COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the documents Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/65/EU to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises and repealing Directive 2001/34/EC Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) 2017/1129, (EU) No 596/2014 and (EU) No 600/2014 to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises
Date: 2022-12-07
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: capital market, insider trading, investment protection, issue of securities, official market, public limited company, share, shareholder, small and medium-sized enterprises, stock-exchange listing

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 7.12.2022  SWD(2022) 762 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT     Accompanying the documents   Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/65/EU to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises and repealing Directive 2001/34/EC          Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market          Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) 2017/1129, (EU) No 596/2014 and (EU) No 600/2014 to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises {COM(2022) 760 final} - {SEC(2022) 760 final} - {SWD(2022) 763 final}  
 
 
Table of contents 

TABLE OF FIGURES .................................................................................................................................... 6 

GLOSSARY ................................................................................................................................................... 7 

1. 

INTRODUCTION: POLITICAL, LEGAL AND MARKET CONTEXT .......................................... 10 

1.1.  Political context ............................................................................................... 10 
1.2.  Legal context ................................................................................................... 12 
1.3.  Market context ................................................................................................. 14 

2. 

PROBLEM DEFINITION .................................................................................................................. 16 

2.1.  What are the problems? ................................................................................... 16 
Lack of flexibility for issuers when listing ................................................................ 16 

2.1.1. 

2.1.2.  Unnecessary regulatory burden for companies .......................................................... 18 

2.2.  What are the problem drivers? ........................................................................ 19 
2.2.1.  Unequal  opportunities  for  EU  companies  regarding  governance  structure,  when 
listing, due to different national rules on MVR share structures (Pre-IPO phase) .................... 20 

2.2.2.  Overly burdensome listing requirements (IPO phase) ............................................... 22 

2.2.3.  Overly burdensome ongoing disclosure requirements (Post-IPO phase) ................... 24 

2.2.4. 

Stakeholders’ views on problem drivers .................................................................... 27 

2.2.5.  Out-of-scope drivers .................................................................................................. 30 

2.2.6. 

Lack of diversified funding ........................................................................................ 32 

2.3.  How will the problem evolve? ........................................................................ 32 

3.  WHY SHOULD THE EU ACT? ........................................................................................................ 33 

3.1.  Legal basis ....................................................................................................... 33 
3.2.  Subsidiarity: Necessity of EU action ............................................................... 34 
3.3.  Subsidiarity: Added value of EU action .......................................................... 34 

4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ............................................................................... 34 

4.1.  General objectives ........................................................................................... 34 
4.2.  Specific objectives ........................................................................................... 35 

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? .................................................................... 35 

5.1.  What is the baseline from which options are assessed? .................................. 35 
5.2.  Description of the policy options .................................................................... 36 
5.2.1.  Options  addressing  unequal  opportunities  for  EU  companies  regarding  governance 
structure,  when  listing,  due  to  different  national  rules  on  MVR  share  structures  (Pre-IPO 
phase) ........................................................................................................................................ 37 

5.2.2.  Options  addressing  the  overly  burdensome  regulatory  listing  requirements  (IPO 
phase)…… ................................................................................................................................ 38 

5.2.3.  Options  addressing  overly  burdensome  ongoing  disclosure  requirements  (post-IPO 
phase)…… ................................................................................................................................ 40 

1 

 
 
 
5.2.4.  Discarded option ........................................................................................................ 41 

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? ........................................................... 41 

6.1.  Options addressing unequal opportunities for EU companies regarding 
governance  structure,  when  listing,  due  to  different  national  rules  on 
MVR share structures (pre-IPO) ..................................................................... 42 
6.1.1. Option 1 - Minimum harmonisation of MVR share structures across the EU ................ 42 

6.1.2.  Option  2  -  Maximum  harmonisation  of  national  legislation  to  allow  for  the  MVR 
share structures be adopted across the EU with specific conditions and clauses ...................... 45 

6.2.  Options relating to overly burdensome regulatory listing requirements 

(IPO phase) ...................................................................................................... 48 
6.2.1.  Option 1 - Scrutiny by exchanges and non-passportable admission documents ........ 48 

6.2.2.  Option 2 - Shorter prospectuses with streamlined scrutiny by NCAs ........................ 53 

6.3.  Options  addressing 

the  overly  burdensome  ongoing  disclosure 

requirements (Post-IPO phase) ........................................................................ 59 
6.3.1.  Option 1  - Review of the definition of  inside information  and of the  conditions for 
delaying its disclosure ............................................................................................................... 59 

6.3.2.  Option 2 - Introduction of a closed list of events which qualify as inside information 
for the purposes of disclosure ................................................................................................... 62 

7.  HOW DO THE OPTIONS COMPARE? ............................................................................................ 64 

7.1.  Options addressing unequal opportunities for EU companies regarding 
governance  structure,  when  listing,  due  to  different  rules  on  MVR 
share structures (Pre-IPO) ............................................................................... 64 

7.2.  Options relating to overly burdensome regulatory listing requirements 

(IPO phase) ...................................................................................................... 65 

7.3.  Options  addressing 

the  overly  burdensome  ongoing  disclosure 

requirements (Post-IPO) .................................................................................. 66 

8. 

PREFERRED OPTION ...................................................................................................................... 67 

8.1.  Overall impact of preferred options ................................................................ 67 
8.2.  The scale of magnitude of the expected impacts of the accompanying 

measures .......................................................................................................... 69 
8.3.  Coherence of the preferred options ................................................................. 71 
8.4.  REFIT (simplification and improved efficiency) ............................................ 75 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? .................................. 75 

ANNEX 1: PROCEDURAL INFORMATION ............................................................................................ 77 

1. 
2. 
3. 
4. 

Lead DG, Decide Planning/CWP references ................................................... 77 
Organisation and timing .................................................................................. 77 
Consultation of the RSB .................................................................................. 77 
Evidence, sources and quality ......................................................................... 82 

ANNEX 2: STAKEHOLDER CONSULTATION ....................................................................................... 84 

2 

 
 
1. 

2. 

Public  and  targeted  consultations  on  the  listing  act:  making  public 
capital  markets  more  attractive  for  EU  companies  and  facilitating 
access to capital for SMEs ............................................................................... 84 
Technical workshop with industry stakeholders ............................................. 93 

ANNEX 3: WHO IS AFFECTED AND HOW? .......................................................................................... 96 

1. 
2. 
3. 

Practical implications of the initiative ............................................................. 96 
Summary of benefits and costs ........................................................................ 97 
SME Test ....................................................................................................... 103 

ANNEX 4: ANALYTICAL METHODS ................................................................................................... 106 

1. 
2. 
3. 
4. 

Data sources and data limitations .................................................................. 106 
The use of equity funding by corporations .................................................... 109 
The value of keeping control of the firm: role of MVR share structures ...... 113 
Issuance costs and costs for producing a prospectus ..................................... 116 
4.1.  Estimates of issuance costs required for an IPO .......................................................... 116 

4.2.  Costs of producing a prospectus ................................................................................... 119 

4.3.  Cost  savings  from  the  use  of  different  types  of  prospectuses  or  documents  as  well  as 
from exemptions ..................................................................................................................... 125 

4.4.  Primary issuances: offers of securities to the public or admission to trading on regulated 
markets .................................................................................................................................... 125 

4.5.  Primary issuances: offers of securities to the public and listing on SME growth markets
………………………………………………………………………………………...127 

4.6.  Secondary issuances ..................................................................................................... 128 

5. 

The costs of being listed ................................................................................ 130 
5.1.  Estimates of the magnitude of the costs of staying listed ............................................. 131 

5.2.  The potential for cost savings – orders of magnitudes and assumptions ...................... 132 

5.2.1.  Cost savings for issuers ............................................................................................ 132 

5.2.2.  Cost savings for public authorities ........................................................................... 134 

ANNEX 5: ANALYSIS OF THE PRE-IPO PHASE: MVR SHARE STRUCTURES .............................. 136 

1.  What are MVR share structures .................................................................... 136 
Loyalty shares vs MVR share structures ....................................................... 137 
2. 
Current  situation  in  the  EU  Member  States  and  in  other  jurisdictions 
3. 
outside of the EU ........................................................................................... 138 
3.1.  Situation in the EU Member States .............................................................................. 138 

3.2.  Situation outside the EU ............................................................................................... 140 

4. 
5. 

EU Legislation on voting rights .................................................................... 143 
Advantages and disadvantages of MVR share structures .............................. 145 
5.1.  Advantages of MVR share structures ........................................................................... 145 

5.2.  Disadvantages of MVR share structures ...................................................................... 147 

6.  Merits of introducing MVR shares in the EU ............................................... 149 

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ANNEX 6: ANALYSIS OF THE IPO PHASE: PROSPECTUS REGULATION .................................... 152 

1. 
2. 
3. 
4. 

Objectives and key changes introduced by the Prospectus Regulation ......... 152 
Subsequent amendments to the Prospectus Regulation ................................. 154 
The evolution of prospectus approval in the EEA ......................................... 155 
Evaluation of the key measures of the Prospectus Regulation ...................... 160 
4.1.  The standard prospectus for equity and non-equity securities ..................................... 161 

4.2.  The Prospectus summary ............................................................................................. 168 

4.3.  The EU Growth prospectus .......................................................................................... 170 

4.4.  Simplified prospectus regimes for secondary issuances............................................... 177 

4.4.1. 

Simplified prospectus for secondary issuances ........................................................ 178 

4.4.2. 

The EU Recovery prospectus................................................................................... 180 

4.5.  The Universal Registration Document (URD) ............................................................. 184 

4.6.  Exemptions from the prospectus for small offer of securities to the public. ................ 186 

4.7.  Scrutiny and approval of the prospectus ...................................................................... 190 

4.8.  Supplements to the prospectus ..................................................................................... 198 

4.9.  Equivalence regime ...................................................................................................... 200 

5. 

Conclusions ................................................................................................... 203 

ANNEX 7: ANALYSIS OF IPO-PHASE: THE LISTING DIRECTIVE .................................................. 204 

1. 

2. 

Introduction and problem description .......................................................................... 204 

Description of the options ............................................................................................ 208 

3.  What are the impacts of the options? ........................................................................... 209 

4. 

5. 

How do the options compare ........................................................................................ 211 

Preferred option ............................................................................................................ 211 

ANNEX 8: ANALYSIS OF THE POST-IPO PHASE: MAR .................................................................... 212 

1. 
2. 

Overview of MAR ......................................................................................... 212 
Analysis of the key measures ........................................................................ 212 
2.1.  Definition of inside information ................................................................................... 212 

2.2.  Delayed disclosure of inside information ..................................................................... 217 

2.3.  Administrative measures and sanctions ....................................................................... 220 

2.4.  Market soundings ......................................................................................................... 226 

2.5. 

Insider lists ................................................................................................................... 228 

2.6.  Cross-market order book surveillance .......................................................................... 228 

3. 

Conclusions ................................................................................................... 229 

ANNEX 9: ANALYSIS OF RULES ON INVESTMENT RESEARCH ................................................... 230 

1. 
2. 

Introduction ................................................................................................... 230 
The EU regulatory environment .................................................................... 231 

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3. 

Developing  an  investment  research  of  quality  for  SMEs:  the  way 
forward .......................................................................................................... 235 

ANNEX 10: ACCOMPANYING MEASURES......................................................................................... 238 

1. 

2. 

Other MAR measures .................................................................................... 238 
Review of the rules on Market soundings. ................................................................... 238 
A) 

B) 

Extension of the alleviations on insiders lists to all types of markets. ......................... 238 

Other prospectus measures ............................................................................ 239 
Simplify and alleviate the universal registration document (URD) regime. ................ 239 
A) 

B) 
Harmonise the upper prospectus exemption threshold for small offers of securities to the 
public (no national discretion) and remove lower threshold. .................................................. 240 

C) 
Reduce  the  current  minimum  six  day-period  between  the  publication  of  a  prospectus 
and the end of an offer of shares. ............................................................................................ 241 

D)  Make the CMRP amendments to the supplement regime permanent. .......................... 241 

E) 
Introduce  a  reference  to  environmental,  social  or  governance  (ESG)  matters  in  the 
empowerment for the Commission to adopt delegated acts to lay down the format and content 
of the prospectus. .................................................................................................................... 241 

F) 

Amend the currently unworkable equivalence regime. ................................................ 242 

3. 

Clarify dual listing ......................................................................................... 243 

ANNEX  11:  ACCOMPANYING  MEASURES  ON  MARKET  INTEGRITY  –  CROSS-

MARKET SURVEILLANCE OF ORDERBOOK DATA ............................................................... 244 

Introduction ................................................................................................... 244 
Standardisation of orderbook data formats .................................................... 244 

1. 
2. 
3.  Mandatory  exchange  of  orderbook  data  for  markets  with  a  cross-

border dimension ........................................................................................... 245 

ANNEX 12: OUT-OF-SCOPE DRIVERS ................................................................................................. 247 

1. 
2. 
3. 
4. 
5. 

6. 

Tax treatment ................................................................................................. 247 
Debt/equity bias ............................................................................................. 247 
Access to company information .................................................................... 247 
Lack of retail investor participation .............................................................. 248 
Narrower  institutional  investor  base  compared  to  other  developed 
markets .......................................................................................................... 249 
Re-equitisation of funding structures ............................................................ 249 

ANNEX 13: OTHER ONGOING INITIATIVES CONTRIBUTING TO IMPROVING PUBLIC 

MARKETS’ ECOSYSTEM .............................................................................................................. 250 

ANNEX 14: PAST INITIATIVES ............................................................................................................. 253 

ANNEX 15: ANALYSIS OF SPACS ........................................................................................................ 255 

5 

 
 
 
 
 
 
TABLE OF FIGURES 

Figure 1. Number of IPOs in different jurisdictions 
Figure 2. Number of annual delistings in the EU classified by type of market 
Figure 3. % of IPOs with MVR structures in the US (2y moving average) 
Figure 4. The listing stages 
Figure 5. The problem tree 
Figure 6. Market funding ratio  

6 

 
 
 
 
 
GLOSSARY 

Term or acronym 

Meaning or definition 

CMRP 

CMU 

CMU AP 

Capital Markets Recovery Package 

Capital Markets Union 

Communication from the Commission to the European Parliament, 
the  Council,  the  European  Economic  and  Social  Committee  and 
the  Committee  of  the  Regions  COM/2020/590  final  -  A  Capital 
Markets  Union  for  people  and  businesses-new  action  plan  EUR-
Lex - 52020DC0590 - EN - EUR-Lex (europa.eu) 

CMU HLF 

High Level Forum on CMU 

CMU HLF Final report 

Final report of the High Level Forum on the Capital Markets 
Union - A new vision for Europe’s capital markets | European 
Commission (europa.eu) 

EEA 

ESAs 

ESMA 

EU 

FESE 

GDP 

IA 

Inside Information 

European Economic Area 

European Supervisory Authorities 

European Securities and Markets Authority 

European Union 

Federation of European Stock Exchanges 

Gross Domestic Product 

Impact Assessment 

In the Market Abuse Regulation inside information is defined in 
Article 7(1)(a) as “information of a precise nature, which has not 
been made public, relating to the issuer or to a financial 
instrument, and which, if it were made public, would be likely to 
have a significant effect on the price of that financial instrument or 
on the price of a related derivative financial instrument” 

IPO 

Initial Public Offering 

Listing Directive 

Loyalty Shares 

Market Abuse Directive or MAD 

Market Abuse Regulation or MAR 

Directive 2001/34/EC of the European Parliament and of the 
Council of 28 May 2001 on the admission of securities to official 
stock exchange listing and on information to be published on those 
securities. 

Loyalty shares are shares that give enhanced voting power to 
shareholders that have held them for a specified time period.  

Directive  2014/57/EU  of  the  European  Parliament  and  of  the 
Council  of  16 April  2014  on  criminal  sanctions  for  market  abuse 
(market abuse directive). 

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. 

7 

 
 
 
MiFID II 

MiFIR 

MTF 

MVR share structures 

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 
(Markets in Financial Instruments Directive). 

Regulation (EU) No 600/2014 of the European Parliament and of 
the  Council  of  15 May  2014  on  markets  in  financial  instruments 
and amending Regulation (EU) No 648/2012 (Markets in Financial 
Instruments Regulation). 

Multilateral Trading Facility 

Multiple voting right share structures means the share structure of 
a company that includes at least two distinct and separate classes 
of shares with a different number of votes. 

NCA 

National Competent Authority 

Non-Voting Shares 

Preferential Shares 

Prospectus 

Prospectus Regulation  

Oxera study 

SME growth market 

SME listing package 

A non-voting share is a type of share that does not give the holder 
any voting rights in the company. It usually constitutes a separate 
class of share 

Preferential shares are shares of a company's stock with dividends 
that are paid out to shareholders before common stock dividends 
are issued but that hold no voting power. 

A legal document that a person or a company (unless exemptions 
apply) needs to draw up and the NCA scrutinise and approve i) 
where a person or company makes an offer to the public of 
transferable securities; or ii) where a company applies for its 
securities to be admitted to trading on a RM (including in the 
context of secondary issuances). A prospectus needs to contain the 
information on the company and the securities offered or admitted 
to trading that an investor needs in order to make an informed 
investment decision.  

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. 

