act to any change in circumstances or development of knowledge having regard to its task 
of safeguarding the general interests recognised by the Treaty' 

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Member State level) could not sufficiently and effectively achieve the objective set, as they 
could not amend the provisions of the Regulations.  

The liquidity of SME financial instruments (especially shares) is also hindered by regulatory 
shortcomings  stemming  from  the  Market  Abuse  Regulation.  In  particular,  this  regulation 
requires  Member  States  to  establish  an  Accepted  Market  Practice  in  order  to  allow  issuers 
located  in  their  jurisdictions  to  enter  into  a  liquidity  provision  contract  with  a  broker.  Only 
four Member States have already established an Accepted Market Practice, which means that 
issuers  in  24  Member  States  do  not  have  this  possibility.  This  fragments  the  Single  Market 
and  creates  a  distortion  of  competition  between  issuers  who  have  the  right  to  enter  into  a 
liquidity  contract  and  those  which  do  not  have  this  possibility.  Limited  trading  may  cause 
investors  to  have  a  negative  perception  of  the  liquidity  of  shares  listed  on  SME  Growth 
Markets  and  could  impair  the  credibility  and  attractiveness  of  those  newly-created  trading 
venues. Action is needed at EU level to ensure that the identified regulatory issues resulting 
from EU rules are adequately tackled and that liquidity can be increased on those markets.  

It has to be considered whether the objectives would be better achieved by action at European 
level (the so-called 'test of European added-value'). By its scale, EU action could reduce the 
administrative burden for SME issuers while at the same time ensuring a level-playing field 
among  issuers.  It  avoids  distortions  of  competition  among  SME  Growth  Markets  and 
safeguards a high level of investor protection and market integrity.  

As  regards  the  regulatory  obstacles  impairing  liquidity  provision,  action  at  national  level 
would  result  in  legal  fragmentation  and  may  lead  to  distortions  in  competition  of  SME 
Growth Markets across Member States. Action at the European level is better suited to ensure 
uniformity  and  legal  certainty.  This  will  help  to  efficiently  achieve  the  objectives  of  the 
Markets  in  Financial  Instruments  Directive  II  (and  notably  the  creation  of  SME  Growth 
Markets)  and  will  better  facilitate  cross-border  investments  and  competition  between 
exchanges, whilst safeguarding the orderly functioning of markets. 

• 

Proportionality 

The  proposed  measures  to  lighten  the  burden  on  listed  SMEs  respect  the  principle  of 
proportionality. They are adequate for reaching the objectives and do not go beyond what is 
necessary.  When  the  Market  Abuse  Regulation  provides  an  option  to  Member  States  to 
alleviate the burden on issuers (e.g. under Article 19(9), National Competent Authorities can 
decide to raise the threshold above which the managers' transactions shall be disclosed to the 
public from EUR 5,000 to EUR 20,000), the Commission has decided not to legislate in order 
to  leave  flexibility  to  Member  States  to  adapt  this  requirement  to  local  conditions.  Where 
there is no flexibility to adapt the Market Abuse Regulation to local conditions, a legislative 
action at EU level is absolutely needed in order to reduce the administrative burden placed on 
SME Growth Market issuers. 

The measure aiming at improving liquidity (the creation of a 29th regime on liquidity contracts 
for SME Growth Market issuers – see infra detailed explanation of the specific provisions of 
the  proposal)  strikes  a  balance  between  establishing  pan-European  standards  on  liquidity 
contracts  while  at  the  same  time  leaving  flexibility  to  Member  States  to  adopt  an  accepted 
market practice on liquidity contracts (e.g. to extend the scope of liquidity contracts to illiquid 
securities other than SME Growth Market shares or to tailor requirements of such contracts to 
local specificities).  

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• 

Choice of the instrument 

The proposed legislative amendments aim in particular at lowering the administrative burden 
and compliance costs faced by SME Growth Market issuers and resulting from the application 
of the Market Abuse Regulation and the Prospectus Regulation. This initiative also seeks to 
promote liquidity by ensuring that any SME Growth Market issuer in the EU can enter into a 
liquidity provision contract.  

To this end, the legislative measures will amend the current provisions of the Market Abuse 
Regulation and the Prospectus Regulation. As many of the necessary amendments would be 
minor changes to existing legal texts they can be summarised in an Omnibus Regulation. The 
legal basis for the Prospectus and the Market Abuse Regulation Regulations is Article 114(1) 
TFEU. Any amending regulation has therefore the same legal basis. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

(a)  Public  consultation  on  'Building  a  proportionate  regulatory  environment  to 

support SME listing' 

On  18  December  2017,  the  Commission  services  launched  a  public  consultation  on  SME 
listing.  It  focused  on  three  main  areas:  (1.)  how  to  complement  the  SME  Growth  Market 
concept  created  by MiFID II;  (2.)  how to  alleviate  the burden on companies  listed on SME 
Growth Markets; and (3.) how to foster the ecosystems surrounding local stock exchanges, in 
particular  with  a  view  to  improving  liquidity  of  shares  listed  on  those  trading  venues.  The 
Commission received 71 responses, sent by stakeholders from 18 Member States19. 

When  asked  why  few  SMEs  seek  a  listing  on  European  public  markets,  many  stakeholders 
mentioned  the  administrative  burden  placed  on  SMEs  by  market  abuse,  transparency  and 
disclosure  rules.  The  Market  Abuse  Regulation  was  described  as  difficult  to  interpret,  thus 
hindering SMEs' compliance to European legislation. 

Most stakeholders also identified the managers' transactions regime as very burdensome and 
costly, arguing in favour of extending the delay to notify transactions, increasing the threshold 
after  which  transactions  need  to  be  notified,  and  putting  the  responsibility  to  disclose 
managers' transactions to the public on their National Competent Authority. On the approach 
towards  insider  lists,  the  vast  majority  of  the  respondents  agreed  that  the  requirement  was 
onerous  and  burdensome  –  albeit  necessary.  On  average,  they  were  in  favour  of  requiring 
issuers either to submit insider lists only upon request by the National Competent Authority, 
or to only maintain a list of 'permanent insiders'. Only a small minority argued in favour of 
fully  exempting  SME  Growth  Market  issuers  from  keeping  insider  lists.  Out  of  the  few 
stakeholders who expressed an opinion on the justification of the delay to communicate inside 
information,  a  majority  were  in  favour  of  requiring  issuers  to  submit  the  justification  only 
upon request by the National Competent Authority, and to exempt them from the obligation of 
keeping  a  disclosure  record.  Again  only  considering  those  having  expressed  an  opinion,  a 

19 

6  public  authorities  (2  ministries  of  finance,  4  NCAs);  18  exchanges;  35  industry  associations  (6  for 
brokers,  14  for  investment  managers/investment  banks,  4  for  insurers,  3  for  accounting/audit,  2  for 
CRAs, 4 for issuers, 1 for pension provision), 2 NGOs, 2 consultancy/law firms, 2 promotional banks, 1 
academic  institution;  ESMA  Securities  Market  Stakeholders  Group  and  the  Financial  Services  User 
Group. Those stakeholders come from 18 Member States: AT, BE, CZ, DE, DK, EE, EL, ES, FI, FR, 
HR, IE, IT, LV, NL, PL SE, UK 

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8 

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clear  majority  of  stakeholders  were  in  favour  of  exempting  private  placement  of  bonds  on 
SME  Growth  Markets  from  market  sounding  rules  when  investors  are  involved  in  the 
negotiations of the issuance.  

Among  those  who  expressed  an  opinion,  a  large  majority  of  respondents  believed  that 
alleviations should be granted to all companies listed on SME Growth Markets. It was argued 
that the “one market, one uniform set of rules” principle was necessary to ensure clarity and 
take-up  for  investors,  issuers  and  financial  intermediaries  alike.  Nevertheless,  a  few  trading 
venues and issuer representatives argued that regulatory alleviations should be granted to all 
SMEs,  regardless  of  whether  they  are  listed  on  a  multilateral  trading  facility  or  a  regulated 
market.  

A majority of stakeholders were against setting rules on a mandatory transfer of issuers from 
an SME Growth Market to a regulated market, arguing instead that the transfer to a regulated 
market should always be left to the discretion of the issuer. Nevertheless, a few believed that 
transfers  of  listing  should  be  facilitated  through  appropriate  regulatory  incentives,  aimed  at 
reducing  the  administrative  burden  and  cost  of  listing  on  a  regulated  market.  Different 
stakeholders mentioned that such an incentive could take the form of a prospectus exemption 
or an alleviated prospectus when an issuer moves from an SME Growth Market to a regulated 
market.  As  regards  the  measures  aimed  at  enhancing  liquidity,  market  participants  widely 
acknowledged the benefits of liquidity contracts. Among the stakeholders who expressed an 
opinion,  a  larger  number  agreed  that  there  would  be  merits  in  creating  an  EU  framework, 
although many insisted on the need to maintain flexibility for such contracts to be adapted to 
local conditions. A few National Competent Authorities feared that such practices could give 
rise to manipulative pricing behaviours. Other NCAs however saw no ground for concerns, as 
long  as  the  framework  would  be  calibrated  to  prevent  manipulative  behaviours  as  under 
currently existing Accepted Market Practices. 

(b)  CMU Mid-term review 

On  20  January  2017,  Commission  services  launched  a  public  consultation  on  the  Capital 
Markets Union Mid-term Review. Many respondents called for a proportionate review of the 
different  obligations  placed  on  non-financial  issuers,  especially  SMEs.  Those  obligations 
were considered to be too burdensome and to deter these issuers from seeking a listing. 

As regards the legal framework applying to listed companies, respondents criticised different 
aspects  of  the  Markets  Abuse  Regulation.  For  instance,  rules  concerning  managers' 
transactions  as  well  as  insider  lists  were  criticised  for  being  too  burdensome  for  companies 
listed  on  multilateral  trading  facilities.  The  definition  of  inside  information  was  considered 
too  complex  and  would  lead  to  the  risk  of  an  anticipated  and  premature  disclosure  of 
information  by  listed  issuers.  Some  respondents  considered  that  the  scope  of  'market 
soundings'  rules  under  the  Market  Abuse  Regulation  was  too  wide  and  that  many  market 
participants  would  be  reluctant  to  be  tested  in  the  context  of  a  market  sounding  due  to  the 
legal  risk  they  could  bear.  Other  respondents  considered  that  the  extension  of  the  Market 
Abuse Regulation to companies listed on multilateral trading facilities made access to public 
markets more expensive, because  of the direct costs of monitoring  and disseminating inside 
information. 

(c)  Call for evidence: EU regulatory framework for financial services 

On  30  September  2015,  the  Commission  services  launched  a  Call  for  Evidence  aimed  at 
improving  the  quality  of  the  current  regulatory  framework  in  financial  services,  including 
those that would be directly impacted by CMU actions. In the Call for Evidence, respondents 
broadly supported the reforms to capital market regulation. They however expressed concerns 

EN 

9 

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about  how  the  market  abuse,  prospectus  and  securities  market  legislation  affect  market 
financing for SMEs.  

Concerning  the  market  abuse  regime  and  SME  Growth  Markets,  some  respondents  argued 
that the market abuse regime placed a high burden on issuers in SME growth markets, which 
might  ultimately  result  in  less  activity  and  thus  reduced  financing  for  SMEs.  Particular 
concerns  related  to  the  widening  of  scope  of  issuers'  duties  under  the  regime  to  companies 
listed on MTFs, such as providing insider lists and notifying managers' transactions. 

• 

Collection and use of expertise 

On  14  November  2017,  Commission  services  organised  a  technical  workshop  with 
approximately 25 securities exchange representatives, from 27 Member States. The aim of the 
workshop  was  to  discuss  technical  provisions  and  potential  alleviations  to  the  regulatory 
framework on SME access to public markets, in preparation of the 2017 public consultation 
on "Building a proportionate regulatory environment to support SME listing".  

A  majority  of  participants  contended  that  the  Market  Abuse  Regulation  had  created  costly 
obligations for SME issuers and imposed stringent requirements, despite the important role it 
plays towards investor confidence. Respondents cited the nature of inside information and the 
level of detail required to disclose such information as reasons to this burden. The difficulty to 
clearly  identify  what  to  consider  inside  information  was  mentioned  as  problematic by  some 
participants.  Few  other  stakeholders  criticised  that  sanctions  applicable  under  the  Market 
Abuse  Regulation  were  not  proportionate  to  the  companies  listed  on  multilateral  trading 
facilities,  which  often  have  a  market  capitalisation  of  less  than  EUR  10  million.  Regarding 
insider  lists,  a  couple  of  participants  highlighted  that  the  exemption  introduced  for  SME 
Growth Markets was not meaningful, as issuers would still be required to provide insider lists 
ex-post and have processes in place to do so. Many stakeholders complained about the strict 
deadlines given to managers to notify their transactions, arguing that the three-day timeframe 
should  be  extended  to  five  days  or  that  two  extra  days  should  be  granted  to  the  issuers  to 
disclose  such  information.  Some  of  them  also  explained  that  managers'  transactions  should 
only  be  notified  when  significant,  i.e.  with  a  value  higher  than  the  current  threshold  (EUR 
5,000). Three trading venues also agreed that the rules of the Market Abuse Regulation should 
not  apply  equally  to  equity issuers and  to  the  ones  issuing  only  debt  instruments.  Finally,  a 
participant explained that, as most SME bonds are privately placed, the exemption from rules 
on market soundings for private placements would represent a real alleviation. 