Oxera Consulting LPP, Primary and secondary equity markets in 
EU, Final report, November 2020, Oxera-study-Primary-and-
Secondary-Markets-in-the-EU-Final-Report-EN-1.pdf 

A  new  category  of  trading  venues  (a  multilateral  trading  facility) 
dedicated to smaller issuers, introduced in MiFID II. To be eligible 
as  an  SME  growth  market,  the  venue  would  have  to  meet  the 
following criteria: (i) a 50% threshold on the minimum number of 
SME  issuers  traded  on  the  SME  growth  market,  (ii)  appropriate 
criteria for initial and ongoing admission to trading, (iii) sufficient 
information published and appropriate ongoing financial reporting 
of issuers, (iv) dissemination  of information to the public and (v) 
compliance with systems and controls under MAR. 

Regulation (EU) 2019/2115 of the European Parliament and of the 
Council of 27 November 2019 amending Directive 2014/65/EU 
and Regulations (EU) No 596/2014 and (EU) 2017/1129 as 
regards the Promotion of the use of SME growth markets 

8 

 
 
 
 
 
SMEs 

SPAC 

Trading venue 

TESG 

TESG Final report 

Small and Medium-sized Enterprises 

Special-Purpose Acquisition Company 

A regulated market, an MTF or an OTF 

Technical Expert Stakeholder Group on SMEs 

Final report of the Technical Expert Stakeholder Group (TESG) on 
SMEs - Empowering EU capital markets - Making listing cool 
again (europa.eu) 

TFEU 

Treaty on the Functioning of the European Union 

Transparency Directive or TD 

Directive 2004/109/EC of the European Parliament and of the 
Council of 15 December 2004 on the harmonisation of 
transparency requirements in relation to information about issuers 
whose securities are admitted to trading on a regulated market. 

URD 

Universal Registration Document 

9 

 
 
 
 
 
1.  INTRODUCTION: POLITICAL, LEGAL AND MARKET CONTEXT 

1.1. Political context 

By  developing  EU  capital  markets  and  decreasing  their  fragmentation  along  national 
borders,  the  CMU  project  aims  to  enable  companies  to  tap  funding  sources  other  than 
bank lending and to adapt their financing structure when maturing and growing in size. 
More  diversified  financing  in  the  form  of  debt  and  equity  would  decrease  risks  for 
individual  firms  and  the  overall  economy  as  well  as  help  EU  companies,  in  particular 
SMEs, realise their growth potential. 

A core aim of the CMU is to give better access to market-based sources of financing for 
EU companies at each stage of their development, including for more mature companies 
seeking  access  to  public  markets.  Recently-listed  companies  often  outstrip  privately-
owned  companies  in  terms  of  annual  growth  and  job  creation1.  By  listing  on  public 
markets, companies can diversify their investor base, gain easier access to equity capital 
and debt finance, raise their public profile and increase brand recognition.  
Since the first CMU Action plan in 20152, progress has been made to make it easier and 
cheaper for  companies, in particular smaller ones, to  access  public markets (see Annex 
14 for more details on the past CMU initiatives). Among others, the Commission has put 
forward  new  rules  to  facilitate  financing  through  capital  markets  for  small  businesses3. 
The aim was to cut red tape for SMEs listing on SME growth markets, a new category of 
trading  venues  dedicated  to  smaller  issuers,  to  reduce  the  regulatory  burden  while 
preserving an appropriate level of investor protection and market integrity.  
Nevertheless,  stakeholders  continue  to  argue4  that  more  needs  to  be  done  on  the 
regulatory  side,  in  particular  with  respect  to  streamlining  the  listing  process  and 
rendering  the  regulatory  treatment  of  companies  more  proportionate  to  their  size.  Such 
simplifications could encourage companies to access public markets, while safeguarding 
investor protection and market integrity. This conclusion was shared by the CMU HLF, 
which, in its final report published in June 20205 recommended the Commission to make 
targeted  modifications  of,  in  particular,  the  prospectus  and  market  abuse  regulatory 
frameworks to make public listing in the EU more attractive, in particular for SMEs.  
In July 2020, the Commission adopted the CMRP6 that introduced targeted amendments 
to  encourage  investments  and  facilitate  a  more  rapid  re-capitalisation  of  companies, 
notably  in  the  Covid-19  context.  However,  given  the  strong  recovery  focus  of  the 
package,  in  some  cases,  the  amended  rules  apply  for  a  limited  period  of  time,  thus 
providing  only  for  a  temporary  relief  to  companies.  Therefore,  while  the  CMRP 
facilitated the access of companies to public market financing in the Covid-19 context, it 
did  not  replace  the  need  to  assess  carefully  and  in  a  more  structural  way  the  merit  of 
further  and/or permanent adjustments to  the overall listing regime  to  make  it easier for 
businesses  to  list  on  EU  venues,  without  undermining  market  integrity  and  investor 
protection. 

1 TESG Final report, p.6 
2 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and 
the Committee of the Regions COM/2015/0468 final - Action Plan on Building a Capital Markets Union 
3 SME listing package 
4 Views expressed in bilateral meetings, expert groups, public consultations and conferences/workshops. 
5 CMU HLF Final report 
6 See: Making capital markets work for Europe's recovery (europa.eu) 

10 

 
 
                                                           
In recognition of this, the new CMU Action Plan that was adopted in September 20207 
announced  that  ‘in  order  to  promote  and  diversify  small  and  innovative  companies’ 
access  to  funding,  the  Commission  will  seek  to  simplify  the  listing  rules  for  public 
markets’. 

Following  up  on  this,  and  building  on  the  measures  already  introduced  with  the  2019 
SME Listing Act, the Commission set up a Technical Expert Stakeholder Group (TESG) 
on SMEs. The Expert group confirmed the concerns expressed by the stakeholders that 
further  legislative  action  is  needed  to  support  listing  of  companies  and  especially  of 
SMEs. In their final report, published in May 2021, the TESG made 12 recommendations 
to  amend  the  listing  legislative  framework  which  applies  both  on  regulated  markets  as 
well as on SME growth markets. 
On  15  September  2021  President  Von  der  Leyen  announced  in  her  letter  of  intent8 
addressed to  the Parliament  and the Presidency  of the Council a legislative proposal  to 
facilitate  SMEs’  access  to  capital,  which  has  been  included  in  the  2022  Commission 
work programme9.  

The decision to list is affected by a multitude of factors, most of which are outside the 
regulators’ reach. Geopolitical instability, Brexit, Covid and low interest rates have had 
an impact on the decision to list and, in particular, on the timing of listing. Other factors 
relate  to  the  features  of  the  ecosystem  that  determine  the  cost  of  services  relevant  for 
listing (underwriting services, due diligence, legal advice, etc.). This Impact Assessment 
does not claim to address any of those elements directly. It cannot be considered a silver 
bullet that – on its own – will change remarkably the situation. However, it evaluates a 
targeted set of measures aiming to reduce the regulatory burden, where it is considered to 
be  excessive  (i.e.  where  regulation  does  not  contribute  to  investor  protection/market 
integrity  in  the  most  cost  efficient  manner  for  stakeholders)  and  increase  flexibility  for 
issuers.  

While the proposed policy options are unlikely to fully revive EU public capital markets 
on their own and should not be understood as a single remedy in itself, they constitute a 
step  in  the  right  direction.  The  ultimate  aim  is  to  build  the  necessary  conditions  for 
structural improvements to occur over time. A more favourable regulatory regime would 
encourage  the  development  of  a  more  favourable  ecosystem,  contributing  in  a  multi-
faceted manner to the CMU objective of improving access to financing by companies. 

Furthermore,  this  proposal  should  be  analysed  in  conjunction  with  other  proposed 
initiatives. The proposed amendments are part of a broader package of measures outlined 
in  the  CMU  Action  Plan10,  which  aim  to  address  other  issues  currently  preventing 
companies from raising capital on public markets (see Annex 13 for more details). The 
Listing Act focuses on alleviating the regulatory requirements that can deter a company 
from deciding to list or to remain listed (‘supply-side’). However, other factors may deter 
issuers  from  listing,  such  as  a  narrow  investor  base,  especially  for  SMEs,  and  a  more 

7 CMU AP 
8 See p. 4: state_of_the_union_2021_letter_of_intent_en.pdf (europa.eu) 
9 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and 
the  Committee  of  the  Regions  Commission  work  programme  2022  Making  Europe  stronger  together  COM  (2021)  645  final 
cwp2022_en.pdf (europa.eu) 
10 CMU AP 

11 

 
 
                                                           
favourable  tax  treatment  of  debt  over  equity.  These  elements  are  addressed  by  other 
ongoing initiatives (see Annex 13 for more details).  

The  creation  of  a  consolidated  tape  through  the  review  of  MiFIR  will  in  particular 
centralise  trading  information  across  the  Union,  contributing  to  more  efficient  trading 
across  the  EU  (by  institutional  investors).  By  facilitating  access  to  company  data 
(including  trading  data),  this  initiative  will  make  it  easier  for  investors  to  identify  an 
investment target and the most efficient venue to trade it on, potentially driving up their 
interest in investing and hence increasing the liquidity and attractiveness of companies’ 
listed  securities.  Increased  liquidity  of  listed  securities  would  decrease  the  illiquidity 
premium paid by many (in particular smaller) companies when listing, overall decreasing 
the  cost  of  capital  for  a  listed  company  and,  hence,  making  listing  generally  more 
attractive.  The  creation  of  an  EU  Single  Access  Point  (ESAP)  will  tackle  the  lack  of 
accessible and comparable data for investors, making companies more visible.  

Another  legislative  proposal  will  reduce  the  debt-equity  bias  for  investors  (DEBRA), 
making  equity  financing  more  attractive  (and  less  costly)  in  general,  by  introducing 
deductibility of new equity allowance  from  taxable profit, akin  to  the deductibility that 
currently  already  exists  for  interest  paid  on  debt.  Furthermore,  a  series  of  Commission 
initiatives will further seek to strengthen the investor base for listed equity. The EU SME 
IPO Fund will play the role of an anchor investor to  attract  more private investment  in 
SMEs’  public  equity  by  partnering  with  institutional  investors  and  investing  in  funds 
focused on SME issuers. CRR and Solvency II reviews will increase the investor base for 
issuers by facilitating investments from banks and insurance companies in public (long-
term) equity. Lastly, the forthcoming Retail Investment Strategy will improve disclosures 
and  distribution  of  investment  products  to  retail  investors  in  a  way  that  promotes 
investors’ trust, further contributing to the demand for listed securities and their liquidity 
on public markets.  

Most  of  these  initiatives  are  currently  in  the  legislative  phase  (e.g.  the  MiFIR  review, 
ESAP  proposal,  proposal  on  a  debt-equity  bias  reduction  allowance).  As  the  final 
contours  of  the  political  agreement  on  these  files  are  not  known  yet,  it  would  be 
impossible to measure their individual or combined impact, and the extent to which they 
will  contribute  to  a  more  favourable  listing  environment  in  the  EU  (including  to  the 
number of potential additional IPOs).  

1.2. Legal context 

Companies can raise capital through the issuance of equity or non-equity securities either 
on  regulated  markets  or  on  MTFs.  While  both  types  of  markets  are  accessible  to 
companies  of  all  sizes,  regulated  markets  are  generally  more  appropriate  for  large  and 
mature businesses.  

Regulated markets require companies to comply with a wide range of EU requirements. 
This ensures that investors are given sufficient, timely and accurate information, both at 
the time of listing and on a continuous basis while listed, so that they can make informed 
investment  decisions.  For  companies,  especially  SMEs,  these  requirements  imply  high 
administrative  costs,  thereby  potentially  reducing  the  relative  benefits  of  listing. 
However,  they  also  carry  benefits  (and  potentially  reduce  their  cost  of  capital)  by 
fostering  market  confidence  in  these  companies  and  by  facilitating  risk  pricing  by 
investors of securities issued by these companies.  

12 

 
 
The Prospectus Regulation harmonises requirements for the prospectus which has to be 
published when securities are offered to the public or admitted to trading on a regulated 
market.  Using  this  document,  investors  can  decide  whether  to  invest  in  the  securities 
issued  by  a  company.11  The  Listing  Directive,  a  minimum  harmonisation  directive 
adopted in 2001, provided the basis for listing on European markets before the adoption 
of  the  Prospectus  Directive  and  the  TD,  that  have  subsequently  replaced  most  of  the 
provisions harmonising the conditions for the provision of information regarding requests 
for the admission of securities to official stock exchange listing and the information on 
securities admitted to trading (See Annex 7 for more details).  

Once  admitted  to  trading,  issuers  must  ensure  disclosure  of  ongoing  and  periodic 
regulated  information  and  its  dissemination  to  the  public.  The  regulated  information 
comprises,  among  other,  financial  reports  and  information  on  major  holdings  of  voting 
rights, pursuant to the TD, as well as information disclosed pursuant to MAR. MAR is a 
comprehensive legislative framework that aims to foster investor confidence and market 
integrity,  by  prohibiting,  among  others,  to  (i)  engage  or  attempt  to  engage  in  insider 
dealing; (ii) recommend that another person engage in insider dealing or induce another 
person to engage in insider dealing12; (iii) unlawfully disclose inside information13 or (iv) 
engage in or attempt to engage in market manipulation. Issuers are also subject to several 
disclosure  and  record-keeping  obligations  and,  notably,  under  a  general  obligation  to 
disclose inside information to the public “as soon as possible”.  

Under EU law, issuers seeking admission to trading or listing on the same type of trading 
venue,  irrespective  of  their  size,  are  subject  to  the  same  requirements.  In  such  a  way, 
investors on the same type of a market feel confident that all companies listed thereon are 
subject to a single set of rules. Smaller companies can however choose to list on an MTF 
to benefit from a lighter regulatory regime. Issuers on MTFs are largely subject to listing 
rules  of  market  operators/investment  firms  that  operate  them,  usually  enjoying  more 
flexibility around the listing criteria and more streamlined disclosure requirements.  

MiFID II created the SME growth market, a subcategory of MTFs, in order to facilitate 
access to capital for SMEs or smaller issuers, and enable them to attract more investment 
and grow. For an MTF to qualify as an SME Growth Market, at least 50% of the issuers 
whose  financial  instruments  are  traded  on  the  MTF  need  to  be  SMEs,  defined  under 
MiFID  II  as  companies  with  an  average  market  capitalisation  of  less  than  EUR  200 
million14. In order to ensure the appropriate level of investor protection, the listing rules 
on  SME  Growth  Markets  must  satisfy  certain  quality  standards,  including  the  need  to 
draw up an appropriate admission document (when a prospectus is not required) and  to 
comply  with  periodic  financial  reporting.  MiFID  II  also  anticipated  that  ‘[a]ttention 
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’.  

11 For more information on prospectus, see the Glossary.  
12 Insider dealing occurs when a legal or natural person in possession of inside information takes unfair advantage of that information 
by entering into market transactions or by amending or cancelling an existing order, to the detriment of third parties who are unaware 
of such information. 
13  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. 
14 On the basis of end-year quotes for the previous three calendar years. 

13 

 
 
                                                           
The  Prospectus  Regulation  then  introduced  the  EU  Growth  prospectus  –  an  alleviated 
form  of  a  standard  prospectus  -  for  SMEs  listed  on  SME  growth  markets.  It  aimed  to 
reduce the costs of preparing a prospectus by smaller issuers, while providing investors 
with material information to assess the offer and take an informed investment decision. 
Issuers listed on an SME growth market can also use a simplified prospectus to transfer 
subsequently to regulated markets. 

MAR  included  specific  alleviations  for  SMEs  whose  shares  are  listed  on  SME  growth 
markets.  These  issuers  obtain  regulatory  relief,  for  example,  in  terms  of  an  exemption 
from the requirement to produce insider lists on an ongoing basis.  

The  CMRP  strengthened  the  measures  around  the  visibility  of  companies,  looking  for 
additional funding on public markets. These measures in particular aimed at addressing 
the  issue  of  the  low  level  of  research  coverage,  in  particular  of  SMEs,  and  included 
alleviations to the unbundling rules under MIFID II.    

1.3. Market context 

EU  capital  markets  remain  underdeveloped  in  size,  notably  in  comparison  to  public 
markets in other major jurisdictions. Since the financial crisis of 2008-2009, EU capital 
markets have been experiencing a negative trend, lagging increasingly behind the US and 
having been more recently surpassed by Asia in  relevance and size. The negative trend 
experienced  by  the  EU  capital  markets  was  exacerbated  after  the  departure  of  the  UK 
from the EU: at that time the UK had been the largest capital market in the EU and the 
prevalent listing venue for EU companies. Several factors explain the state of EU capital 
markets, such as a pronounced bank financing bias (over market based funding) by EU 
companies,  shallower  pools  of 
long-term  capital  (specifically  pension  assets), 
burdensome listing rules and the fragmentation of capital markets along national borders 
(resulting  in  a  high  number  of  national  trading  venues  with  fragmented  liquidity  and 
insufficient scale). 

Underdeveloped  public  capital  markets  prevented  some  EU  companies,  particularly 
SMEs,  from  raising  funding  on  capital  markets15,  translating  into  a  significant 
opportunity  cost  for  the  EU  economy,  in  terms  of  foregone  economic  growth,  job 
creation  and  innovation.  Companies  that  issue  securities  are  known  to  grow  faster  in 
terms  of  assets,  sales  and  number  of  employees  than  companies  that  do  not16.  The 
difference in growth rate is even larger for SMEs.  

IPOs  have  been  following  a  negative  trend  in  the  EU  over  the  last  decade 
(notwithstanding  a  rebound  from  Q3  2020  to  Q4  202117).  The  EU  has  gone  from 
surpassing the US in number of IPOs per  year  in 2011 to, ten years later, being behind 
the US, with around one third of global IPOs taking place in the US18 in 2021 (Figure 1). 