It was mentioned that market participants would welcome more clarity on liquidity provision 
contracts, considering their importance for both brokers and companies. A few stakeholders 
explained  that  Accepted  Market  Practices  on  liquidity  provision  should  not  be  removed, 
advocating for legal certainty on the issue. 

On 28 November 2017, Commission services also organised a technical workshop gathering 
approximately  30  representatives  of 
investors,  brokers  and  other  financial 
intermediaries. 

issuers, 

The great majority of stakeholders agreed that the application of the Market Abuse Regulation 
imposes  significant  costs  on  SMEs.  Some  of  them  suggested  that  the  Market  Abuse 
Regulation  should  be  abandoned  altogether  on  SME-dedicated  markets,  or  that  legislation 
should go back to the previous the Market Abuse Regulation regime, as the new regime often 
leads to companies trying to delist their shares from the market. Stakeholders remarked that 
the  exemption  provided  by  the  Market  Abuse  Regulation  from  keeping  and  updating  an 
insider list is of limited value, as a company could be still asked by the National Competent 
Authority to provide an overwhelming  quantity of information,  which is hardly  manageable 

EN 

10 

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for  smaller  issuers.  Some  participants  did  point  out  that  insider  trading  is  a  great  risk  and 
potentially  detrimental  to  investor  confidence.  Therefore  maintaining  at  least  the  permanent 
section  of  the  insider  list  could  appear  as  a  balanced  approach.  With  regard  to  managers' 
transactions,  it  was  stated  by  many  that  extending  the  three-day  timeframe  to  notify  the 
market  would  not  endanger  investor  protection.  Few  stakeholders  stated  that  EUR  20,000 
would represent a more proportionate threshold for the disclosure of managers' transactions, 
although  it  could  be  increased  even  further  without  compromising  market  integrity.  Others 
argued that requiring the National Competent Authority to make managers' transaction public 
would reduce the burden placed on issuers. Some participants argued that transfers of listing 
from  an  SME  Growth  Market  to  a  regulated  market  should  be  incentivised  through  a  less 
burdensome prospectus. 

• 

Impact assessment 

This proposal is accompanied by an impact assessment that was submitted on 19 March 2018 
and approved by the Regulatory Scrutiny Board (RSB) - with reservations - on 22 April 2018.  

The RSB requested to amend the draft impact assessment to clarify: (i) the justification of the 
initiative from a subsidiarity point of view; (ii) how the scope of the initiative was determined 
(in terms of measures to include and how the impact assessment grouped those measures into 
options);  (iii)  how  the  preferred  options  would  affect  investor  protection.  The  comments 
formulated  by  the  Board  were  addressed  and  integrated  in  the  final  version  of  the  impact 
assessment. 

The impact assessment analyses several policy options to achieve the dual goals of reducing 
the administrative burden on SME Growth Market issuers and fostering the liquidity on equity 
instruments  listed  on  those  trading  venues,  while  maintaining  a  high  level  of  investor 
protection and market integrity. 

The Commission carried out an analysis of problems that may impede the supply of financial 
instruments  on  SME  Growth  Markets  as  well  as  the  demand  for  such  instruments  (in 
particular the liquidity issue that may discourage investors from investing in those markets). 
The impact assessment describes three drivers that explain those problems: 1) the regulatory 
burden on listed SMEs resulting from the application of MAR; 2) the inadequate definition of 
SME  Growth  Markets;  and  3)  the  lack  of  mechanisms  to  promote  trading  and  liquidity  on 
SME Growth Markets. 

It should be noted that some of those issues result from the application of MiFID II level 2 
and  will  be  dealt  with  through  separate  amendments  to  Commission  Delegated  Regulation 
2017/565.  

The Table below provides a summary of the different alleviations provided to SME Growth 
Market  issuers  (under  the  Market  Abuse  Regulation  and  the  Prospectus  Regulation)  and 
measures  aimed  at  fostering  liquidity  of  SME  shares,  as  well  as  their  impacts  on  relevant 
stakeholders. 

Preferred policy Options 

Impact on relevant markets/sectors 

Preferred options under the Market Abuse Regulation 

Adoption  of  a  new  deadline  to 
publicly 
managers' 
disclose 
transactions  (2  days  as  of  the 
notification date by the managers) 

This would alleviate the administrative burden on SME 
Growth  Markets,  by  ensuring  that  they  have  sufficient 
time  to  disclose  managers'  transactions  to  the  public. 
There should be little to no impact on  market integrity 

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11 

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Obligation  to  maintain  a  list  of 
'permanent insiders' 

Justification  of  delayed 
inside 
information  to  be  made  only  on 
request  (and  no  need  to  keep  a 
disclosure record) 

by changing the starting point of the time period.  

This would alleviate the burden on issuers, by avoiding 
the  costs  of  drawing  up  an  ad  hoc  list  of  insiders  for 
each  piece  of  inside  information.  The  impact  on  the 
capacity  of  National  Competent  Authorities  to  detect 
insider trading would be minimal as they rarely rely on 
insider lists in practice.  

This  would  lower  the  administrative  burden  on  SME 
Growth  Market  issuers,  by  exempting  them  from 
recording a long list of information (disclosure record). 
The  impact  on  market  integrity  would  be  minimal,  as 
the  National  Competent  Authorities  would  still  be 
notified  in  case  of  delays  and  able  to  request  a 
justification (prepared ex-post by the issuers).  

Exemption  of  negotiated  private 
bonds  with 
of 
placements 
the 
from 
investors 
institutional 
market  sounding  regime  when  an 
alternative wall-crossing  procedure 
is in place 

This would alleviate the administrative burden on both 
issuers (and those acting on their behalf) and investors 
and would ease the issuance of private placements. An 
alternative  wall-crossing  procedure  would  ensure  that 
all  parties  are  aware  of  their  obligations  as  regards 
inside information disclosure.  