15  Maria  Demertzis,  Marta  Domínguez-Jiménez  and  Lionel  Guetta-Jean  Renaud,  June  2021  -  Europe  should  not  neglect  its  capital 
markets union, Policy Contribution Issue n˚13/21 PC-CMU.pdf (bruegel.org). 
16 Tatiana Didier, Ross Levine and Sergio L. Schmukler (2016), Capital market financing, firm growth, and firm size distribution. 
17  This  rebound, however,  was  not  driven  by  a  change  in  the  fundamentals  of  the  listing  ecosystem  in  the  EU, but  rather  by  large 
government  stimuli  programs  which  improved  the  market  sentiment  globally  regarding  the  COVID-19  recovery.  Furthermore,  it 
seems that the rebound has finished in 2022, with global Q1 2022 IPO figures stating a -37% YoY decline in number of IPOs.  
18 The US figures have been further inflated by the growing trend in listing via SPACs, which have not taken off in the EU yet (See 
Annex 15 for more information on SPACs). 

14 

 
 
                                                           
In 2021 only 11% of global IPOs took place in the EU, while 38% were in the US, 18% 
in China and 4% in the UK alone19. 
Figure 1. Number of IPOs in different jurisdictions 

1.500

1.000

500

0
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

EU

UK

US

Source: Jay Ritter, Fese, PWC & LSE 

In  terms  of  IPO  proceeds  the  value  of  capital  raised  through  IPOs  in  the  EU  declined 
from 0.9‰ of GDP in 2015 to 0.3‰ in 2020. These figures are much lower than those of 
the US or the UK20. 

Furthermore,  the  structural  issues  of  EU  capital  markets  are  not  only  observed  in  the 
decline in IPOs but also in the increase of companies delisting from EU public markets. 
While there could be multiple reasons to a company’s delisting, such as the company’s 
acquisition  by  another  company,  buy-out  by  a  private  equity  firm  or  NCA’s  or 
exchange’s  request  due  to  non-compliance  with  obligations,  the  majority  of  delistings 
were  voluntary  (i.e.  not  mandatory).  In  a  survey  conducted  by  Oxera21,  companies 
mainly  cited:  (i)  challenges  associated  with  meeting  regular  financial  reporting 
requirements;  (ii)  time  and  cost  associated  with  compliance  and  administration;  (iii) 
annual  fees  paid  to  advisers,  brokers  and  exchanges;  and  (iv)  requirements  to  disclose 
sensitive  information  (under  MAR).  In  short,  for  those  companies,  the  benefits  of 
remaining listed simply no longer outweighed the costs associated with remaining listed. 
Since  2012,  the  amount  of  delistings  in  EU  capital  markets  has  more  than  doubled 
(Figure 2).  

Figure 2. Number of annual delistings in the EU classified by type of market 

19 https://www.pwc.com/gx/en/audit-services/ipo-centre/assets/pwc-global-ipo-watch-2021.pdf  
20 IPO proceeds as a ‰ of GDP was 4.1‰ for the US and 4.2‰ for the UK. 
21 Oxera study, p. 78. 

15 

 
 
 
                                                           
Source: Commission services based on FESE data 

Delistings  have  been  heavily  outpacing  listings,  therefore  reducing  the  total  number  of 
listed companies in the EU and with it - the overall size of EU public markets. Shrinking 
public markets risk triggering a vicious cycle, where investors stop investing due to less 
investment  opportunities  and  lower  liquidity  (and  higher  spreads),  which  in  turn 
discourages  companies  from  seeking  public  listing  due  to  less  investors  (or  narrower 
investor-base). 

Underdeveloped  EU  public  markets  push  EU  companies  to  list  in  other  jurisdictions, 
with  a  few  EU  companies  having  recently  chosen  this  option22.  If  EU  public  markets 
cannot  provide  the  scale  and  services  that  issuers  are  looking  for,  EU  companies  will 
look  elsewhere  for  funding  and  EU  competitiveness  and  innovative  capacity  may  be 
seriously impaired as a result. Efficient and attractive public capital markets are therefore 
central  to  making  the  EU  economy  more  globally  competitive  and  resilient,  thus 
underpinning the EU’s open strategic autonomy. 

2.  PROBLEM DEFINITION 

2.1. What are the problems? 

2.1.1. 

Lack of flexibility for issuers when listing 

Founders  of  companies  are  more  likely  to  choose  to  list  on  public  markets  if  it  allows 
them to continue shaping the business in accordance with their respective original ideas 
and  aspirations.  Flexibility  for  issuers  to  choose  how  to  distribute  voting  rights  may 
therefore influence their decision on whether to list or not.  

Fear  of  losing  control  over  one’s  company  appears  to  constitute  a  deterrent  to  getting 
listed  and  tapping  public  markets  for  founders  and  family  owned  companies.  Existing 
owners rarely want to cede control of their business, but new investors will want to have 

22  Prominent  examples  include  the  Swedish  company  Spotify,  the  world’s  largest  music  streaming  service  provider  seated  in 
Stockholm,  which  listed  on  the  New  York  Stock  Exchange  via  a  direct  listing  in  2018,  and  the  German  biotechnology  company 
BioNTech, which listed on NASDAQ in 2019. 

16 

 
 
 
                                                           
control  over  their  future  investment  and  EU  law  fosters  responsible  engaged  share-
ownership.23, 24  

Multiple  voting  right  (“MVR”)  share  structures  are  one  of  the  most  effective  ways  to 
allow founders and families to retain control post-listing while raising a larger amount of 
funds and enjoying the benefits associated to listing.25 The implementation of this type of 
structures  has  been  supported  in  several  reports  and  studies.  The  CMU  HLF 
recommended  that  companies  are  allowed  to  implement  a  MVR  share  structure  with  a 
view  to  allowing  the  owners  to  maintain  control  of  their  company.  The  Oxera  study 
suggested that regulators could ease restrictions on control-enhancing mechanisms (such 
as  MVR  share  structures)  to  encourage  companies  to  list  without  owners  having  to 
relinquish  control  of  their  companies.  The  TESG  echoed  this,  noting  that  MVR  share 
structures have been used in a number of countries, where they were seen as an efficient 
way for founders to go public, while retaining control of their company.  
In  the  targeted  consultation,  the  overwhelming  majority  of  the  respondents  (76%)26 
considered  that  shares  with  MVR  encourage  firms  (especially  family-owned  and  high-
growth,  innovative  companies)  to  go  public  as  they  allow  founders  to  access  public 
equity financing while retaining control of their business27.  

MVR share structures have proven to be especially popular among high-tech companies 
with  Facebook,  Google,  Alibaba28  and  Snap  –  to  name  a  few  –  using  MVR  share 
structures in their IPOs. Overall, about 46% of US tech companies chose these structures 
for  their  IPOs  in  2021  (this  contrasts  with  just  9%  in  2001).  MVR  share  structures  are 
also gaining popularity among non-tech companies.29 At the moment, most of the largest 
financial  centres  allow  for  MVR  share  structures  in  IPOs  (e.g.  US,  China/Hong-Kong, 
UK,  and  Singapore).  The  UK  has  recently  further  flexed  its  rules,  allowing  for  MVR 
share  structures  in  companies  listing  on  the  premium  segment  of  the  London  Stock 
Exchange.30  As  part  of  the  review,  the  UK  also  introduced  safeguards  to  mitigate 
concerns regarding the protection of minority shareholders’ rights. There is evidence that 

23 The results of an issuer survey run by Oxera show that control is a key influencing factor in the listing decision. Loss of control is 
widely cited by unlisted companies as the most important reason for staying private. These results echo findings of other academic 
surveys  including  the  one  carried  out  by  the  EIB  that  stated  that  preference  for  corporate  control  explains  150  bps  of  the  equity 
premium.  
24 The EU Shareholders Rights Directive 2 of 2017 aims to foster responsible exercise of control and voting rights of shareholders, in 
particular institutional investors and asset managers. 
25 For more explanation on MVR share structures, including the different positive and negative aspects of such share structures see 
Annex 5.  
26 34 respondents out of 45. Exchanges, supported by issuers and privately-owned companies, consider that MVR share structures can 
open  opportunities  for  companies  to  transition  from  private  financing  to  public  capital  markets.  2  NCAs  noted  that  the  lack  of 
mechanisms to ensure that control would not be lost acts as a strong disincentive to seek a listing, while two other NCAs explained 
that  they  remain  sensitive  to  and interested  in this  subject,  measuring its  advantages and  disadvantages  for  every  party  involved  in 
public  markets.  A  few  stakeholders  (4  out  of  45)  responded  negatively  including  institutional  investors’  association  that  expressed 
their concern about the disappearance of the one share – one vote principle.  
27 The Portuguese supervisory authority (Portugal being the most recent Member State that allowed MVR share structures in 2022) 
noted that a wide study on the reasons why companies do not access Portuguese capital markets revealed that the lack of mechanisms 
to ensure that the control would not be lost is a strong disincentive to seek market based financing by Portuguese unlisted companies. 
The  same  finding  appears  in  a  study  published  by  the  Deutsches  Aktieninstitut,  where  the  lack  of  flexibility  around  MVR  share 
structures is cited as a reason why companies, especially start-ups, may decide to list in the US rather than in Germany (where these 
shares are banned). 
28 Alibaba decided against listing on the  Hong-Kong exchange due to the inability to use MVR share structures. This prompted the 
Hong Kong authorities to adapt their laws. (Source: CFA Institute, dual-class shares: the good, the bad, and the ugly, p. 2).  
29 In 2021, 32% of all US IPOs used a MVR share structure (corresponding to a total of 117 companies). Out of those companies, 44 
companies were from the non-tech sector - the highest number since 1996. This suggests that the MVR share structures are increasing 
getting more important also with non-tech companies.  
30 https://www.fca.org.uk/publication/policy/ps21-22.pdf  

17 

 
 
                                                           
absent  such  safeguards,31  there  is  risk  that  minority  shareholders  may  be  consistently 
outvoted  by  controlling  shareholders  on  important  decisions.  For  more  information  see 
Annex 5.  

Figure 3. % of IPOs with MVR share structures in the US (2y moving average) 

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021

Source: Jay Ritter, University of Florida 

2.1.2. 

Unnecessary regulatory burden for companies  

Tech IPOs

Non-tech IPOs

When  making  a  decision  on  whether  or  not  to  list,  companies  weigh  expected  benefits 
against the costs. If costs prevail, or if alternative sources of financing offer a less costly 
and easier option, companies will not seek access to public markets. Feedback from the 
market  indicates that the initial  and ongoing costs of becoming a public  company have 
risen considerably in recent decades, both in absolute terms and relative to private equity 
funding, in particular for SMEs32.  

The costs of listing  can be broadly categorised into direct and indirect costs, as well as 
initial  (one-off)  and  ongoing  costs.  The  direct  costs  mostly  derive  from  fees  paid  to 
parties  involved  in  supporting  a  company  through  the  listing  process  and  once  listed 
(such  as  underwriters,  accountants,  legal  advisers,  listing  venue)33.  Alongside  fees, 
issuers face a range of indirect costs stemming, among others, from the efforts (and the 
management time) required to comply with the requirements associated with the listing 
process as well as the ongoing regular reporting and disclosure requirements.  

The  sources  that  quantify  IPO  costs  point  to  a  range  of  3-10%  of  the  issuing  amount. 
There  is,  however,  little  quantitative  information  about  the  ongoing  costs  and  in 
particularly  about  the  costs  of  complying  with  the  obligations  stemming  from  MAR. 
Annex 4 provides further analysis on the costs of listing and staying listed.  

The  direct  costs  of  listing  (i.e.  underwriting  and  legal  fees)  are  largely  fixed  and 
generally  (but  not  entirely)  influenced  by  a  high  degree  of  fragmentation  and  hence  a 
limited degree of competition in the EU listing ecosystem. Such ecosystem is represented 

31 As evidenced by the developments at the recent (2022) Meta General Meeting, the founder’s outsized voting power may result in 
fending off minority shareholders’ ESG proposals, aiming at improving the sustainability of this company. 
32 TESG Final report, p. 6 
33 Oxera study, p. 62.  

18 

 
 
                                                           
by investment banks, brokers, market-makers and other third party advisors specialised in 
listing/listed companies. Regional fragmentation of EU markets and different languages 
lead  to  a  rather  small  market  for  legal  experts  and  financial  intermediaries  that 
accompany companies in the issuance process and, where necessary, after listing. For this 
reason, and despite representing a considerable share of the overall listing costs the level 
of  these  costs  largely  reflects  the  limitations  of  the  established  market  structure,  which 
would  not  be  possible  to  address  directly  in  the  short  term  with  regulatory  measures. 
These  direct  costs  may  nevertheless  be  reduced  in  the  longer-term.  As  regulatory 
measures  address  some  barriers,  more  companies  would  be  expected  to  list  on  EU 
markets, driving up the scale and creating room for entry by competitors, hence driving 
down the level of fees charged by financial intermediaries and legal experts.  

This IA focuses mainly on the indirect costs of listing, i.e. the costs induced by the initial 
and  ongoing  listing  requirements,  as  well  as  in  part  on  the  direct  costs  related  to  the 
production  of  listing  documents  (such  as  prospectus).  Contrary  to  most  types  of  direct 
costs, indirect costs can be more easily reduced through targeted legislative amendments 
aimed at streamlining and clarifying existing rules.  

Regulatory burden, in particular related to ongoing compliance, is usually considered an 
indirect  cost  of  listing.  Compliance  with  these  requirements  requires  companies  to  hire 
additional  (expert)  staff.  This  can  prove  particularly  burdensome,  especially  for  SMEs. 
Extensive regulatory requirements also typically increase liability and litigation risks for 
issuers and their advisors as well as the amount of time spent by the management on the 
listing process (and on the subsequent compliance with post-listing rules). Finally, they 
often  force  issuers  to  look  for  external  legal  advice,  thus  further  contributing  to  higher 
legal, accounting and advisory fees. The drawing up of a prospectus (as a pre-condition 
for  a  public  offer/admission  to  trading)  is,  in  turn,  a  direct  cost,  notably  when  it  is 
(entirely) outsourced to an external legal counsel.  

Both  the  CMU  HLF  and  the  TESG  confirmed  that  the  listing  process  and  ongoing 
requirements for companies, and in particular for listed SMEs, have become excessively 
burdensome over time. Similarly, the Oxera study stressed that the indirect ongoing costs 
of  being  listed  are  often  cited  as  having  the  most  significant  impact  on  the  decision  to 
seek  a  listing,  or,  indeed,  deciding  to  delist34.  Several  industry  practitioners  have 
highlighted  the  efforts  required  to  comply  with  the  regulatory  requirements  associated 
with  the  listing  process,  and  the  related  litigation  risk,  as  the  most  significant  costs  of 
listing.  Furthermore,  they  confirmed  that  management  time  and  other  indirect  costs 
associated with an IPO have increased over time35. This view is backed by the results of 
the public consultation as well as by feedback received from stakeholders in the context 
of workshops organised with stakeholders, such as representatives of exchanges, issuers 
and investors (See Annex 2 for more details).  

2.2. What are the problem drivers? 

This  IA focuses  on  the selected drivers related to  the specific barriers in  the regulatory 
framework. The ‘out-of-scope’ drivers are briefly described in section 2.2.6. below and 
more extensively in Annex 12. 

34 Oxera study, p.69.  
35 Oxera study, p 62. 

19 

 
 
                                                           
The listing cycle is made up of three stages: the pre-IPO stage, the IPO process itself and 
the  post-IPO  stage.  The  regulatory  environment  impacts  all  three  stages  of  the  process 
and is among the main driving forces for the problems described in the previous section. 
To make it more attractive for firms to list and remain listed in the EU would require that 
the regulatory barriers in all stages of the listing cycle are addressed. 

Figure 4. The listing stages

Pre-IPO: Company Law 

The decision to  list for a company is  made after analysing the cost-benefit  of listing in 
public capital markets when compared to other sources of funding. Currently, many EU 
companies  do  not  find  the  prospect  of  being  listed  as  beneficial  when  compared  to 
attracting  funding  from  other  sources  such  as  private  equity  or  bank  loans.  There  are 
several drivers that impact the decision to list at this stage, one of which is the flexibility 
accorded  under  company  law  to  use  various  share  structures,  such  as  MVR  share 
structures, and thus allowing the issuer to retain more control post-listing. 

IPO: Prospectus Regulation 

Once a company makes the decision to list, it must go through the IPO process. During 
this process the regulatory regime is very relevant as it determines the information that 
must be published by the company (Prospectus Regulation). The requirements to produce 
such documentation can be quite onerous in some cases and this may act as a deterrent 
from listing.  

Post-IPO: MAR  

Once a company has listed, it may enjoy the benefits associated with public listing such 
as  superior  growth  in  terms  of  assets,  revenues  and  employees  and  a  higher  brand 
recognition.  At  the  same  time,  the  company  must  also  comply  with  a  number  of 
requirements  and  failure  to  properly  comply  with  these  requirements  could  lead  to 
sanctions  and  litigations  for  the  firm  (MAR).  Both  a  lack  of  clarity  regarding  such 
requirements and a disproportionate sanctions regime could lead to companies refraining 
from  listing  in  the  first  place  (or  trigger  delisting  for  the  already  listed  companies).  In 
addition, listed companies, especially SMEs, need to make themselves known to possible 
investors: the current low level of investment research on such issuers, driven by many 

20 

 
 
 
underpinning factors,36 leads to their low visibility and scarce investors’ interest, further 
limiting the liquidity for the already listed companies (See Annex 9 for more details). 

The  drivers  and,  subsequently,  proposed  policy  options  follow  the  order  of  the  listing 
cycle and hence focus on addressing regulatory barriers that emerge at various stages of 
the  listing  process,  i.e.  those  stemming  from  company  law  (rules  on  MVR  share 
structures), Prospectus Regulation and MAR. Annexes 5, 6 and 8 provide elements of an 
evaluation  of  the  legislative  framework  applying  to  each  of  these  stages.  Annex  5 
provides for an overview of the current national rules on MVR share structures and sets 
out positive and negative aspects of these share structures. Annexes 6 and 8 take a critical 
look at whether the regulation applying at the IPO and post-IPO stages is fit for purpose 
and delivers its intended objectives at minimum cost (i.e. avoiding unnecessary costs or 
burdens). 

2.2.1. 

Unequal  opportunities  for  EU  companies  regarding  governance  structure, 
when listing, due to different national rules on MVR share structures (Pre-IPO phase) 

While there are different ways to protect shareholder control across Member States, there 
is  currently  fragmentation  in  the  EU  as  regards  MVR  share  structures,  in  particular, 
which  leads  to  unequal  opportunities  for  EU  companies  when  listing.  MVR  share 
structures are currently available in twelve Member States,37 while the remaining fifteen 
do  not  allow  them.  Loyalty  shares  are  allowed  only  in  5  Member  States38.  Table  1  in 
Annex 5 provides an overview of the Member  States’ legislation regarding MVR share 
structures.  

Some  Member  States  (banning  MVR  share  structures)  provide  for  alternative  share 
structures,  such  as  loyalty  shares,  preferential  shares  and  non-voting  shares.  These 
alternative  structures  can  allow  a  founder  to  preserve  control  in  the  company. 
Nevertheless,  being  more  rigid  in  their  set-up39,  they  naturally  constrain  the  amount  of 
equity that can be raised at the IPO stage and through follow-on issuances (since further 
ordinary  shares  issuances  would  inevitably  dilute  the  founder’s  interest,  due  to  a  fixed 
(lower) voting right ratio). MVR share structures by contrast allow founders to maintain 
majority-voting  control  while  only  retaining  a  minority  of  the  cash-flow  rights  (and 
therefore selling a larger portion of their investment in the company). Furthermore, while 
MVR  share  structures  are  meant  to  increase  the  allure  of  public  markets  for  founder 
driven  company  and  to  isolate  their  decision-making  from  market  pressures,  loyalty 
shares, are issued to reward long-term investors who hold on to the company’s stock for 
a long time (i.e. any shareholder can obtain additional voting rights if they hold the stock 
for  the  designated  time)  and  are  not  generally  used  at  the  moment  of  the  IPO.  Loyalty 
shares are thus expected to lead to a more stable, long-term-oriented ownership base that 
would  benefit  companies’  development,  protecting  it  from  the  influence  of  short-term 
investors.  

36  These  factors  may  range  for  example  from  low  profitability  of  SME  research  (small  ticket),  lack  of  trust  in  issuer-sponsored 
research, development of passive investment strategy. 
37 Shares that give enhanced voting power to shareholders that have held their shares for a specified time period (typically 2 years) or 
met a series of conditions. Any shareholder can obtain the added voting rights provide they maintain the share for the specified time 
period or comply with the conditions. The additional voting rights are not transferred, when loyalty shares are traded. 
38 Two of these Member States also allow for MVR shares (Italy and Netherlands) and the other three only allow loyalty shares but 
not MVR share structures (Belgium, France, Spain). 
39 Non-voting and preferential shares allow only for a 0:1 voting ratio (compared to ordinary shares), while loyalty shares typically 
allow to grow voting rights only gradually over time (i.e. they are typically proportionate to the time the investor stays invested in the 
company). 

21 

 
 
                                                           
While the link between the flexibility to list with MVR share structures and the decision 
to  IPO  is  difficult  to  demonstrate  empirically  (and  the  decision  to  IPO  is  obviously  a 
complicated process,  taking into account  a lot of different  factors), Sweden (a  Member 
State  with  one  of  the  most  flexible  MVR  share  structure  regimes  in  the  EU)  has 
consistently had a high  number of  IPOs  relative to  its size  across the  years40, reporting 
the  highest  number  of  IPOs  in  the  EU  in  2021.41  Furthermore,  in  the  US, 31.7%  of  all 
IPOs  in  2021  used  MVR  share  structures  with  46.2%  of  tech  companies  using  this 
structure.42 Nevertheless, it would not be possible to ascertain that those companies that 
listed in the US or in Sweden in 2021 with MVR shares would not have listed if these 
share  structures  had  not  been  allowed  in  the  US  or  in  Sweden  (or  would  have  listed 
elsewhere).  It  can,  however,  be  assumed  with  a  reasonable  degree  of  certainty  that  the 
ability to list with MVR shares was an important consideration in the overall decision to 
list.  Annex  5  further  elaborates  on  the  link  between  MVR  share  structures  and  the 
decision to go public.  

The  prohibition  of  MVR  share  structures  in  some  Member  States  leads  to  a  situation 
where some  companies  (based in  those Member  States and that wish to  list  with  MVR 
share structures) are put in a situation of a comparative disadvantage versus companies in 
other Member States that allow MVR share structures. In fact, these companies are faced 
with  a  choice  of  either  remaining  private  or  moving  to  another  Member  State  or  third 
country to benefit from this added flexibility. This results in higher costs either in terms 
of  a  missed  IPO  opportunity  for  those  companies  (and  foregone  EU  growth  and  future 
tax revenues for the Member States in question) or an increased burden associated with 
listing in another Member State or in a third country (allowing MVR share structures)43. 
To  the  extent  that  these  firms  would  decide  to  list  on  a  trading  venue  outside  the  EU, 
capital market development in the EU is also negatively affected. Annex 5 provides for 
an overview of the current national rules on MVR share structures and sets out positive 
and negative aspects of these share structures. 

2.2.2. 

Overly burdensome listing requirements (IPO phase) 

Companies issuing securities on public markets  need to publish a prospectus, unless an 
exemption applies. Many stakeholders indicated, as a driver for the high cost of listing, a 
considerable  length  and  complexity  of  the  prospectus  documentation44.  This  refers  to 
both  instances  where  companies  seek  access  to  public  markets  for  the  first  time  (IPO) 
and  where  they  access  public  markets  for  follow-on  or  secondary  issuances  of  equity 
and/or non-equity securities.  
ESMA collected data on the length of the different types of prospectuses in 202145, also 
distinguishing between EU Member States46. A notable difference between the mean and 
the median length of prospectuses is indicative of discrepancies between the shortest and 
the longest prospectuses or, more generally, of a wider divergence and, consequently, of 

40 For example comparing the IPO figures from Sweden: 107 in 2021, 28 in 2020, 23 in 2019 and 25 in 2018 with France: 32 in 2021,  
8 in 2020, 8 in 2019 and 16 in 2018 
41 PWC IPO watch Europe 2021 
42 This represents 117 IPOs, of which 54 were tech companies. 
43 Additional costs and issues linked to listing outside of a home Member State include having to move headquarters, hiring advisors 
specialised in the host Member State’s laws/rules, complying with an unfamiliar set of regulations, (potentially) working in another 
language and the home bias of investors. 
44 CMU HLF Final report, p. 68; TESG Final Report, p. 23; Oxera study, p. 67.  
45 See Table 3 of Annex 6. 
46 See Figure 8 of Annex 6. 

22 

 
 
                                                           
the lack of uniformity of prospectuses in the EU47. The scenario highlighted in Figure 8 
of Annex 6 confirms that the length of prospectuses may significantly vary depending on 
the Member State where the prospectus is approved.  

The length of the prospectus makes its drawing up, as well as its scrutiny and approval 
process  time-consuming,  expensive  and  complex,  in  particular  for  companies  offering 
their  securities  cross-border  (and  hence  preparing  multiple-language  documents). 
Feedback  interviews  conducted  by  Oxera  indicate  that  senior  management  of  firms 
seeking  to  list  now  spend  a  significantly  higher  proportion  of  their  time  on  the  listing 
process than before—between 30% and 50% of the CEO and CFO time in the six months 
prior to listing48. When assessing the specific costs of preparing a prospectus,  available 
data proved to  be limited (see section 6.1. below and Annex  4 for more details)49. The 
collected  data  show  that  a  standard  prospectus  for  equity  remains  to  be  the  most 
expensive type of a prospectus (reaching up to EUR 300 000 for large issuers), with the 
costs of EU Growth prospectus and simplified prospectuses being on average up to 25% 
lower50. While the data on the EU Recovery prospectus  is  even more limited, given its 
rather  recent  introduction,  the  obtained  figures  suggest  on  average  up  to  40%  cost 
savings51  (compared  to  the  simplified  prospectus  for  secondary  issuances52)  for 
companies. The costs of non-equity prospectuses are lower than those of equity, and the 
difference  in  costs  incurred  by  SMEs  and  large  companies  is  less  pronounced  than  for 
equity. 

Data and responses from stakeholders confirm that the current rules that lead to excessive 
disclosure  contribute  to  both  very  lengthy  and  also  very  divergent  prospectuses  across 
Member  States.  For  example,  in  some  cases  the  Prospectus  Regulation  requires 
information that may not be indispensable for investors to make an informed investment 
decision (i.e. not  justified from  the investor protection point of view).  In other cases, a 
prospectus  is  required  when  a  lot  of  information  is  already  available  in  the  public 
domain. Feedback to the public consultation (echoed during the stakeholders’ meetings) 
confirmed the view that  neither the standard prospectus  nor the EU  Growth  prospectus 
strike an appropriate balance between effective investor protection and the proportionate 
administrative  burden  for  issuers.  For  secondary  issuances,  the  majority  of  the 
respondents53  indicated  that  a  significantly  simplified  prospectus  focusing  on  essential 
information only should be available, considering that information on issuers is already 
available at that point via other sources (See Annexes 2 and 6 for more details).  

The  excessive  length  of  the  prospectus  can  discourage  some,  in  particular  smaller, 
investors from consulting it or even considering investing. In the case of larger investors, 
the  laborious  analysis  of  lengthy  prospectuses  would  translate  into  a  higher  cost  of 
investing  in  these  companies.  It  also  requires  a  longer  period  of  time  for  the  NCA  to 
scrutinise  and  approve  the  prospectus54,  albeit  the  complexity  and  quality  of  the 

47 Based on a sample of 1144 documents, the mean and the median length of a single language prospectus differ by 38 pages.  
48 Oxera study, p. 68. 
49 Less than 10 respondents to the public consultation provided an estimate of these costs. 
50 See Table 7 of annex 4. 
51 See Table 7 of Annex 4. 
52  A  simplified prospectus  for  secondary  issuances is  the  natural  reference  for  comparison  with the  EU Recovery  prospectus  (both 
apply (or applied) to secondary issuances). 
53 57% of respondents (16 out of 28). 
54 These costs may or may not be in the end reimbursed by the fees charged by NCAs to issuers for the scrutiny of prospectuses. The 
remaining costs might then be seen as a form of state subsidy, hence translating into higher costs for the administration/state overall. 

23 

 
 
                                                           
prospectus  are  also  important  factors  that  can  impact  the  overall  length  of  the  scrutiny 
and approval process.  

An additional problem stems from the fact that the current rules do not sufficiently frame 
supervisory  scrutiny  by  NCAs.  This  leads  to  further  differences  in  NCAs’  treatment  of 
prospectuses, contributing to overly lengthy prospectuses, in particular in some Member 
States. When inquired about their satisfaction with the length and outcome predictability 
of  the  NCA  scrutiny  and  approval  process,  the  prevalent  opinion  among  the  issuers’ 
representatives who took part in a stakeholder workshop on the Listing Act was that they 
are  not  satisfied.  The  representatives  of  exchanges  and  investors  were  more  neutral  in 
their  reaction.  Furthermore,  in  the  context  of  the  targeted  consultation,  53%  of  the 
respondents (23 stakeholders)55 argued that there is divergence in the way NCAs assess 
the  completeness,  comprehensibility  and  consistency  of  prospectuses,  calling  for  more 
alignment in terms of the documentation required and length of the process. Furthermore, 
the  ESMA  peer  review  of  the  scrutiny  and  approval  procedures  of  prospectuses  by 
competent authorities of 21 July 202256 highlighted some areas of material differences in 
NCAs’ approaches to scrutiny and approval of prospectuses, such as deadlines imposed 
by  NCAs  for  issuers  to  respond  to  comments,  NCAs’  procedures  for  the  approval  of 
prospectuses and additional criteria that NCAs apply for the scrutiny of the completeness, 
comprehensibility and consistency of the prospectus. 

The Evaluation of the Prospectus Regulation, set out in Annex 6, highlights that current 
prospectus  requirements  place  unnecessary  burden  on  issuers  and  that  the  intended 
objectives of the Prospectus Regulation could be delivered with less costly requirements 
for issuers while maintaining an adequate level of investor protection.  

2.2.3. 

Overly burdensome ongoing disclosure requirements (Post-IPO phase) 

Once  admitted  to  trading/listing,  issuers  must  ensure  regular  disclosure  of  periodic  and 
ad hoc information and its dissemination to the public. The information to be published 
includes yearly and half-yearly financial reports, major changes in the holding of voting 
rights as well as ad hoc inside information which could affect the price of securities.  

The  Fitness  Check  on  financial  and  sustainability  public  reporting  by  companies, 
published  by  the  Commission  in  2021,  covered  a  large  group  of  the  public  reporting 
obligations that are relevant for listed companies (including, in particular, the obligations 
stemming  from  the  Transparency  Directive)57.  Its  conclusion  highlighted  that  the  EU 
framework  for  public  reporting  is  generally  fit  for  purpose  and  that  the  cost  of  regular 
public  reporting  stemming  from  the  EU  framework  seems  a  relatively  modest  “cost  of 
doing business” for companies. In the targeted consultation, when asked whether there is 
potential to simplify the Transparency Directive’s rules, 11% of the respondents (9 out of 
79)  replied  “no”,  while  71%  (56  out  of  79)  either  did  not  reply  or  did  not  express  an 
opinion.  Therefore  this  IA  only  focuses  on  the  disclosure  obligation  stemming  from 
MAR, which did not fall in the scope of the Fitness check on financial and sustainability 
public reporting by companies.  

55 Including 10 business associations (of banks, issuers, and law firms), 7 companies (including 2 operators of trading venues, a trade 
association and a law firm), 3 NCAs and 2 NGOs. 
56 ESMA42-111-70. Available at: esma42-111-7170_final_report_-_prospectus_peer_review.pdf (europa.eu).  
57  Commission  Staff  Working  Document  -  Fitness  Check  on  the  EU  framework  for  public  reporting  by  companies,  SWD/2021/81 
final. This Fitness Check assessed primarily whether the EU framework on corporate reporting has achieved its objective of providing 
stakeholders with financial and non-financial information that is sufficient in quantity and quality to enable them to make informed 
investment decisions, protect their interests and hold companies publicly accountable. 

24 

 
 
                                                           
Feedback from stakeholders collected in the context of public consultations58 as well as 
of expert groups59 and by means of bilateral exchanges60, highlighted that some aspects 
of  the  MAR  disclosure  regime  place  a  particularly  high  burden  on  issuers  listed  on 
regulated markets as well as on SME growth markets. 

Stakeholders  notably  perceive  as  burdensome  the  obligation  to  disclose  as  soon  as 
possible  all  inside  information  given  the  broadness  of  the  notion  of  inside  information 
and  the  fact  that  the  same  notion  applies  both  for  the  purpose  of  prohibition  of  insider 
dealing as well as disclosure (see Annex 2 and 8, paragraph 2.1. for further details).  

While the broad notion of inside information caters for a comprehensive (and very early) 
prohibition of insider dealing, when applied in the context of the disclosure obligation, it 
creates legal uncertainty and comes at a cost of either disclosing information that is not 
yet  mature  enough  or  risking  high  sanctions  for  a  non-timely  disclosure.61  Several 
respondents  to  the  consultation  carried  out  by  ESMA62  highlighted  that  the  notion  of 
inside  information  lacks  legal  clarity.  Hence  issuers  encounter  difficulties  when 
delineating  between  what  is  and  what  is  not  inside  information63.  This  has  multiple 
consequences, which span from increased compliance costs – including consultants’ and 
legal advisors’ fees – to the risk that issuers either qualify the information as being inside 
information  when  in  doubt,  or,  on  the  contrary,  postpone  or  avoid  such  classification. 
Stakeholders  sought  clarifications  both  on  the  general  interpretation  of  certain  MAR 
provisions,  relevant  for  determining  when  the  information  needs  to  be  disclosed  (for 
instance,  as  regards  intermediate  steps,  or  the  level  of  certainty  needed  to  consider  the 
information  precise),  and  on  concrete  types  of  events  (or  scenarios)  triggering  possible 
disclosure (See Annexes 2 and 8 for more details).  

The  CMU  HLF  noted  that  the  current  notion  of  inside  information  is  extremely  costly 
when  events  are  preliminary  (e.g.  a  CEO  harbouring  plans  to  potentially  step  down, 
board  members  discussing  potential  ideas  of  a  merger,  preliminary  risks  of  litigation, 
etc.)  and  recommended  that  the  Commission  narrows  down  the  definition  to  reduce 
unnecessary disclosure64. This was echoed by the TESG that stressed the need to clarify 
what constitutes inside information and when inside information needs to be disclosed by 
distinguishing  between  “a  definition  of  inside  information  for  the  purposes  of  market 
abuse prohibition, and a more ‘advanced’ notion of inside information, typically linked 
to a higher degree of certainty of the information, triggering the disclosure obligation”65.  