Creation  of  a  European  regime  for 
liquidity  provision  contracts  for 
SME Growth Market equity issuers 
while  allowing  NCAs  to  establish 
Accepted Market Practices 

This  would  increase  liquidity  and  reduce  volatility  of 
SME shares, thus  increasing  the attractiveness of SME 
Growth  Markets  for 
intermediaries  and 
exchanges.  

investors, 

Preferred options under the Prospectus Regulation 

lighter 

'transfer 
Creation  of  a 
prospectus'' 
for  SME  Growth 
Market  issuers  listed  for  at  least 
three  years  when 
seeking  a 
graduation to regulated markets 

This  would  help  companies  graduate  from  the  SME 
Growth  Market  to  the  regulated  market,  by  allowing 
them to produce a simplified prospectus.  

The impact assessment also notes that for the sake of consistency, simplicity and clarity for 
both investors and issuers, the alleviations under the Market Abuse Regulation should benefit 
to all companies listed on SME Growth Markets and not only to SMEs listed on those trading 
venues. 

The  impact  assessment  concludes  that  the  proposed  'package'  of  measures  (through  this 
omnibus proposal for a Regulation and the envisaged targeted changes to MiFID II level 2) 
will  contribute  to  the  overarching  CMU  goal  of  facilitating  access  to  capital  markets  for 
smaller companies. This package of measures will support companies listed on SME Growth 
Markets,  by  reducing  their  administrative  burden  and  by  enabling  improved  liquidity. 
However, the impact assessment also underlines that the regulatory measures included in this 
initiative  would  not  have  an  overwhelming  impact  on  the  situation  of  small  companies 
considering a listing. 

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• 

Regulatory fitness and simplification 

This initiative aims, in part, to reduce compliance costs for issuers on SME Growth Markets. 
This is the case for the amendments envisaged with regard to the Market Abuse Regulation 
that would lead to a reduction of costs estimated at between EUR 4.03 million and EUR 9.32 
million per year. This would represent for each issuer a 15-17.5% reduction of costs resulting 
from  the  Market  Abuse  Regulation  application.  The  creation  of  a  'transfer  prospectus' 
allowing issuers to move from an SME Growth Market to a regulated market would lead to 
cost  savings  estimated  at  between  EUR 4.8  and  EUR 7.2  million  per  year.  Such  a  'transfer 
prospectus'  would  decrease  the  costs  incurred  for  the  preparation  of  this  document  by  25-
28.5%.  

• 

Fundamental rights 

Future  legislative  measures  need  to  be  in  compliance  with  relevant  fundamental  rights 
embodied  in  the EU Charter  of Fundamental Rights.  The proposal respects the fundamental 
rights  and  observes  the  principles  recognised  by  the  Charter,  in  particular  the  freedom  to 
conduct  a  business  (Art.  16)  and  consumer  protection  (Art.  38).  As  this  initiative  aims  at 
alleviating the administrative burden placed on small issuers, this initiative would contribute 
to improving the right to conduct business freely. The envisaged amendments to the Market 
Abuse  Regulation  and  the  Prospectus  Regulation  should  not  have  any  impact  on  consumer 
protection,  as  those  targeted  changes  are  framed  in  a  way  that  will  preserve  a  high  level  of 
market integrity and investor protection. 

4. 

BUDGETARY IMPLICATIONS 

The initiative is not expected to have any noteworthy impact on the EU budget.  

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

A monitoring of the impact of the new Regulation will be carried out by the Commission. Key 
parameters to measure the effectiveness of the Regulation in achieving the stated objectives 
(i.e. alleviation of the administrative burden and increased liquidity) will be: 

(1) 

Impacts on SME growth market issuers and market operators  

(a)  Number of registered SME Growth Markets  

(b)  Number of listings and market capitalisation across SME Growth Markets  

(c)  Number and size of Initial Public Offerings (IPOs) and Initial Bond Offerings 

(IBOs) on SME Growth Markets  

(d)  Number and size of European SME IPOs and IBOs in third countries  

(e)  Ratio of bank based vs. capital market based external financing of SMEs  

(f)  Number  and  volume  of  private  placements  of  listed  bonds  with  institutional 

investors 

(g)  Number of ‘transfer prospectuses’ 

(2) 

Impacts on liquidity on SME growth markets 

(a)  Number of liquidity contracts entered into issuers 

(b)  Transaction volumes (calibrated against the number of listings per venue) 

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13 

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(c)  Average free float  

(d)  Average bid-ask spreads of listings  

(e)  Average liquidity at touch  

(f)  Average market book depth  

(g)  Average time to execution of orders  

(h)  Average daily volatility. 

This list of indicators is non-exhaustive and can be expanded to accommodate the monitoring 
of  additional  impacts.  Additional  indicators  may  help,  for  example,  to  measure  also  the 
effectiveness  of  the  other  non-regulatory  actions  that  form  part  of  the  wider  SME  listing 
package. It should also be noted that there are no concrete quantitative objectives set out for 
any of the indicators in the list. As there is a wide range of factors which will heavily affect 
the  indicators  but  that  are  not  addressed  by  this  initiative,  the  effectiveness  of  the  initiative 
should rather be gauged on the basis of the directional development of indicators. 

Many  of  the  indicators  would  require  the  help  of,  and  data  input  from,  Member  States, 
National Competent Authorities, the European Securities and Markets Authority (ESMA) and 
market operators. This is particularly the case for indicators on liquidity. 

• 

Detailed explanation of the specific provisions of the proposal 

(a)  Amendments to the Market Abuse Regulation 

Exemption  from  the  market  sounding  regime  for  private  placements  of  bonds  with 
qualified investors  

To foster the development of private placement markets of bonds, the Commission proposes 
an amendment to the market sounding regime in Article 11 of the Market Abuse Regulation. 
Currently, a private placement of bonds with qualified investors (i.e. a public offer of bonds 
that is  addressed solely to qualified investors as defined by the Prospectus Regulation)  may 
fall into the scope of the market sounding regime. This is because such an issuance may have 
a potential effect on the creditworthiness of an issuer that already has securities (e.g. shares or 
bonds) admitted to trading on a trading venue and can therefore constitute inside information. 

The technical amendment to Article 11 of the Market Abuse Regulation will aim at clarifying 
that communication of information to potential qualified investors with whom all the terms of 
a  privately  placed  bond  transaction  (including  contractual  terms)  are  negotiated  will  not  be 
subject to the market sounding regime. This exemption will be available when (i) the issuer 
seeking  a  private  placement  of  bonds  already  has  its  equity  or  non-equity  financial 
instruments  admitted  to  trading  on  an  SME  Growth  Market;  and  (ii)  if  an  alternative  wall-
crossing20 procedure is in place, by which any potential qualified investor acknowledges the 
regulatory  duties  stemming  from  the  access  to  inside  information.  This  alternative  wall-
crossing procedure could take the form of a non-disclosure agreement. 