Annex 8 points to wide divergences across Member States in the number of disclosures 
of  inside  information  which  are  not  explained  by  the  size  of  the  Member  State  in 
question. For instance, in France in Q1 2022 the number of public disclosures per issuer 
was  6.76  whereas  in  Spain  it  was  0.27.  This  is  illustrative  of  the  fact  that  there  are 

58 Targeted consultation on the listing act: making public capital markets more attractive for EU companies and facilitating access to 
capital for SMEs | European Commission (europa.eu) 
59 TESG and CMU HLF. 
60 Workshops with exchanges, issuers and investors conducted as part of preparatory work on the Listing Act. 
61 While it was (and probably would be) impossible to quantify the cost of this legal uncertainty stemming from the unclear definition 
of  the  inside  information,  it  could  be  reasonably  assumed  that  compliance  with  the  disclosure  obligation  under  MAR  requires 
additional  resources  (internal  or  external)  to deal  with  legal  interpretation.  Where  the  lack  of  legal  clarity  cannot be  removed  with 
interpretation, an issuer must bear either the indirect costs related to the risk of being sanctioned or the direct costs of unnecessary/too 
early disclosure. 
62 MAR_review_report -_cp.pdf (europa.eu)  
63 ESMA Final Report on the MAR Review, p. 47, points 131-133. 
64 CMU HLF Final Report, p.67.  
65 TESG Final Report, p.27.  

25 

 
 
                                                           
important  differences  in  how  stakeholders  interpret  the  current  rules,  with  stakeholders 
from some Member States having a stricter interpretation than stakeholders from others. 
As the notion of inside information triggers a varying level of disclosure, it is likely to 
give rise to costs of legal interpretation, rendering the compliance with the current rules 
very costly for issuers. 

The  high  costs  stemming  from  the  obligation  to  disclose  all  inside  information  are 
accompanied by a lack of legal clarity around the conditions that issuers need to meet in 
order  to  delay  disclosure.  While  the  delay  mechanism  could  counterbalance  the 
broadness  of  the  notion  of  the  inside  definition,  in  particular  when  timely  disclosure  is 
likely  to  prejudice  the  legitimate  interests  of  the  issuers,  the  lack  of  clarity  around  the 
conditions of its application defeats this objective. As the data in Annex 8 show, in some 
Member  States,  issuers  regularly  rely  on  the  mechanism  for  delaying  the  disclosure  of 
inside information, while in others issuers do so only on an exceptional basis. From July 
2016 to June 2019, the possibility to delay has been evoked in about 14  000 cases with 
significant discrepancies across the EU. For instance, in some Member States, in a 3-year 
period, issuers have never notified delay to their respective NCAs, whereas in others the 
average number of delays per quarter was above 100.  

As a result of the ensuing lack of clarity under MAR, companies are likely to either over-
disclose information  and over-submit  requests to NCAs for delays, to  avoid  the risk of 
being  sanctioned,  or  bear  the  risk  of  being  sanctioned.  Both  over-disclosure  and  over-
submission of delay requests to NCAs are likely to increase the costs to companies that 
often  prepare  the  necessary  documentation  with  the  help  of  external  (or  internal)  legal 
advisors.  Furthermore,  too  early  disclosure  of  information  could  actually  mislead 
investors and trigger action on his/her part that could prove to be suboptimal in hindsight 
(e.g. divesting the stock too soon or not divesting soon enough). This is likely to increase 
the  opportunity  (both  direct  and  indirect)  cost  for  the  investor.  Finally,  too  frequent 
requests for delays to NCAs are likely to drive up the costs for NCAs who would have to 
review  them.  Conversely,  the  potential  cost  of  being  sanctioned  might  be  unacceptable 
for issuers, not only because of the level of administrative pecuniary sanctions, but  also 
because of indirect costs, like reputational damage.  
While  ESMA  in  its  Final  Report  on  the  MAR  Review66  concluded  that  the  notion  of 
inside information should be left unchanged and that ESMA’s guidance would suffice to 
provide the necessary clarification,  a  majority of the stakeholders  (52%)  that expressed 
an  opinion  on  this  question  considered  that  ESMA’s  guidance  would  not  be  fully 
sufficient (See Annexes 2 and 8 for more details). Similarly, both the CMU HLF and the 
TESG concluded that changes to the level 1 text would be needed in order to  instil full 
legal clarity and reduce compliance costs for issuers. Annex 8 summarises the assessment 
carried out by the Commission in relation to the most relevant MAR provisions for which 
ESMA’s  conclusions  are  not  in  line  with  the  feedback  received  from  experts  and 
stakeholders,  including  the  definition  of  inside  information  (Article  7),  and  delayed 
disclosure (Article 17(4)).  

The  burden  stemming  from  the  MAR  disclosure  obligation  are  amplified  by  a 
disproportionate  sanctioning  regime  for  disclosure-related  infringements67,  in  particular 

66 ESMA Final Report on the MAR Review, p. 55. 
67  MAR  distinguishes  between  the  market  abuse  infringements  (e.g.  insider  dealing,  market  manipulation)  and  disclosure-related 
market abuse infringements (e.g. late disclosure/reporting). 

26 

 
 
                                                           
for SMEs. The TESG highlighted in their report that the risk of an inadvertent breach of 
MAR and the associated administrative sanctions are seen as important factors that may 
lead  to  companies  delisting  or  even  dissuade  companies  from  listing  at  all.  Half  of  the 
respondents to the public consultation (22 out of 44)68 indicated that they do not find the 
current  MAR  punitive  regime  proportionate  to  the  objectives  sought  by  the  legislation 
nor to the type and size and entities potentially covered.  

Under EU legislation, which is not prescriptive on the matter, SMEs may potentially be 
sanctioned at the same level as a large company.69 In the case of SMEs, breaches of the 
MAR disclosure obligations may, however, occur due to insufficient resources afforded 
by those SMEs to regulatory compliance and be of an accidental nature, rather than the 
result  of  malicious  intent  on  their  part.  While  the  sanctions  regime  should  serve  as  an 
effective  deterrent  for  companies  not  to  commit  infringements,  in  the  case  of  SMEs, 
where breaches are often not intended but rather result from weaker ongoing compliance 
mechanisms  due  to  the  lack  of  resources,  a  higher  level  of  sanctions  would  not 
necessarily be associated with a higher level of compliance. As SMEs can be imposed a 
prohibitively  high  level  of  sanctions,  the  current  sanctions  regime  serves  rather  as  a 
deterrent not to list and not as an effective deterrent not to infringe law, defeating entirely 
the purpose of the legislation. This appears to be corroborated by evidence provided by 
an  issuers’  representative  who  reported  that  since  MAR  entered  into  force  (July  2016), 
the  number  of  listed  companies  in  its  Member  State  declined  (in  net  terms)  by  86 
companies  (i.e.  by  10%)  with  53  on  the  regulated  market  and  33  on  an  SME  growth 
market.  The  same  stakeholder  attributed  the  decline  to  the  disproportionate  sanctioning 
regime.  

An indirect impact of the excessive and disproportionate sanctions regime is that it acts 
as  a  disincentive  for  companies  to  list  de  facto  preventing  them  from  accessing  public 
equity markets (and generally having less alternative funding sources which may have an 
impact on the cost of capital for those companies). In addition, the choice not to list could 
lead to an opportunity cost for these companies (foregone development opportunities), as 
well as  for the EU economy  (foregone  growth  and job  creation). Member States might 
also lose out on foregone tax revenue70.  

Under  MiFID  II,  investment  firms  and  brokers  became  subject  to  the  so  called 
“unbundling  requirement”,  whereby  execution  commissions  should  have  been  invoiced 
to  clients  separately  from  payments  for  research.  While  the  CMRP  introduced  some 
alleviations in this respect, to tackle the issue of the low research in particular for SMEs, 
these  measures  did  not  effectively  address  the  problem:  many  investment  firms  and 
brokers  continued  to  follow  the  unbundling  rule  for  the  majority  of  their  clients.71 
Therefore, the level of SME research continued to be low in the EU even after the CMRP 
(See  Annex  9  for  more  details).  Considering  the  effects  of  the  ongoing  energy  crisis, 

68  22  respondents believed  that  the current punitive  regime  under MAR  is not  proportionate to the  objectives  of  the  legislation  (10 
companies/business  associations,  7  business  associations,  3  academic/research  institution,  1  non-governmental  organisation  and  1 
public authority). In the group of respondents who believed that punitive regime under MAR is proportionate, the majority are public 
authorities. See Annex 2 for more details.  
69 Currently, provisions of MAR on the minimum of the maximal pecuniary sanctions do not differentiate between SMEs and large 
companies. This differentiation is left to the discretion of NCAs. Article 31 of MAR states that Member States shall ensure that when 
determining the type and level of administrative sanctions, competent authorities shall take into account all relevant circumstances, 
including, where appropriate “the financial strength of the person responsible for the infringement, as indicated, for example, by the 
total turnover of a legal person or the annual income of a natural person”. 
70 Given the absence of figures in this area, no quantification of the impact is possible. 
71 AMF : Reviving research in the wake of MIFID II, January 2020 

27 

 
 
                                                           
companies increasingly struggle with finding investors to finance their operations. Their 
visibility to investors, including through research, hence becomes ever more important.  

2.2.4. 

Stakeholders’ views on problem drivers 

Different  groups  of  stakeholders  responded  to  the  consultation  and  despite  diverging 
interests, their views converged when asked about the different problem drivers. 

Pre-IPO phase: MVR share structures 

For  the  pre-IPO  phase  of  the  listing  process,  the  majority  of  stakeholders  (75%  or  34 
respondents  out  of  45  that  responded  to  the  public  consultation)  answered  that,  where 
allowed, the use of MVR shares has effectively encouraged more firms to seek a listing 
on public markets (this included issuers, exchanges, NCAs and financial intermediaries). 
36% (four out of the eleven) investors and investor associations replying to this question 
agreed  that  the  ability  by  companies  to  use  MVR  share  structures  would  support  more 
public  listings  (five  of  the  responding  investors  (46%)  raised  concerns  around 
engagement of minority shareholders). 

A large majority of exchanges (88%) that responded to the public consultation (seven out 
of eight) considered that MVR share structures can contribute to companies’ transitioning 
from  private  financing  to  public  markets.  Representatives  of  issuers  and  private 
companies  shared  this  view.  Three  investors’  associations  that  replied  to  this  question 
also  stressed  that  MVR  share  structures  encourage  firms  to  go  public  with  only  one 
stating  the  contrary  and  three  not  giving  an  answer.  Two  NCAs  noted  that  the  lack  of 
mechanisms  to  preserve  control  acts  as  a  strong  disincentive  for  companies  to  seek  a 
listing,  while  two  other  NCAs  noted  that  they  were  still  weighing  advantages  and 
disadvantages  of  MVR  share  structures.  One  NCA  stressed  the  importance  of  leaving 
sufficient room for manoeuvre to Member States while ensuring that MVR shares can be 
marketed and admitted to public trading within the EU.  

27%  of  stakeholders  (9  respondents  out  of  33)  reacted  negatively  to  the  possibility  to 
introduce MVR  share structures  across the EU.  An (institutional) investors’ association 
expressed  a  concern  about  the  disappearance  of  the  ‘one  share  –  one  vote’  principle, 
considering that MVR share structures may allow a minority shareholding to gain control 
of  a  company,  therefore  leading  to  the  abuse  arising  from  the  dichotomy  between 
shareholder power and economic risk. 

IPO and post-IPO stages: Prospectus Regulation and MAR 

A  vast  majority  of  respondents  (72%,  i.e.  66  respondents  out  of  91)  believed  that 
excessive  compliance  costs  linked  to  regulatory  requirements  in  the  IPO  and  post-IPO 
phase were rather or very important factors in explaining the lack of attractiveness of EU 
public markets. This included the vast majority of issuers, exchanges, investors and some 
NCAs.  On  the  IPO  stage,  one  investor  association  singled  out  the  length,  thresholds 
(from which publication is required), the deadline and passporting rules of the Prospectus 
regulation  as  a  large  source  of  general  compliance  burden  that  make  it  unattractive  for 
many businesses to go public. An exchange stated that the costs and burdens associated 
with the regulatory requirements applicable to companies admitted to regulated markets 
are  the  most  significant  barrier  to  listing.  Several  stakeholders  stated  that  the  listing 
burden  is  similar  for  large  companies  and  SMEs,  therefore  making  the  burden  very 

28 

 
 
 
disproportionate  for  an  SME.  The  majority  of  respondents  argued  that  both  listing  and 
post-listing rules lead to a burden disproportionate with the investor protection objectives 
that these rules are meant to achieve (52%, i.e. 42 respondents out of 80, and 57%, i.e. 45 
respondents out of 78 of respondents, respectively). 

In your view, does compliance with IPO listing requirements create a 
burden disproportionate with the investor protection objectives that 
these rules are meant to achieve?

13%

35%

52%

No

Yes

Don’t know / no opinion / not applicable

In your view, does compliance with post-IPO listing requirements 
create a burden disproportionate with the investor protection 
objectives that these rules are meant to achieve?

13%

30%

57%

No

Yes

Don’t know / no opinion / not applicable

The  majority  of  respondents  (59%,  i.e.  35  respondents  out  of  59)  considered  that  the 
standard  prospectus  in  its  current  form  does  not  strike  an  appropriate  balance  between 
effective investor protection and the proportionate administrative burden for issuers, and 
that  it  should  be  significantly  alleviated.  This  included  the  majority  of  issuers  and 
exchanges as well as banks and an NCA. The same view was also expressed by 44% of 

29 

 
 
 
respondents  (21  respondents  out  of  48)  with  respect  to  the  EU  growth  prospectus.  In 
contrast,  48%  of  respondents  (20  respondents  out  of  42)  believed  that  the  prospectus 
regime  for  non-equity  securities  has  been  successful  in  facilitating  fundraising  through 
capital markets. 

Regarding secondary issuances, respondents’ views were split. While a slight majority of 
respondents  (51%,  i.e.  31  respondents  out  of  61)  considered  that  the  prospectus 
requirement should not be lifted for secondary issuances, a significant minority (43%, i.e. 
26  respondents  out  of  61)  considered  that  issuers  listed  continuously  for  at  least  18 
months  on  a  regulated  market  or  an  SME  growth  market,  should  not  have  to  publish  a 
prospectus  for  subsequent  issuances.  Finally,  a  majority  of  respondents  (54%,  i.e.  23 
respondents  out  of  43)  did  not  think  that  there  is  alignment/convergence  in  the  way 
NCAs assess the completeness, comprehensibility and consistency of draft prospectuses 
that are submitted to them for approval. 

On  the  post-IPO  phase  of  the  listing  process,  as  mentioned  earlier,  a  vast  majority  of 
stakeholders,  composed  of  representatives  of  issuers,  trading  venues,  banks,  financial 
intermediaries, institutional and retail investors, that replied to the consultations believed 
that excessive compliance costs linked to regulatory requirements were also an important 
factor in explaining the lack of attractiveness of EU public markets. Overall respondents 
found  most  aspects  of  the  current  MAR  regime  burdensome.  The  most  burdensome 
requirements  were the ones related to  the definition of inside information (64%, i.e. 28 
respondents  out  of  44,  said  it  was  very  burdensome  or  rather  burdensome)  and  the 
conditions  for  delay  of  disclosure  (70%,  i.e.  28  respondents  out  of  40,  mainly 
representatives  of  banks,  trading  venues,  issuers,  institutional  investors,  financial 
intermediaries and legal advisors, said it was very burdensome or rather burdensome). 

When asked about the most important costs of remaining listed, respondents specifically 
pointed  to  fees  to  auditors,  to  ensure  compliance  with  the  listing  regulation  (20%  of 
respondents,  i.e.  13  respondents  out  of  65,  replied  “very  important”  and  32%  of 
respondents,  i.e.  21  respondents  out  of  65,  -  “rather  important”).  Respondents  also 
pointed to significant corporate governance costs (8%, i.e. 5 respondents out of 65, stated 
that  this  cost  is  “very  important”  and  29%,  i.e.  19  respondents  out  of  65,  -  “rather 
important”)  and  ongoing  fees  to  legal  advisors  (17%,  i.e.  11  respondents  out  of  64, 
replied “very important” and 23%, i.e. 15 respondents out of 64, “rather important”). 

Respondents’  views  were  split,  when  asked  if  ESMA’s  clarifications  on  the  notion  of 
inside information  would be  sufficient.  Almost  half of those  who expressed an opinion 
nevertheless  believed  that  ESMA’s  guidelines  would  not  be  sufficient  to  provide  the 
necessary clarifications around the notion of inside information (54%, i.e. 27 respondents 
out  of  50,  including  representatives  of  banks,  trading  venues,  issuers,  legal  advisors  as 
well as two NCAs).  

Half  of  respondents  (50%,  i.e.  22  respondents  out  of  44),  including  representatives  of 
banks,  trading  venues,  issuers  and  legal  advisors,  shared  the  opinion  that  the  current 
punitive  regime  under  MAR  is  not  proportionate  to  the  objective  sought  by  the 
legislation. 

30 

 
 
 
2.2.5. 

Out-of-scope drivers 

Beyond  the  problem  drivers  listed  above,  access  to  EU  public  equity  markets  is  also 
constrained by other factors, such as a more favourable tax treatment of debt over equity, 
SMEs’ lack of knowledge of capital markets and generally a more narrow investor base, 
when  compared  to  other  developed  capital  markets,  which  is  further  constrained  by  a 
strong  home  bias72  (reinforced  by  lengthy  and  cumbersome  withholding  tax  reclaim 
procedures). Tax incentives are also often quoted as an important element in promoting 
companies’ access to public markets.73 Stakeholders74 also expressed concern regarding 
the narrow application of exemptions under the state aid rules. Furthermore, the level of 
EU  retail  investor  participation  in  capital  markets  remains  very  low  compared  to  other 
developed  economies.  This  translates  into  lost  opportunities  in  terms  of  the  return  on 
long-term  savings  for  EU  citizens  but  also  in  terms  of  less  funding  available  for  EU 
companies and less deep public capital markets more generally, which in turn decreases 
the pace of economic recovery and future growth potential. These and other out-of-scope 
drivers  (See  Annex  12  for  more  details)  are  not  addressed  in  the  current  initiative 
focusing  on  regulatory  barriers,  but  are  nevertheless  considered  in  the  wider  plan  to 
facilitate companies’ access to public markets (see section 1 on political context as well 
as Annex 13).  

Figure 5. The problem tree 

Companies  will  opt  in  favour  of  (or  against)  a  public  listing  of  their  shares/bonds  by 
weighing the costs and benefits of such a decision. Although it would be exaggerated to 
claim  that  low  listing  levels  are  the  direct  consequence  of  only  the  regulatory  issues 
described above, the latter do contribute to reducing the relative attractiveness of public 
markets:  they  increase  the  regulatory  burden  imposed  on  companies  when  listing  on 
public markets and reduce the possibilities for founders and families to retain control of 
their  company  when  listing.  The  reduced  relative  attractiveness  of  EU  public  markets 
could lead to EU companies choosing to list or raise funding in third countries, depriving 

72 Demonstrated in the CMU indicators, specifically, indicator 28 holdings of equity from other Member States.  
73 Several Member States (such as Sweden, France, the UK and Italy) have all implemented tax incentives to encourage savings in 
equity, by providing tax reliefs on capital gains. 
74 TESG Final report, p. 60. 

31 

 
 
 
                                                           
the EU of the full growth and employment potential, or to delist, when already listed in 
the EU.  

The  broader  consequence  would  be  lower  scale  and  competitiveness  of  EU  capital 
markets and less efficient risk sharing in the EU economy with impact on, resilience to 
financial shocks.  

2.2.6. 

Lack of diversified funding 

Reduced  companies’  access  to  public  equity  and  bond  markets  also  results  in  limited 
opportunities  for  EU  companies  to  diversify  their  sources  of  funding  and  reduce  their 
overreliance on bank loans. An unbalanced funding structure (between bank and market-
based  funding)  of  a  company  makes  it  more  exposed  to  market  volatility  and  makes  it 
less  resilient  in  periods  of  shocks.  Studies75  have  demonstrated  that  in  economies  with 
more  bank-based  financial  structures  such  as  the  EU,  an  increase  in  bank  financing 
increases  systemic  risk,  while  an  increase  in  market  financing  decreases  systemic  risk. 
By contrast, an economy reliant more on market-based funding, such as the US, is overall 
more resilient to systemic risk when increasing overall financing in the system.  

Figure 6. Market funding ratio  

80%

70%

60%

50%

40%

30%

20%

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

USA

UK

EU

Source: OECD 

2.3. How will the problem evolve? 

Although the regulatory impediments identified in this impact assessment do not explain 
on their own the low levels  of  IPO  activity in the EU, they  contribute to the costs that 
further  disincentive  companies  to  raise  capital  on  public  markets  and  exacerbate 
unfavourable  market  conditions.  If  no  EU  action  is  taken,  the  existing  regulatory 
shortcomings  would  remain.  As  companies’  access  to  public  capital  markets  would  be 
impeded, companies, especially SMEs, would continue to be largely dependent on bank 
financing.  On  the  one  hand,  smaller  family-owned  companies  and  entrepreneurs  may 
have incentives to keep their companies private, not only hampering their own access to 
finance  and  the  development  of  the  local  capital  market,  but  also  preventing  public 
shareholders  from  enjoying  the  benefits  associated  with  investing  in  many  successful 
businesses. On the other hand, larger founder-led and high tech companies would  most 

75 Joost Bats and Aerdt Houben, 2017. Bank-based versus market-based financing: Implications for systemic risk 

32 

 
 
 
                                                           
likely continue to choose listing in the UK or the US over listing in the EU to scale up 
and  grow.  The  gap  between  the  EU  capital  markets  and  capital  markets  from  other 
developed economies would continue to widen.  

3.  WHY SHOULD THE EU ACT? 

There  is  a  policy  imperative  for  the  EU  to  act  swiftly.  Policy  options  set  out  in  this 
impact  assessment  would  address  the  issues  that  have  been  repeatedly  highlighted  by 
stakeholders  over  the  past  years  as  holding  back  the  EU  companies,  and  especially 
SMEs,  from  accessing  public  markets  (see  Annex  2  for  more  details).  No  other  policy 
measures  taken  by  the  Commission  separately  would  address  the  specific  problems 
identified in this impact  assessment, which stem from a concrete regulatory failure that 
can  only  be  addressed  by  a  legislative  amendment  of  the  relevant  regulation.  Market 
developments, such as the emergence of FinTech and other recent trends in the financial 
services  industry,  are  not  expected  to  substantially  improve  the  situation  regarding  the 
problems at hand. The problem therefore requires a legislative intervention. 

Furthermore, waiting longer before taking action would be unlikely to bring better insight 
and  would  push  back  even  further  the  entry  into  application  of  the  new  streamlined 
regime.  The  options  proposed  respect  the  principle  of  proportionality,  are  adequate  for 
reaching the objectives and do not go beyond what is necessary. They aim at striking an 
appropriate balance between reducing the administrative burden and increasing flexibility 
for  issuers  and  ensuring  adequate  and  effective  investor  protection  as  well  as 
safeguarding market integrity. 

3.1. Legal basis 

The legal basis of the Prospectus Regulation and MAR 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.  

Article 114 TFEU would also be relevant for the introduction of EU rules on MVR share 
structures.  The  fact  that  rules  are  different  across  Member  States  creates  an  uneven 
playing field for companies incorporated in different Member States. In fact, companies 
seated  in  the  Member  State  banning  MVR  share  structures  would  be  forced  to  transfer 
seat  to  another  Member  State,  in  the  case  of  listing  with  a  MVR  share  structure  (to 
comply  with  the  law  of  a  given  Member  State),  hence  raising  costs  of  listing  for  these 
companies.  In  contrast,  a  similar  company  already  incorporated  in  the  Member  State 
which allows MVR share structures would not have to incur these costs. Furthermore, in 
some  cases,  because  of  these  additional  costs/considerations,  companies  might  even 
decide against listing (i.e. accessing public equity markets) altogether, depriving them of 
an  alternative  source  of  financing  and  putting  them  in  a  situation  of  competitive 
disadvantage  vis-à-vis  companies  from  the  Member  State  which  allows  MVR  share 
structures. Finally, the growing trend of EU companies to operate cross-border calls for 
common  European  company  law  mechanisms,  including  the  possibility  to  depart  from 
the  “one  share,  one  vote”  principle  through  the  issuance  of  MVR  shares.  There  is 
therefore a significant obstacle to the creation of a single market that an EU rule on MVR 
share structures would seek to remedy.  

33 

 
 
 
Article 50(1) TFEU and in particular Article 50(2)(g) TFEU, may also be relevant for the 
introduction  of  EU  provisions  on  MVR  share  structures.  They  provide  for  the  EU 
competence  to  act  in  order  to  attain  freedom  of  establishment  as  regards  a  particular 
activity, in particular “by coordinating to the necessary extent the safeguards which, for 
the protection of the interests of members and others, are required by Member States of 
companies or forms within the meaning of the second paragraph of Article 54 TFEU with 
a  view  to  making  such  safeguards  equivalent  throughout  the  Union”.  Recourse  to  this 
provision is possible if the aim is to prevent the emergence of current or future obstacles 
to  the  freedom  of  establishment  resulting  from  the  divergent  development  of  national 
laws. The emergence of such obstacles must be likely and the measure in question must 
be designed to prevent them. 

3.2. Subsidiarity: Necessity of EU action 

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  (TEU).  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 at EU level.  

Legislation  applying  to  issuers  and  trading  venues  is  largely  harmonised  at  EU  level, 
leaving  limited  flexibility  for  Member  States  to  adapt  this  legal  framework  to  local 
conditions. As a consequence, modifications of the EU legislation are necessary to bring 
about  desired  improvements.  In  addition,  an  EU  action  is  more  appropriate  as  the 
initiative  seeks  to  support  cross-border  listing  and  securities  trading  activity  across  the 
whole EU, in order to further integrate and achieve scale on EU capital markets.  

With respect to MVR share structures, unless action at the EU level is taken, there is very 
low likelihood that all Member States that currently do not allow MVR share structures 
would unilaterally and with no external incentive amend their rules in the near future. It 
is  so  because  of  a  number  of  reasons,  starting  from  historical  reasons,  stakeholder 
pressures, past experience and the fact that changing company law, which was developed 
over centuries, is often seen as complex. Any delays in allowing these structures across 
the  whole  of  the  EU  would  risk  to  continue  to  deprive  some  companies  (i.e.  in  those 
Member  States  that  ban  those  structure)  of  eligible  funding  opportunities  or  impose 
additional  costs  on  them,  ultimately  pushing  them  to  list  in  and  relocate  to  third 
countries.  Finally,  even  if  Member  States  decided  to  take  action,  the  approaches  could 
differ significantly, potentially leading to further fragmentation.  

3.3. Subsidiarity: Added value of EU action 

It has to be considered whether the objectives would be better achieved by action at EU 
level (the so-called  ‘test  of European added-value’). As there is almost no flexibility to 
adapt  MAR  and  Prospectus  Regulation  to  local  conditions,  a  legislative  action  at  EU 
level  would  seem  the  most  appropriate  to  reduce  the  administrative  burden  placed  on 
companies  accessing  public  markets.  By  its  scale,  EU  action  could  reduce  the 
administrative  burden  for  issuers,  while  at  the  same  time  safeguarding  market  integrity 
and investor protection, thus ensuring a level-playing field. 

34 

 
 
4.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

4.1. General objectives 

In  response  to  the  identified  problems,  the  general  objective  is  to  make  listings  on  EU 
capital  markets  more  attractive  through  streamlined  and  clear  regulatory  obligations  in 
order to make capital-raising on public markets by companies of all sizes less costly. This 
would in turn diversify funding sources for companies in the EU by facilitating access to 
alternative  sources  of  financing  and  help  increasing  investment,  economic  growth,  job 
creation  and  innovation  in  the  EU.  Public  markets  should  be  made  more  attractive  for 
companies that seek a first-time listing and for firms that are already listed.  Larger and 
more liquid EU public markets, in turn, would also help improve risk sharing in the EU, 
with positive effects on financial stability. 

4.2. Specific objectives 

The  3  major  specific  objectives  that  would  contribute  to  the  general  objectives  set  out 
above are the following: 

1.  Reduce  regulatory  and  compliance  costs  for  companies  seeking  to  list  or  already  listed 

with a view to streamline the listing process and enhance legal clarity;  

2.  Ensure investor protection and market integrity; 

3.  Provide more incentives for issuers to list.  

5.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

5.1. What is the baseline from which options are assessed? 

Under the baseline scenario, no amendments are introduced to the legislative framework 
governing  the  rules  for  listing  and  already  listed  companies.  The  excessive  regulatory 
requirements associated with burdensome listing documentation and ongoing disclosures, 
paired with excessive and disproportionate punitive measures, fragmented legal regimes 
along  national  borders,  and  low  SME  visibility  vis-à-vis  investors  would  continue  to 
weigh  on  companies’  decision  to  list  and  stay  listed.  The  baseline  scenario,  therefore, 
features EU capital markets that would continue to suffer from inefficiencies regarding to 
the  regulatory  framework  for  listing,  which  in  turn  would  reduce  attractiveness  to  list, 
resulting in an economic cost for EU issuers, investors and the EU economy as a whole. 
The  declining  trend  in  IPOs  and  increasing  delistings  by  companies  would  likely 
continue under the baseline scenario.  

With falling IPO numbers, the EU markets would gradually lose scale, creating a vicious 
cycle whereby an increasingly higher number of companies would stay private or be even 
driven  out  of  EU  markets  to  more  efficient  markets,  impairing  the  EU  overall  global 
competitiveness. The  potential for the EU  to  grow and innovate would be considerably 
hampered.  The  EU  economy  would  continue  to  be  financed  mainly  by  banks.  The 
development  of  capital  markets  in  the  EU  would  lag  behind  that  of  other  developed 
economies. In the absence of liquid public markets, price discovery for assets would be 
impaired  in  the  EU:  financial  intermediaries  would  increasingly  rely  on  benchmarks  in 
financial  centres  in  third  countries.  With  reduced  risk  sharing,  the  EU  economy  would 
also  become  less  resilient  to  shocks.  Overall,  EU  companies  would  most  likely  lose  in 
terms  of  foregone  growth  opportunities  (e.g.  when  going/staying  public),  the  EU  –  in 

35 

 
 
 
terms  of  innovation,  jobs  and  growth  potential,  Member  States  –  in  terms  of  fiscal 
revenue,  and  investors  –  in  terms  of  reduced  investment  opportunities.  Over  a  longer 
terms,  the  EU  might  become  more  dependent  on  financial  markets  in  third  countries, 
hence reducing its strategic autonomy.  

While the regulatory amendments set out in the options below, on their own, could not 
address all the challenges faced by the EU public markets, together with other measures 
considered  as  part  of  a  wider  plan  to  enhance  companies’  access  to  public  capital 
markets, they would seek to contribute to reversing the current negative trend.76  

These broader measures  in particular include the forthcoming retail investment strategy 
that would address the low level of retail participation, the SME IPO Fund that aims to 
make  listings  more  attractive  and  strengthen  the  investor  base  for  SME  IPOs,  the 
DEBRA77  proposal  that  seeks  to  address  the  debt/equity  bias  for  investors  and  the 
forthcoming withholding tax proposal that would address barriers related to cross-border 
taxation procedures. While these measures would be expected individually and jointly to 
contribute to the creation of a more favourable listing environment in the EU, they would 
not  be  able  to  address  the  specific  legislative  challenges  addressed  by  this  initiative, 
which would continue to weigh on listing by EU companies, unless tackled.  

5.2. Description of the policy options 

Policy  options  presented  below  aim  to  tackle  the  problem  drivers  identified  in  the  pre-
IPO, IPO and post-IPO stages of the listing life-cycle. The policy options that address the 
same problem driver in a given IPO stage (e.g. post-IPO (MAR)) are mutually exclusive 
(i.e.  only  one  option  can  be  chosen).  Policy  options  across  different  IPO  stages  are, 
however, cumulative (i.e. the preferred options in the pre-IPO, IPO and post-IPO stages 
all add up to jointly form a final set of options). 

While  this  initiative  has  a  specific  focus  on  SMEs  and  SME  growth  markets,  the 
envisaged  policy  options  cover  all  companies,  including  companies  trading  (or  seeking 
admission  to  trading)  on  regulated  markets.  This  is  in  line  with  Action  2  of  the  CMU 
Action Plan and the feedback received from expert groups and respondents to the public 
consultation.  In  Action  2  of  the  CMU  Action  Plan,  the  Commission  committed  to 
simplifying the listing rules for all public markets. Furthermore, both the CMU HLF as 
well as the TESG recommended that the Commission introduce targeted amendments to 
the listing framework both on regulated markets as well as on SME growth markets. The 
feedback  to  the  public  consultation  confirmed  that  the  regulatory  compliance  costs  are 
seen as an important factor in explaining the lack of attractiveness of listing on both types 
of trading venues. Addressing all relevant regulatory listing problems (i.e. both on SME 
growth  markets  and  regulated  markets)  in  one  legislative  initiative  avoids  a  piece-meal 
approach  to  legislation,  where  the  same  legislative  acts  would  have  to  be  re-opened 
several  years  later  to  then  address  problems  relevant  to,  for  example,  only  regulated 
markets. 

Furthermore, the envisaged policy options do not differentiate between SME issuers and 
non-SME issuers which are listed on the same trading venue. Issuers seeking admission 
to trading on the same type of trading venue (be it a regulated market or a SME growth 

76 See Annex 12 on out-of-scope drivers. 
77 See Annex 13 on other ongoing initiatives contributing to improving public markets ecosystem.  

36 

 
 
                                                           
market), irrespective of their size, are currently subject to the same listing requirements. 
Different listing requirements for smaller issuers compared to larger issuers on the same 
venue  are  likely  to  confuse  stakeholders,  and  in  particular  investors.  This  is  a 
fundamental  principle  underpinning  EU  financial  legislation,  as  it  aims  to  ensure  that 
investors  on  the  same  type  of  trading  venue  feel  confident  that  all  companies  listed 
thereon are subject to a single set of rules.  