Liquidity Provision Contract for SME Growth Market Issuers 

Under  the  changes  to  Article  13  of  the  Market  Abuse  Regulation,  SME  Growth  Market 
issuers  will  have  the  possibility  to  enter  into  a  'liquidity  provision  contract'  with  a  financial 
intermediary  that  will  be  entrusted  with  the  task  of  enhancing  the  liquidity  of  the  issuer's 
shares.  This  will  be  allowed  even  if  the  National  Competent  Authority  where  the  SME 

20 

Wall crossing is the act of making a person an “insider” by providing them with inside information 

EN 

14 

  EN 

 
 
 
                                                 
Growth  Market  is  located  has  not  established  an  Accepted  Market  Practice  on  liquidity 
provision contracts in accordance with Article 13 of the Market Abuse Regulation.  

This  possibility  will  be  subject  to  three  conditions:  (i)  the  liquidity  provision  contract  shall 
meet the conditions set out by Article 13(2) and by the implementing technical standards to be 
developed  by  the  European  Securities  and  Markets  Authority;  (ii)  the  liquidity  provider 
should be an investment firm authorised under MiFID II and a market member of the SME 
Growth  Market  where  the  issuer  has  its  shares  admitted  to  trading;  and  (iii)  the  market 
operator or the investment firm operating the SME Growth Market shall be informed of the 
conclusion of a  liquidity contract  and agree  with  its terms and conditions. Those conditions 
should be met at all times and the relevant NCAs may request a copy of the liquidity contract 
from the issuer or from the investment firm acting as a liquidity provider. 

The  European  Securities  and  Markets  Authority  will  be  empowered  with  the  task  of 
developing  implementing  technical  standards  providing  for  a  liquidity  provision  contract 
template. Those implementing technical standards will set the requirements that such liquidity 
provision contracts shall comply with, in order to be legal in all Member States.  

This  new  provision  will  not  prevent  Member  States  from  adopting  an  Accepted  Market 
Practice  in  accordance  with  Article  13,  to  tailor  liquidity  provision  contracts  to  local 
conditions or to extend the scope of liquidity contracts beyond SME Growth Market issuers 
(e.g. for illiquid securities listed on regulated markets). 

Justification of the delay in disclosing inside information 

The objective of this modification to Article 17 of the Market Abuse Regulation is to reduce 
the  obligations  imposed  on  SME  Growth  Market  issuers  when  they  decide  to  delay  the 
publication of inside information.  

Under  this  amendment,  SME  Growth  Market  issuers  will  be  still  obliged  to  notify  such  a 
delay to the relevant National Competent Authority. However, they will only be held liable to 
justify  the  reasons  for  the  delay  upon  the  request  of  the  National  Competent  Authority 
(instead  of  doing  so  in  all  circumstances).  Besides,  SME  Growth  Market  issuers  would  be 
exempted from the obligation to keep the list of detailed information to justify the delay on an 
on-going  basis  (as  currently  laid  down  in  Commission  Implementing  Regulation  (EU) 
2016/1055).  This  justification  will  be  prepared  ex-post  if  and  when  the  issuer  receives  a 
request from the National Competent Authority. 

Insider lists for SME Growth Markets 

Under  the  Market  Abuse  Regulation  (Article  18(6)),  SME  Growth  Market  issuers  are  not 
requested to maintain insider lists on an on-going basis, as long as (i) the issuer takes all the 
reasonable steps to ensure that any person with access to inside information acknowledges the 
legal and regulatory duties which follow and is aware of the applicable sanction, and (ii) the 
issuer is able to provide the National Competent Authority with the insider list on request.  

This  amendment  proposes  to  replace  the  current  alleviation  provided  by  the  Market  Abuse 
Regulation to SME Growth Market issuers by a less burdensome 'list of permanent insiders'. 
This would be easier for SMEs to produce while being still meaningful for the investigations 
of National Competent Authorities on insider dealing cases. This list of 'permanent insiders' 
would  include  all  the  persons  that  have  regular  access  to  inside  information  relating  to  that 
issuer due to their function within the issuer (such as members of administrative, management 
and  supervisory  bodies)  or  their  position  (executives  in  a  position  to  make  managerial 
decisions  affecting  the  future  developments  and  business  prospects  of  the  issuers  and 
administrative staff having regular access to inside information). This alleviation will be only 
granted to SME Growth Market issuers without prejudice to the obligations of persons acting 

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on their behalf or for their account (such as accountants, lawyers, rating agencies…) to draw 
up, update and provide to the National Competent Authority upon request their own insider 
lists in accordance with Article 18(1) to 18(5).  

Managers' transactions by SME Growth Market Issuers 

Currently,  Persons  Discharging  Managerial  Responsibilities  (PDMRs)  and  Persons  Closely 
Associated (PCAs) shall declare their transactions to the National Competent Authority and to 
the  issuer  within  three  days  after  the  transaction  date.  At  the  same  time,  the  issuer  shall 
disclose  the  information  to  the  market,  no  later  than  three  days  after  the  transaction. 
Respondents  to  the  public  consultation  underlined  the  technical  impossibility  to  meet  the 
three-day deadline for the notification when the issuer already receives the information from 
the  manager  late,  as  the  three-day  period  encompasses  the  declaration  by  both  PCAs  and 
PDMRs to the issuer, and the issuer to the market.  

Under  this  amendment,  persons  discharging  managerial  responsibilities  and  persons  closely 
associated  to  SME  Growth  Market  issuers  would  be  required  to  notify  the  issuer  and  the 
National  Competent  Authority  within  three  business  days.  Then,  after  the  notification  by 
PDMRs and PCAs, the issuer will have an extra two days to disclose the information to the 
public. 