5.2.1.  Options  addressing  unequal  opportunities  for  EU  companies  regarding 
governance  structure,  when  listing,  due  to  different  national  rules  on  MVR  share 
structures (Pre-IPO phase) 

Option 1: Minimum harmonisation of MVR share structures across the EU 

Under  this  option,  the  Commission  would  introduce  into  EU  law  the  possibility  for 
companies to adopt MVR share structures and for MVR shares to be admitted to trading 
across  all  Member  States.78  This  option  would  leave  flexibility  to  Member  States  to 
determine how the rule would exactly apply, allowing them to better tailor it to national 
specificities.  Member  States  would  be  given  discretion  in  determining  effective 
conditions and safeguards attached to the MVR shares (e.g. voting ratios, sunset clauses). 
The general high-level principles could, however, be set out at EU level, in particular the 
need  to  ensure  an  adequate  balance  between  the  interests  of  founders  and  minority 
investor protection or the need to take into account specific considerations, for example, 
related  to  sustainability,  when  designing  those  safeguards79.  Furthermore,  appropriate 
safeguards  would  also  need  to  be  put  in  place  to  avoid  the  situation  where  a  Member 
State  imposes  far-reaching  protections  for  investors,  rendering  the  issuance  of  MVR 
share  structures  unattractive  for  issuers.  The  scope  of  this  option  could  either  cover  all 
companies or be targeted at a specific subset of companies, e.g. issuers listing on SME 
growth markets. The latter approach could have the benefits of allowing for targeting the 
measure  where  it  is  most  needed,  reducing  risks  stemming  from  a  possibly  overly 
permissive approach by some Member States and offering a possibility to those Member 
States who already have a flexible regime in place not to adjust it. 

Option 2: Maximum harmonisation of MVR share structures across the EU 

Under option 2, the general principles and the options on scope set out in option 1, would 
be  complemented  with  a  detailed  set  of  rules  on  the  safeguards  for  minority  investors, 
such as voting power limitation clauses, sunset clauses, clauses setting out the limitation 
on  the  number  of  votes  attached  to  a  single  share,  all  of  which  would  seek  to  protect 
other (minority) investors in the company from undue impact of MVR share structures. 
Furthermore,  under  option  2,  the  EU  law  could  also  prescribe  inter  alia  who  can  hold 
MVR shares, in which decisions the additional voting rights are taken into account  and 
on which conditions  (and whether) they  can be transferred to  a third party. This  option 
would  be  quite  restrictive  in  the  sense  that  all  Member  States  would  be  obliged  to 
implement the same rigid framework including the same safeguards. This policy option 

78 In principle, minimum harmonisation can also be achieved via a Recommendation tool. In the past, Commission recommendations, 
however,  showed  only  limited  effectiveness  in  fomenting  legislative  changes  in  Member  States,  in  particular  in  the  area  of 
company/corporate law. 
79 This may include the provision of sunset clauses, i.e. (i.e. clauses that eliminate higher voting rights after a designated period of 
time). 

37 

 
 
                                                           
would create a harmonised regime in the EU for MVR share structures and would be far 
more detailed and far-reaching than policy option 180.  

5.2.2.  Options  addressing  the  overly  burdensome  regulatory  listing  requirements  (IPO 

phase) 

Options  set  out  below  refer  to  both  instances  where  companies  seek  access  to  public 
markets  for the first  time (IPO)  and where they  access  public markets  for follow-on or 
secondary  issuances of equity  and/or non-equity  securities.  In both  instances, under the 
current  rules,  companies  produce  voluminous  prospectuses  that  are  scrutinised  and 
approved by NCAs in a lengthy process.  

Option 1: Scrutiny by exchanges and non-passportable admission document  

Under this option, the main change would entail  a shift in the scrutiny and approval of 
the  prospectus.  Exchanges  would  have  the  responsibility  of  scrutinising  and  approving 
the  prospectus  for  first-time  issuers,  thus  alleviating  the  burden  of  a  currently  lengthy 
scrutiny process carried out by NCAs. As the option moves the scrutiny to exchanges, to 
balance out the considerations of investor trust, first issuance prospectuses  on regulated 
markets (i.e. where no public information already exists) should remain more informative 
and detailed when they  are scrutinised by exchanges  than when they are scrutinised by 
NCAs.  In  the  case  of  SME  growth  markets,  where  exchanges  have  already  established 
themselves  in  the  role  of  entities  reviewing  admission  documents  (and  investors  are 
confident in the process as it currently stands), the option could combine the transfer of 
scrutiny  of  the  listing  documents  to  exchanges  with  modifications  (i.e.  alleviations)  to 
their substance. In the same vein, in the case of secondary issuances, the content of the 
prospectus  could  also  be  streamlined,  as  public  information  on  the  company  and  its 
securities is already available. 

In the case of IPOs, the responsibility for reviewing the prospectus would be placed on 
the  regulated  market  where  the  issuer  is  seeking  admission  to  trading,  while  the 
prospectus  would  stay  substantially  unchanged  in  terms  of  its  contents  (for  reasons  set 
out  above).  These  prospectuses  would  only  be  filed  with  NCAs  (but  not  scrutinised). 
SME  growth  markets  would  be  responsible  for  the  review  of  a  shorter  and  simpler 
admission document submitted for publication by issuers. The content of such admission 
document  would  be  largely  left  to  discretion  of  the  SME  growth  markets  with  only 
minimum  standards  set  at  EU  level.  While  this  document  would  allow  the  offer  of 
securities to the public without a prospectus, it would not be passportable, i.e. securities 
could not be offered in other Member States. 

In the case of secondary issuances, a very short and streamlined prospectus similar to the 
“EU  Recovery  Prospectus”81  would  replace  the  simplified  prospectus  for  secondary 
issuances for both equity and non-equity securities. Like in the case of IPOs, exchanges 
would  be  responsible  for  the  scrutiny  and  approval  of  these  prospectuses.  The  EU 
Recovery prospectus format would also be used by companies wishing to transfer from 
an SME growth market to a regulated market (i.e. replacing the simplified prospectus for 
secondary issuances as the “transfer prospectus”). 

80 As for option 1, the scope of this option could cover all companies or be limited to a specific subset of companies, such as issuers 
listing on SME growth markets. 
81 The EU Recovery prospectus was introduced in the post-COVID recovery context in the CMRP. 

38 

 
 
                                                           
In order to ensure that the scrutiny by exchanges is done adequately, a set of conflict of 
interest  rules  would  be  put  in  place.  Furthermore,  safeguards  would  need  to  be 
considered  in  order  to  avoid  that  exchanges  charge  excessive  fees  for  scrutiny  and 
approval of prospectuses. 

Option 2: Shorter prospectuses with streamlined scrutiny by NCAs 

Under this option, both the contents and scrutiny of the prospectus would be streamlined, 
although  the  scrutiny  would  stay  with  NCAs.  The  option  would  also  seek  to  exempt 
issuers  from  an  obligation  to  draw  up  a  prospectus  in  certain  cases,  where  a  lot  of 
information about the company and securities is already available to public. Furthermore, 
the prospectus would be further standardised (i.e. its sections would be subject to a fixed 
order  of  disclosure),  it  would  be  published  in  an  electronic  format  only  (i.e.  no  paper 
copies  on  request)  and  it  would  be  allowed  to  draw  it  up  in  English  as  the  language 
customary in the sphere of international finance (except for the summary). 

In  the  case  of  an  offer  of  securities  to  the  public  and/or  the  admission  to  trading  on 
regulated  markets,  including  the  case  of  an  IPO,  both  the  contents  and  size  of  the 
prospectus would be considerably streamlined. On the one hand, it would  be clearly set 
out  which  sections  of  the  current  prospectus  would  no  longer  be  required  or  should  be 
alleviated.  Furthermore,  rules  on  the  incorporation  by  reference  would  be  further 
reinforced,  making  it  a  legal  requirement,  rather  than  a  possibility  that  an  issuer  could 
avail  itself  of.  On  the  other  hand,  only  for  shares  or  other  transferable  securities 
equivalent  to  shares  in  companies82,  a  limit  number  of  pages  (300  pages)  would  be 
introduced  to  avoid  overly  lengthy  prospectuses  for  companies  that  do  not  have  a 
complex financial history83. In addition, the ability of NCAs to request issuers to include 
additional information would be more narrowly framed to limit the duration of scrutiny, 
as well as the length of the prospectus. 

Companies  offering  securities  to  the  public  and  listing  on  SME  growth  markets  would 
have  to  draw  up  a  shorter  and  simpler  EU  IPO  admission  document,  which  would  be 
subject to a page limit, as well as subject to scrutiny and approval by a  NCA. This EU 
admission  document  would  allow  issuers  to  offer  securities  to  the  public,  as  well  as 
passport  them  into  other  Member  States.  The  powers  of  NCAs  in  a  scrutiny  process 
would also be better framed. 

In the case of secondary issuances, issuers of securities fungible with securities already 
admitted  to  trading  on  a  regulated  market  or  listed  on  an  SME  growth  market,  or 
companies  transferring  from  SME  growth  markets  to  regulated  markets  would  be 
exempted, under certain conditions, from the requirement to draw up a prospectus or an 
EU  admission  document.  Instead  these  companies  would  only  be  required  to  publish  a 
statement  of  ongoing  compliance  with  reporting  and  transparency  requirements, 
accompanied with a short summary document that would detail, for example, the use of 
proceeds and any other relevant information, not yet disclosed publicly.84 This exemption 
would, however, not apply to instances, where companies are going through considerable 
transformations,  for  example  in  terms  of  governance  or  business  model,  and  using  the 

82 Prospectuses for issuances of non-equity securities, or of equity securities other than shares (e.g. certain convertible, exchangeable 
and derivative securities) tend to be more heterogeneous, may be rather complex and hence should benefit from flexibility in terms of 
length (as also confirmed by stakeholders in workshops). 
83 See recital 9 and Article 18 of Commission Delegated Regulation (EU) 2019/980. 
84 This takes into account the fact that a lot of information is already disclosed by publicly listed companies on a continuous basis.  

39 

 
 
                                                           
proceeds for that purpose85. In such cases, as well as in the case of secondary issuances 
of  securities  not  fungible  with  securities  already  admitted  to  trading,  issuers  would  be 
required  to  draw  up  a  short  and  streamlined  prospectus  similar  to  the  EU  Recovery 
prospectus, which would  replace the simplified prospectus  for  secondary  issuances  (for 
both equity and non-equity securities) and would be scrutinised and approved by a NCA. 

5.2.3.  Options addressing overly burdensome ongoing disclosure requirements  (post-IPO 

phase)  

The current lack of legal clarity in MAR stems from the Level 1 text and concerns one of 
the core concepts of the market abuse framework: the notion of inside information and, in 
particular,  its  application  in  the  context  of  the  disclosure  obligation.  Any  guidance 
provided by a supervisory body might be useful in applying level 1.  It would, however, 
not be sufficient to instil full legal certainty, as it would not have the binding nature of a 
level  1  text.  Hence  the  below  options  set  out  a  legislative  change  rather  than  an 
empowerment for ESMA to issue guidelines. This is without prejudice to ESMA and/or 
NCAs to issue guidance to further clarify level 1.  

Option 1 – Review of the definition of inside information and of the conditions for 
delaying its disclosure 

This option addresses issuers’ concerns in MAR regarding the lack of clarity with respect 
to  the  notion  of  inside  information  and  the  broad  scope  of  the  notion  for  disclosure 
purposes.  While  amending  the  definition  of  inside  information  for  disclosure  purposes 
under  MAR,  the  option  leaves  the  notion  unchanged  for  the  purposes  of  prohibiting 
insider  dealing  and  market  manipulation.  It  also  aims  to  ensure  that  sanctions  for 
disclosure-related  market  abuse  infringements  are  proportionate  and  do  not  dissuade 
SMEs from going public. 

Under this option, issuers would still be required, as it is currently the case, to disclose all 
inside  information  to  the  public.  However,  the  notion  of  what  constitutes  inside 
information for disclosure purposes would be refined and narrowed down, so as to ensure 
that  issuers  would  not  be  under  the  obligation  to  disclose  information  that  is  too 
preliminary and therefore not  yet mature enough for disclosure and not reliable enough 
with  a  risk  to  mislead  the  public.  This  amendment  would  be  complemented  by  a  non-
exhaustive  and  purely  indicative  list  of  events,  which  are  likely  to  fall  under  the 
disclosure  obligation  (i.e.  the  fact  that  an  event  does  not  appear  on  the  list  would  not 
automatically  mean  it  should  not  be  disclosed).  Issuers  would  therefore  still  need  to 
assess,  on  a  case-by-case  basis,  whether  certain  information  needs  to  be  disclosed 
according to the general duty to disclose inside information to the market. The list would, 
however, serve as a reference point for conducting such assessment. Furthermore, these 
changes would be accompanied by an amendment of the conditions required to delay the 
disclosure of inside information to make sure the delay acts as a proper counterbalance 
when disclosure is likely to prejudice the legitimate interests of the issuer. 

In parallel to the clarifications around the general duty to disclose inside information and 
the conditions to delay disclosure, administrative sanctions for disclosure-related market 
abuse infringements would be made more proportionate for SMEs, so as to ensure they 

85 A company is going through a considerable transformation when, for example the management structure changes, the company is 
involved in a takeover, the business direction changes or the financial structure changes. 

40 

 
 
                                                           
do  not  dissuade  smaller  companies  from  going  public.  For  example,  the  minimum 
threshold for setting the most severe level of sanctions for SMEs would be lowered. This 
would  give  Member  States  the  possibility  to  decrease  in  their  national  laws  the  cap  on 
pecuniary sanctions for SMEs for disclosure-related infringements, which, in turn, would 
decrease the cap on sanctions imposed by competent authorities in individual decisions.  

Option 2 – Introduction of a closed list of events which qualify as inside information 
for the purposes of disclosure 

Under this option, the broadness of the notion in the context of the disclosure obligation 
would be addressed by setting out a closed list of material events which would spell out 
the  cases  when  companies  must  disclose  information  (i.e.  the  list  would  not  merely 
exemplify what events could fall under the disclosure obligation, like it is the case under 
Option 1, but would be exhaustive – outside of those cases, no disclosure would have to 
be provided to the public). This closed list of events would replace the notion of inside 
information  for  disclosure  purposes  only  (i.e.,  the  current  notion  of  inside  information 
would remain in place for the purpose of prohibiting insider dealing). Issuers could still 
choose  to  disclose  material  information  falling  outside  the  list  if  they  wish.  However, 
they  would  not  be  under  the  obligation  to  do  so.  As  opposed  to  Option  1,  disclosure 
would  be  limited  to  a  subset  of  information  that  would  be  specifically  identified  in 
legislation. An exhaustive list of events would greatly limit, if not fully remove, the need 
for  delayed  disclosure.  Hence,  the  conditions  to  delay  disclosure  would  be  reviewed, 
reflecting the exceptional nature of delay under the new regime.  

Changes to  the sanctioning  regime are not  foreseen under this option, as  an exhaustive 
list  would  make  any  accidental  breach  of  disclosure  requirements  highly  unlikely 
(including by SMEs) due to full legal clarity on when disclosure is required.  

5.2.4.  Discarded option 

Centralise  the  supervision  of  prospectuses  (including  the  scrutiny  and  approval) 
with ESMA.  

One  option  considered  but  later  discarded  was  to  confer  to  ESMA  the  supervision 
(including scrutiny and approval) of certain categories of prospectuses more relevant in 
the  cross-border  context,  such  as  for  example  wholesale  non-equity  prospectuses  and 
prospectuses drawn up by third country issuers. ESMA’s centralised supervision of those 
prospectuses is likely to be more effective and efficient than their supervision at national 
level  due  to  the  nature  of  the  securities  and  issuers  concerned  and  potential  risks  of 
regulatory  arbitrage.  This  option  was  however  discarded  as  politically  non-feasible, 
notably  building  on  the  experience  of  ‘the  ESAs’  review’,  tabled  by  the  Commission 
back  in  2017,  and  the  results  of  the  recent  stock-taking  exercise  conducted  by  the 
Commission  services  on  the  need  for  further  harmonisation  of  EU  rules  and  progress 
towards supervisory convergence.86  

6.  WHAT ARE THE IMPACTS OF THE POLICY OPTIONS? 

The analysis carried out in this impact assessment aims to identify the costs of regulatory 
compliance  for  listing  and  staying  listed  and  to  provide  scenarios  to  what  extent 

86 Report from the Commission to the European Parliament and the Council On the operation of the European Supervisory Authorities 
(ESAs) COM(2022) 228 final 

41 

 
 
                                                           
regulatory alleviations could reduce these costs and improve incentives for firms to make 
more  use  of  public  market  funding.  There  is,  however,  no  good  empirical  basis  for 
translating  the  cost  savings  expected  under  the  proposed  options  into  a  number  for  the 
increase in future IPOs. 

The decision to list (i.e. go for an IPO) is complex. It is taken by managers or owners of 
heterogeneous companies, weighing on a host of economic, financial, (geo) political and 
legal considerations. This impact assessment refrains from putting forward any estimate 
of how many  IPOs an individual (or joint) envisaged cost saving(s) would lead to  with 
one notable exception,  where such  an  exercise  appears justifiable (see section 6.1.1.).87 
The  number  should,  therefore,  be  considered  as  a  mere  illustration  of  a  possible 
magnitude of the effect, rather than its exact estimate.  

Nevertheless,  the  initiative  will  directly  address  the  obstacles  to  the  use  of  IPOs  that 
market  practitioners  consistently  quoted  as  being  the  result  of  the  excessive  regulatory 
burden  at  EU  level.  While  the  initiative  will  not  address  all  obstacles  to  listing,  it  will 
remove those related to the EU regulation from the list of factors that are holding back 
the development of more active equity markets  in the EU. However, legislation  cannot 
force market  players to  undertake  IPOs. Those decisions will belong  to  companies that 
will have different needs and constraints.  

This  impact  assessment  also  does  not  consider  (quantify)  a  less  direct  and  more  long-
term  impact  of  the  proposed  measures  on  listing  costs,  such  as  underwriting  fees,  that 
largely reflect the limitations of the established market structure (i.e. the limited degree 
of competition in the EU listing ecosystem) and that, short of price intervention, cannot 
be  addressed  directly  with  regulatory  measures.  These  costs  may  be  reduced  in  the 
longer-term by a potential increase in the number of listings which would create room for 
entry by competitors.  