(b)  Amendment to the Prospectus Regulation 

Transfer Prospectus 

Issuers that are listed for a certain period of time on an SME Growth Market are required to 
produce a full prospectus when they want to graduate to a regulated market. This is because 
no  alleviated  prospectus  schedule  (such  as  the  'EU  Growth  prospectus'  or  the  simplified 
prospectus for secondary issuances) is available to them in such a situation. This amendment 
to  the  Prospectus  Regulation  would  create  an  alleviated  'transfer  prospectus'  for  companies 
listed for at least three years on an SME Growth Market and wishing to move to a regulated 
market. SME Growth Market issuers are subject to ongoing disclosure requirements under the 
Market  Abuse  Regulation  and  the  rules  of  the  SME  Growth  Market  operator,  as  required 
under  Directive  2014/65/EU.  As  such,  they  provide  investors  with  a  lot  of  information.  A 
transfer  prospectus  (based  on  the  simplified  prospectus  for  secondary  issuances  foreseen  by 
the  Prospectus  Regulation)  should  therefore  be  available  to  issuers  in  such  a  situation.  This 
prospectus would be available when SME Growth Market issuers are seeking (i) an admission 
of their securities to trading on a regulated market or (ii) both an admission and a new offer of 
securities on a regulated market. 

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2018/0165 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion 
of the use of SME growth markets 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 114 thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Central Bank1 , 
Having regard to the opinion of the European Economic and Social Committee2,  
Acting in accordance with the ordinary legislative procedure3, 

Whereas: 

(1) 

(2) 

1 
2 
3 
4 

The Capital Markets Union initiative aims at reducing dependence on bank lending, at 
diversifying  market-based  sources  of  financing  for  all  smaller  and  medium-sized 
enterprises  (‘SMEs’) and at promoting the issuance  of bond and shares  by SMEs on 
public  markets.  Companies  established  in  the  Union  that  seek  to  raise  capital  on 
trading  venues  are  facing  high  one-off  and  ongoing  disclosure  and  compliance  costs 
which can deter them from seeking an admission to trading on Union trading venues in 
the  first  place.  In  addition,  shares  issued  by  SMEs  on  Union  trading  venues  tend  to 
suffer from lower levels of liquidity and higher volatility, which increases the cost of 
capital, making this source of funding too onerous.  
Directive  2014/65/EU  of  the  European  Parliament  and  of  the  Council4  has  created  a 
new  type  of  trading  venues,  the  SME  growth  markets,  a  subgroup  of  Multilateral 
Trading  Facilities  (‘MTFs’),  in  order  to  facilitate  access  to  capital  for  SMEs  and  to 
facilitate the further development of specialist markets that aim to cater for the needs 
of  SME  issuers.  Directive  2014/65/EU  also  anticipated  that  “attention  should  be 
focused  on  how  future  regulation  should  further  foster  and  promote  the  use  of  that 
market  so  as  to  make  it  attractive  for  investors,  and  provide  a  lessening  of 
administrative  burdens  and  further  incentives  for  SMEs  to  access  capital  markets 
through SME growth markets”. 

OJ C […], […], p. […]. 
OJ C , , p. . 
Position of the European Parliament of ... (OJ ...) and decision of the Council of ... 
Directive 2014/65/EU  of  the European Parliament  and of  the  Council of 15  May 2014 on  markets  in 
financial  instruments  and  amending  Directive  2002/92/EC  and  Directive  2011/61/EU  (OJ  L  173, 
12.6.2014, p. 349). 

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(3) 

(4) 

(5) 

It has however been noted that issuers admitted to trading on an SME growth market 
benefit  from  relatively  few  regulatory  alleviations  compared  to  issuers  admitted  to 
trading on MTFs or regulated markets. Most of the obligations set out in Regulation 
(EU) No 596/2014 European Parliament and of the Council5 apply in the same manner 
to  all  issuers,  irrespective  of  their  size  or  the  trading  venue  where  their  financial 
instruments  are  admitted  to  trading.  That  low  level  of  differentiation  between  SME 
growth markets and MTF issuers acts as a disincentive for MTFs to seek a registration 
as an SME growth market, which is illustrated by the low uptake of the SME growth 
market  status  to  date.  It  is  therefore  necessary  to  introduce  additional  alleviations  to 
adequately foster the use of SME growth markets.  

The  attractiveness  of  SME  growth  markets  should  be  reinforced  by  further  reducing 
the compliance costs and administrative burdens faced by SME growth market issuers. 
To maintain the highest standards of compliance on regulated markets, the alleviations 
provided for in this Regulation should be limited to companies listed on SME growth 
markets, irrespective of the fact that not all SMEs are listed on SME growth markets 
and not all companies listed on SME growth markets are SMEs. Pursuant to Directive 
2014/65/EU,  up  to  50%  of  non-SMEs  can  be  admitted  to  trading  on  SME  growth 
markets  to  maintain  the  profitability  of  the  SME  growth  markets’  business  model 
through, inter alia, liquidity in non-SMEs securities. In view of the risks involved in 
applying different sets of rules to issuers listed on the same category of venue, namely 
SME growth markets, the changes set out in this Regulation should not be limited to 
SME issuers only. For the sake of consistency for issuers and clarity for investors, the 
alleviation of compliance costs and administrative burdens should apply to all issuers 
on SME growth markets, irrespective of their market capitalisation. Applying the same 
set of rules to issuers also ensures that companies are not penalised because they are 
growing and are no longer SMEs.  

According  to  Article  11  of  Regulation  (EU)  No  596/2014,  a  market  sounding 
comprises  the  communication  of  information,  prior  to  the  announcement  of  a 
transaction,  in  order  to  gauge  the  interest  of  potential  investors  in  a  possible 
transaction and the conditions relating to it such as its potential size or pricing, to one 
or  more  potential  investors.  During  the  negotiation  phase  of  a  private  placement  of 
bonds,  SME  growth  market  issuers  enter  into  discussions  with  a  limited  set  of 
potential  qualified  investors  (as  defined  in  Regulation  (EU)  2017/1129  of  the 
European Parliament and of the Council6) and negotiate all the contractual terms and 
conditions  of  the  transaction  with  those  qualified  investors.  The  communication  of 
information  in  that  negotiation  phase  of  a  private  placement  of  bonds  aims  at 
structuring  and  completing  the  entire  transaction,  and  not  at  gauging  the  interest  of 
potential investors as regards a pre-defined transaction. Imposing market sounding on 
private placements of bonds can thus be burdensome and act as a disincentive to enter 
into  discussions  for  such  transactions  for  both  issuers  and  investors.  In  order  to 
increase the attraction of private placement of  bonds on SME growth  markets, those 
transactions  should  be  excluded  from  the  scope  of  the  market  sounding  regime, 
provided that an adequate non-disclosure agreement is in place. 

5 

6 

Regulation  (EU)  No  596/2014  of  the  European  Parliament  and  of  the  Council  of  16  April  2014  on 
market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament 
and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (OJ L 173, 
12.6.2014, p. 1). 
Regulation  (EU)  2017/1129  of  the  European  Parliament  and  of  the  Council  of  14  June  2017  on  the 
prospectus  to  be  published  when  securities  are  offered  to  the  public  or  admitted  to  trading  on  a 
regulated market, and repealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12). 

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(6) 

(7) 

(8) 

(9) 

7 

Some  liquidity  in  an  issuer’s  shares  can  be  achieved  through  liquidity  mechanisms 
such  as  market-making  arrangements  or  liquidity  contracts.  A  market-making 
arrangement  involves  a  contract  between  the  market  operator  and  a  third  party  who 
commits  to  maintaining  the  liquidity  in  certain  shares  and  benefits  from  rebates  on 
trading fees in return. A liquidity contract involves a contract between an issuer and a 
third party who commits to providing liquidity in the shares of the issuer, and on its 
behalf. To ensure that market integrity is fully preserved, liquidity contracts should be 
available for all SME growth markets issuers across the Union, subject to a number of 
conditions.  Not  all  competent  authorities  have,  pursuant  to  Article  13  of  Regulation 
(EU)  No  596/2014,  established  accepted  market  practices  in  relation  to  liquidity 
contracts  pursuant  to  Article  13  of  Regulation (EU)  No  596/2014,  which  means  that 
not all SME growth market issuers have currently access to liquidity schemes across 
the  Union.  That  absence  of  liquidity  schemes  can  be  an  impediment  to  the  effective 
development  of  SME  growth  markets.  It  is  therefore  necessary  to  create  a  Union 
framework  that  will  enable  SME  growth  market  issuers  to  enter  into  a  liquidity 
contract  with  a  liquidity  provider  in  another  Member  State  in  the  absence  of  an 
accepted  market  practice  established  at  national  level.  The  Union  framework  on 
liquidity  contracts  for  SME  growth  markets  should  however  not  replace,  but  rather 
complement,  existing  or  future  accepted  market  practices.  Competent  authorities 
should keep the possibility to establish accepted market practices on liquidity contracts 
to tailor their conditions to local specificities or to extend such agreements to illiquid 
securities other than SME growth market shares. 

In order to ensure a uniform application of the Union framework for liquidity contracts 
referred to in recital 6, Regulation (EU) No 596/2014 should be amended to empower 
the  Commission  to  adopt  implementing  technical  standards  developed  by  the 
European Securities and Markets Authority, setting out a template to be used for the 
purposes  of  such  contracts.  The  Commission  should  adopt  those  implementing 
technical  standards  by  means  of  implementing  acts  pursuant  to  Article  291  of  the 
Treaty  and  in  accordance  with  Article 15  of  Regulation  (EU)  No  1095/2010  of  the 
European Parliament and of the Council.7 

According  to  Article  17(4)  of  Regulation  (EU)  No  596/2014,  issuers  can  decide  to 
delay the public disclosure of inside information if their legitimate interests are likely 
to  be  prejudiced.  Issuers  are  however  required  to  notify  the  competent  authority 
thereof  and  to  provide  an  explanation  of  the  rationale  supporting  the  decision.  The 
obligation  for  SME  growth  market  issuers  to  document  in  writing  the  reasons  why 
they have  decided to  delay the disclosure can be burdensome. It is  considered that a 
lighter requirement for SME growth markets issuers consisting in an obligation to only 
explain the reasons for the delay upon request by the competent authority would have 
no  significant  impact  on  the  ability  of  the  competent  authority  to  monitor  the 
disclosure  of  inside  information,  while  significantly  reducing  the  administrative 
burden  for  SME  growth  markets  issuers,  provided  that  competent  authorities  would 
are still notified of the decision to delay and are in a position to open an investigation 
if they have doubt as regards that decision.  

The current less stringent requirements for SME growth markets issuers to produce, in 
accordance  with  Article  18(6)  of  Regulation  (EU)  No  596/2014,  an  insider  list  only 

Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Securities and Markets Authority), amending 
Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 
84). 

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upon  the  request  of  the  competent  authority,  is  of  limited  practical  effect,  because 
those  issuers  are  still  subject  to  ongoing  monitoring  of  the  persons  who  qualify  as 
insiders in the context of ongoing projects. The existing alleviation should therefore be 
replaced by the possibility for SME growth markets issuers to maintain only a list of 
permanent  insiders,  which  should  include  persons  who  have  regular  access  to  inside 
information due to their function or position within the issuer.  

(10)  Pursuant  to  Article  19(3)  of  Regulation  (EU)  No  596/2014,  issuers  have  to  make 
public  transactions  carried  out  by  persons  discharging  managerial  responsibilities 
(‘PDMRs’) and persons closely associated with them (‘PCAs’) within three days after 
the transaction. The same deadline applies to PDMRs and PCAs as regards their duty 
to  report  their  transactions  to  the  issuer.  Where  SME  growth  market  issuers  are 
notified  late  by  PDMRs  and  PCAs  of  their  transactions,  it  is  technically  challenging 
for  those  SME  growth  market  issuers  to  comply  with  the  three-day  deadline,  which 
may  give  rise  to  liability  issues.  SME  growth  markets  issuers  should  therefore  be 
allowed  to  disclose  transactions  within  two  days  after  those  transactions  have  been 
notified by the PDMRs or the PCAs. 

(11)  SME  growth  markets  should  not  be  perceived  as  a  final  step  in  the  scaling  up  of 
issuers  and  should  enable  successful  companies  to  grow  and  move  one  day  to 
regulated  markets  to  benefit  from  greater  liquidity  and  a  larger  investors’  pool.  To 
facilitate  the  transition  from  an  SME  growth  market  to  a  regulated  market,  growing 
companies should be able to use the simplified disclosure regime for the admission on 
a  regulated  market,  as  set  out  in  Article  14  of  Regulation  (EU)  2017/1129  of  the 
European  Parliament  and  of  the  Council,  provided  that  those  companies  are  already 
admitted  to  trading  on  an  SME  growth  market  for  at  least  three  years.  That  period 
should enable issuers to have a sufficient track record and to provide the market with 
information on their financial performance and reporting requirements under the rules 
of Directive 2014/65/EU. 

(12)  According  to  Regulation  (EC)  No  1606/2002  of  the  European  Parliament  and  of  the 
Council8,  SME  growth  market  issuers  are  not  obliged  to  publish  their  financial 
statements  in  International  Financial  Reporting  Standards.  However,  to  avoid 
departing  from  regulated  market  standards,  SME  growth  markets  issuers  that  would 
want to use the simplified disclosure regime for a transfer to a regulated market should 
prepare their most recent financial statements, including comparative information for 
the previous year in accordance with that Regulation.  

(13)  Regulations (EU) No 596/2014 and (EU) No 2017/1129 should therefore be amended 

accordingly.  

(14)  The amendments set out in this Regulation should apply 6 months after the entry into 
force of this Regulation to provide sufficient time for incumbent SME growth market 
operators to adapt their rulebooks, 

8 

Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the 
application of international accounting standards (OJ L 243, 11.9.2002, p. 1). 

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HAVE ADOPTED THIS REGULATION: 

Article 1 

Amendments to Regulation (EU) No 596/2014 

Regulation (EU) No 596/2014 is amended as follows: 

1. 

in Article 11, the following paragraph 1a is inserted : 

“ 1.a Where an offer of securities is addressed solely to qualified investors as defined 
in Article 2(e) of Regulation (EU) 2017/1129 of the European Parliament and of the 
Council*, communication of information to those qualified investors for the purposes 
of  negotiating  the  contractual  terms  and  conditions  of  their  participation  in  an 
issuance of bonds by an issuer that has financial instruments admitted to trading on 
an  SME  growth  market  shall  not  constitute  a  market  sounding  and  shall  not 
constitute unlawful disclosure of inside information. That issuer shall ensure that the 
qualified  investors  receiving  the  information  are  aware  of,  and  acknowledge  in 
writing,  the  legal  and  regulatory  duties  entailed  and  are  aware  of  the  sanctions 
applicable to insider dealing and unlawful disclosure of inside information. 

________________________ 
* 

Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on 
the prospectus to be published when securities are offered to the public or admitted to trading 
on a regulated market, and repealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12).”; 

2. 

in Article 13, the following paragraphs 12 and 13 are inserted: 

“12.  An  issuer  whose  financial  instruments  are  admitted  to  trading  on  an  SME 
growth  market  shall  be  authorised  to  enter  into  a  liquidity  contract  for  its  shares 
where all of the following conditions are met:  

(a) 

(b) 

(c) 

(d) 

the  terms  and  conditions  of  the  liquidity  contract  comply  with  the  criteria  set 
out  in  Article  13(2)  of  this  Regulation  and  in  Commission  Delegated 
Regulation (EU) 2016/908**; 

the liquidity contract is established in accordance with the template as referred 
to in the paragraph 13; 

the  liquidity  provider  is  duly  authorised  by  the  competent  authority  in 
accordance  with  Directive  2014/65/EU  and  is  registered  as  a  market  member 
by  the  market  operator  or  the  investment  firm  operating  the  SME  growth 
market; 

the market operator or the investment firm operating the SME growth market 
acknowledges in writing to the issuer that it has received a copy of the liquidity 
contract and agrees to that contract’s terms and conditions.  

The  issuer  referred  to  in  the  first  subparagraph  of  this  paragraph  shall  be  able  to 
demonstrate at any time that the conditions under which the contract was established 
are met on an ongoing basis. That issuer and the investment firm operating the SME 
growth  market  shall  provide  the  relevant  competent  authorities  with  a  copy  of  the 
liquidity contract upon their request. 

13. In order to ensure uniform conditions of application of paragraph 12, ESMA shall 
develop draft implementing technical standards setting out a contractual template to 
be  used  for  the  purposes  of  entering  into  a  liquidity  contract  to  ensure  compliance 
with  the  conditions  set  out  in  Article  13.  ESMA  shall  submit  those  draft 

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implementing technical standards to the Commission by […]. Power is conferred on 
the Commission to adopt the implementing technical standards referred to in the first 
subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010. 

_________________________ 

** 

Commission  Delegated  Regulation  (EU)  2016/908  of  26  February  2016  supplementing 
Regulation  (EU)  No  596/2014  of  the  European  Parliament  and  of  the  Council  laying  down 
regulatory  technical  standards  on  the  criteria,  the  procedure  and  the  requirements  for 
establishing an accepted market practice and the requirements for maintaining it, terminating it 
or modifying the conditions for its acceptance (OJ L 153, 10.6.2016, p. 3). ”; 

3. 

in Article 17(4), the following subparagraph is added: 

“An  issuer  whose  financial  instruments  are  admitted  to  trading  on  an  SME  growth 
market  and  which  has  decided  to  delay  the  public  disclosure  of  inside  information 
shall  notify  that  decision  to  the  competent  authority.  The  explanations  for  the 
decision  to  delay  are  to  be  provided  only  upon  request  of  the  competent  authority 
specified in accordance with paragraph 3. That competent authority shall not require 
that issuer to keep a record of that explanation.”; 

4. 

in Article 18, paragraph 6 of is replaced by the following: 

“6.  Issuers  whose  financial  instruments  are  admitted  to  trading  on  an  SME  growth 
market shall be authorised to include in their lists of insiders only those persons who, 
due to the nature of their function or position within the issuer, have regular access to 
inside  information.  Any  person  acting  on  behalf  of,  or  for  the  account  of  an  issuer 
admitted to trading on an SME growth market issuer remains subject to requirements 
set out in paragraphs 1 to 5.  

That list shall be provided to the competent authority upon its request.”; 

5. 

in the first subparagraph of Article 19(3), the following sentence is added:  

“Issuers  whose  financial  instruments  are  admitted  to  trading  on  a  SME  growth 
market  shall  have  two  business  days  after  receipt  of  a  notification  as  referred  to  in 
paragraph 1 to make public the information contained in that notification.”. 

Article 2 

Amendments to Regulation (EU) No 2017/1129 

Article 14 of Regulation (EU) 2017/1129 is amended as follows: 

1. 

in the first subparagraph of paragraph 1, the following point d is added: 

“(d) issuers that have been admitted to trading on an SME Growth Market for at least 
three  years  and  who  seek  admission  of  existing  or  new  securities  to  trading  on  a 
regulated market.”; 

2. 

in the second subparagraph of paragraph 2, the following sentence is added: 

“For issuers as referred to in point (d) of the first subparagraph of paragraph 1, the 
most  recent  financial  statements,  containing  comparative  information  for  the 
previous year included in the simplified prospectus, shall be prepared in accordance 
with  the  International  Financial  Reporting  Standards  as  endorsed  in  the  Union 
pursuant to Regulation (EC) No 1606/2002***. 

________________________________ 

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***  Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 
on the application of international accounting standards (OJ L 243, 11.9.2002, p. 1). ”. 

Article 3 

Entry into force and application 

This  Regulation  shall  enter  into  force  on  the  twentieth  day  following  that  of  its 

publication in the Official Journal of the European Union. 

It shall apply from 6 months after entry into force. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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