6.1.  Options addressing unequal opportunities for EU companies regarding governance 
structure,  when  listing,  due  to  different  national  rules  on  MVR  share  structures 
(pre-IPO) 

6.1.1. Option 1 - Minimum harmonisation of MVR share structures across the EU 

Effectiveness in meeting the specific objectives  

Policy option 1 envisages a minimum harmonisation of national legal regimes regarding 
MVR  share  structures,  while  leaving  discretion  to  Member  States  on  how  to  frame  it. 
This  option  would  ensure  that  Member  States  currently  banning  MVR  share  structures 
would allow them, without imposing any further constraints on those Member States that 
currently already have a flexible regime in place.  

By  giving  flexibility  to  founders  to  adopt  MVR  share  structures  to  retain  control,  this 
option  would  be  effective  in  providing  companies  (established  in  a  Member  State  that 
currently  bans  MVR  share  structures)  with  improved  incentives  to  list.  Fear  of  losing 
control is one of the largest deterrents to listing for founders. In the public consultation 

87  This  exception  was  included  because  a  widely  quoted  empirical  paper  provided  numbers  considered  sufficiently  targeted  and 
reliable to undertake a “what-if” scenario. While the number seems high, there is no other empirical study to qualify the result. 

42 

 
 
 
                                                           
an overwhelming majority (76%)88 of respondents89 (including the vast majority of issuer 
associations)  agreed  that  the  use  of  MVR  share  structures  have  effectively  encouraged 
more  firms  to  seek  a  listing  on  public  market.  Ten  respondents90  to  the  targeted 
consultation  stressed  that  one  of  the  key  reasons  for  the  wave  of  hi-tech,  high  growth 
issuers choosing to list in third countries (such as the US or the UK) is the flexibility that 
these  jurisdictions  grant  to  issuers  with  respect  to  MVR  share  structures.91  Likewise, 
family-owned  and  smaller  companies  are  more  likely  to  consider  listing  on  a  public 
market as a viable funding source if reassured that they would not have to cede control 
over  their  business  once  they  list.92  By  ensuring  that  companies  can  be  admitted  to 
trading in all EU Member States with MVR share structures, option 1 would address the 
existing  market  fragmentation  in  this  area  in  the  EU.  Furthermore,  it  would  reduce  the 
cost of listing for those companies who currently need to list abroad in order to  benefit 
from  this  flexibility93.  Finally, MVR  share  structures  would help  founders (once listed) 
avoid short-term market pressures and focus on their long-term vision for the company.94  

Under  option  1,  Member  States  would  enjoy  flexibility  in  setting  safeguards  and 
conditions  around  MVR  share  structures.  However,  they  would  need  to  ensure 
compliance with  few  high-level  principles95, that would  be  set  out  at  EU level,  such as 
the  need  to  strike  a  proper  balance  between  the  interests  of  founders  and  minority 
investor protection, or the need to safeguard sustainability considerations, in particular in 
order  to  avoid  the  founders’  ability  to  block  important  decisions  in  this  area,  or  other 
relevant  considerations  when  designing  those  safeguards,  such  as  ensuring  equal 
treatment  of  shareholders.  This  option  would  therefore  ensure  that  investors  enjoy  a 
minimum  degree  of  protection  across  the  EU,  as  well  as  that  some  important  policy 
considerations are duly safeguarded, leaving to Member States the discretion as to how to 
tailor safeguards and conditions to the specificities of their local markets. This has also 
been raised by two respondents to the public consultation, who were in favour of a more 
homogenous EU-wide regime, noting the need to consider the perspective of investors so 
that the MVR share regime does not discourage investment and shareholder engagement, 
particularly for active and engaged investors. 

Cost-benefit analysis 

Cost-benefit  for  issuers: A  minimum  harmonisation  of  MVR  share  structures  would  be 
beneficial for issuers established in a Member State that currently bans these structures, 
as  it  would  allow  them  to  retain  control  of  their  company  (and  continue  shaping  the 
business in accordance with their respective original ideas and aspirations), while raising 

88 See footnote 98 for more details. 
89  34  respondents  out  of  45,  including  stock  exchanges,  business  associations  (for  issuers,  banks  and  capital  markets),  financial 
advisors, and 4 NCAs. Among those that disagreed were asset managers, associations of asset managers/investors, an NCA (from the 
Member State that does not allow these structures) and a consumer organisation.  
90 Stakeholders include issuers’ representatives, investors’ representatives as well as public authorities.  
91 Issuer association and an investment bank. See Annex 2 for more details.  
92 Oxera report, p. 46. 
93 Additional costs and issues linked to listing outside of a home Member State include having to move headquarters, hiring advisors 
specialised in the host Member State’s laws/rules, complying with an unfamiliar set of regulations, (potentially) working in another 
language and the home bias of investors. 
94 Joel Seligman, ‘Equal Protection in Shareholder Voting Rights: The One Common Share, One Vote Controversy’ (1986) 54 George 
Washington Law Review 687, 687. 
95 Even though this proposal is limited to MVR share structures, another form of control enhancing tools, such as loyalty shares, might 
require a different set of safeguards such as a safeguard that would specifically seek to protect the interests of third-country investors 
(Loi Florange).  

43 

 
 
 
                                                           
a  larger  amount  of  funds  (without  diluting  ownership  too  much)  and  enjoying  the 
benefits  associated  with  listing.  Option  1  would,  in  particular,  reduce  (if  not  fully 
remove)  opportunity  costs96  currently  incurred  by  issuers  that  remain  private  to  avoid 
losing control. It would also eliminate the additional costs incurred by issuers that choose 
to list in another country in order to benefit from this flexibility. Despite providing for a 
minimum level of harmonisation, option 1 would include appropriate safeguards to avoid 
the  situation  where  a  Member  State  imposes  far-reaching  protections  for  investors, 
rendering the adoption of MVR share structures unattractive for issuers (thus protecting 
the benefits to issuers). 

The opportunity costs of the absence of MVR share structures (in those Member States 
where  it  is  not  allowed)  could  be  defined  as  the  missing  growth  opportunities  of 
companies (i.e. potential issuers) that decide to refrain from listing. The studies suggest 
that  the  growth  difference  is  particularly  pronounced  in  the  year  of  issuance  and  the 
subsequent  two  years.  When  assuming  that  there  could  be  21%  more  IPOs97  in  those 
Member  States  that  introduce  MVR  share  structures  and  taking  the  average  number  of 
IPOs in 2015-2021 as baseline, it could be extrapolated that there could potentially be 11 
IPOs  more  per  year.  If  it  is  furthermore  assumed,  that  the  IPO  would  boost  both  asset 
growth  in  and  market  capitalisation  of  these  companies98  by  6%,99  i.e.  the  EU  market 
valuation  could  be  EUR  737  million  higher  than  without  these  additional  IPOs  taking 
place (See Annex 4, chapter 3 for more detail). 

For issuers established in a Member State that already allows these structures, option 1 
would  not  entail  any  substantial  change/cost  saving.  Furthermore,  a  minimum 
harmonisation  approach  would  allow  Member  States  that  currently  provide  for  a  very 
flexible  regime  on  MVR  share  structure  to  retain  it  (thus  not  decreasing  the  benefits 
already enjoyed by companies in those Member States). However, as this option would 
leave  to  Member  States  most  of  the  discretion  as  to  the  specific  conditions  and 
safeguards  attached  to  MVR  share  structures,  in  the  case  of  a  cross-border  listing,  a 
company  would  still  face  a  certain  degree  of  fragmentation  (unlevel  playing  field). 
Nevertheless, overall the impact on issuers is likely to be positive. 

Cost-benefit for investors: 22% of the investors that responded to the public consultation 
expressed support for this measure, while 36% were critical.100 The introduction of MVR 
share  structures  would  mean  that  investors  would  enjoy  diminished  decision  making 
power when investing in certain companies. Unless subject to investors safeguards, such 
as  a  sunset  clause,  MVR  share  structures  may  provide  founders  with  perpetual  control 
and thereby lead to controlling shareholder entrenchment. This may potentially increase 
the  risk  that  insiders  extract  private  benefits  from  control  and  lead  to  agency  costs  and 

96 These cost savings would however be impossible to quantify. 
97 20% may be considered as a rather conservative assumption in light of the fact that, for example, around 40% of all publicly listed 
companies in Sweden (that has one of the most flexible MVR share regimes in the EU) used MVR share structures at IPO (although 
the number of companies with MVR share structures varies on an annual basis). Skog. R, Lidman, E (2022)  London allowing dual 
class Premium listings: A Swedish commentary 
98 Taking the average market capitalisation of firms that had IPOs 2015-2021 per Member State. 
99 The growth difference documented in Didier et al. (2016) 
100 When asked about the impact that MVR share structures have on the attractiveness of a company for investors, 36% of respondents 
(equivalent to 15 respondents) opted for negative or slightly negative, 22% (equivalent to 9 respondents) opted for positive or slightly 
positive,  while  29%  (equivalent  to  12  respondents)  opted  for  neutral.  Some  of  the  respondents  who  viewed  the  attractiveness 
negatively (including two NCAs and some investors’ associations) expressed their concern about the disappearance of the one share – 
one vote principle and noted, in particular, that MVR share schemes may undermine existing accountability mechanisms in corporate 
governance law, such as shareholders’ ability to elect directors, and lead to management’s entrenchment. 

44 

 
 
                                                           
expropriation risk, all of which may damage company value over time (see Annex 5 for 
further details). Such risk would be only in part mitigated by the inclusion of minimum 
high  level  safeguards  at  EU  level.  In  the  public  consultation,  an  institutional  investors 
association  expressed  their  concern  that  MVR  share  structures  may  allow  a  minority 
shareholding to gain control of a company, and may therefore lead to abuse arising from 
the dichotomy between shareholder power and economic risk. 

There is no compelling evidence that would demonstrate that investors would be overall 
unwilling to invest in the companies issuing MVR shares. Research, however, shows that 
restrictions  on  MVR  share  structures,  such  as  imposing  a  maximum  voting  ratio,  may 
contribute  more  towards  maximising  shareholder  value  compared  to  the  case  where  no 
restrictions are in place.101 Thus, under this option, in view of the corporate governance 
risks of MVR share structures, Member States would be required to ensure an effective 
and  proper  balance  between  founders’  and  investors’  interests,  however  enjoying 
discretion in  setting the appropriate safeguards.  It would,  thus,  be expected that overall 
the costs for investors would be neutral or only slightly negative.  

Cost-benefit  for  exchanges:  This  option  would  entail  no  direct  benefit  or  cost  for 
exchanges. As a second order effect, by bringing more companies to list, it would benefit 
exchanges  in  terms  of  increased  listings  and  higher  revenues.  This  was  the  view 
expressed  by  exchanges  in  the  public  consultation  that  were  largely  in  favour  of  MVR 
share structures.102  
Cost-benefit for NCAs: This option would entail no changes for NCAs.103  

6.1.2.  Option 2 - Maximum harmonisation of national legislation to allow for the MVR share 

structures be adopted across the EU with specific conditions and clauses 

Effectiveness in meeting the specific objectives  

Under  this  policy  option  a  full  harmonisation  of  legal  regimes  regarding  MVR  share 
structures would be achieved. The objective would be to harmonise both the possibility 
to  be  admitted  to  trading  with  MVR  share  structures  as  well  as  all  the  conditions  and 
safeguards attached, such as a cap on voting rights attached to a MVR share or instances 
where  MVR  shares  cannot  be  used.104  This  option  would  likely  to  increase  listing 
restrictions and requirements  for companies in  certain  Member States  (notably in  those 
that have a flexible MVR share regime). 

Like  with  policy  option  1,  companies  across  the  whole  EU  would  be  allowed  to  be 
admitted to trading, while using MVR share structures in their home Member States. For 
companies that are based in  the Member States that currently do not  allow  MVR  share 
structures,  this  would  eliminate  the  costs  associated  with  having  to  list  in  another 

101 See: Dual class IPOs: A theoretical analysis - ScienceDirect 
102  For  example,  Euronext  stated  that  the  introduction  of  an  MVR  share  regime  at  EU  level  would  be  an  important  development. 
According to them, an EU harmonised regime would avoid a competitive disadvantage for some markets, where MVR share structure 
are currently banned. 
103 In the public consultation, 4 NCAs agreed that MVR share structures make listing more attractive, 1 NCA - disagreed and 7 NCAs 
did  not  give  an  answer.  Two  NCAs  noted  that  the  lack  of  mechanisms  to  ensure  that  control  would  not  be  lost  acts  as  a  strong 
disincentive  to  seek  a  listing,  while  the  views  of  the  two  other  NCAs  were  less  clear-cut  with  them  still  weighing  the  costs  and 
benefits of a possible intervention.  
104 It is possible to limit the use of MVR share structures in certain cases. Under this approach, certain decisions where there is non-
negligible  risk  that  MVR  shareholders  may  be  subject  to  a  conflict  of  interest  or  where  stronger  influence  from  (minority) 
shareholders could be beneficial to the overall value creation in the company, MVR shares could be treated as ordinary shares (e.g. 
voting on sustainability matters or on appointing senior management).  

45 

 
 
                                                           
Member State in order to benefit from the flexibility to use  MVR shares. It would also 
reduce the opportunity cost of not being able to list publicly for those who abandon the 
decision to list (as a result of the ban) and potentially lower their cost of capital. 

Like option 1, option 2 would also be effective in regards to providing issuers with more 
incentives to list. Similarly to option 1, it would ensure that the Member States that have 
banned MVR share structures adapt their rules to allow them. However, Option 2 would 
also  likely  reduce  the  flexibility  that  issuers  currently  enjoy  in  certain  Member  States 
where these structures are allowed with few restrictions. In fact, this policy option could 
lead to potential interferences with existing  MVR share regimes, thus reducing – rather 
than  increasing  –  the  companies’  attractiveness  to  list  in  certain  Member  States. 
Conditions set out at EU level could include a cap on voting rights  attached to a  MVR 
share,  a  time-based  sunset  clause,  after  which  these  shares  would  convert  to  normal 
shares, limitations to the use of MVR shares and their transfer to third parties. 

Cost-benefit analysis 

Cost-benefit  for  issuers:  similar  to  option  1,  the  maximum  harmonisation  of  the  MVR 
share regime at EU level would generally be beneficial for issuers as it would provide in 
particular the companies planning to list in those Member States that banned MVR share 
structures  with  more  flexibility,  reducing  the  opportunity  cost  for  those  companies,  as 
well  as  potentially  their  cost  of  capital.  However,  this  option  would  also  include  more 
stringent  conditions  and  safeguards  that  must  be  complied  with  by  issuers  across  all 
Member States in order to be admitted to trading with these share structures. This would 
lead to certain issuers having to comply with more restrictive regimes then currently in 
place, therefore increasing either direct or indirect costs of accessing public markets for 
these companies.105 

Similarly  to  option  1  (See  section  6.1.1  for  more  detail),  it  is  estimated  that  the  EU 
market  valuation  could  be  EUR  737  million  higher  if  MVR  share  structures  are 
introduced  across  all  Member  States  (See  also  Annex  4  for  more  detail).  Nevertheless, 
under option 2 (unlike option 1), this reduction should then be balanced against a higher 
cost of compliance with a more restrictive regime (than is in place today) for companies 
in the Member States that already allow MVR share structures. The final (net) saving is 
therefore  likely  to  be  smaller  than  in  the  case  of  option  1  (although  it  would  be 
impossible to quantify the difference between the two). 

This  option  would  provide  a  level  playing  field  among  issuers  from  different  Member 
States and enhance market integration in the EU. Like in option 1, option 2  would also 
eliminate  additional  costs  linked  to  moving  to  another  country  that  a  company  would 
have to incur if it wanted to list using MVR share structures. Overall the cost efficiency 
for issuers would be slightly positive. 

Cost-benefit  for  investors:  The  introduction  of  MVR  share  structures  would  mean  that 
investors would now have to accept diminished decision making powers when investing 
in certain companies. However, under option 2, all EU investors would be subject to the 

105  Investors  in  different  Member  States  are  characterised  with  a  different  degree  of  overall  engagement.  For  example,  in  some 
(Nordic) Member States, despite the fact that many companies issue MVR shares, investors do not appear to suffer from the lack of 
engagement/influence  in  these  companies  (as  confirmed  in  discussions  with  stakeholders).  It  may,  however,  not  be  the  case  in  all 
Member States, where investors may be disadvantaged by MVR share structures, unless extensive investor protection safeguards  are 
introduced. This may depend, in particular, on the maturity of capital markets, historically established investor relationship and even 
cultural aspects in those countries. Skog. R, Lidman, E (2022) London allowing dual class Premium listings: A Swedish commentary  

46 

 
 
                                                           
safeguards and conditions harmonised at EU level that would provide the same level of 
protection to all investors across Member States. This would be in line with the views of 
investor  associations  that  stated  in  the  public  consultation  that  they  view  safeguards  as 
necessary in the case of MVR share structures. The overall impact on investors is likely 
to be neutral/marginally positive. On the one hand, investors from those Member States 
that previously banned MVR share structures are likely to be negatively affected due to 
their reduced ability to influence decisions in the company (although this risk would be 
somewhat mitigated by the safeguards introduced for minority investors under option 2). 
On  the  other  hand,  investors  in  Member  States  that  allow  MVR  share  structures  with 
rather  loose  safeguards  for  minority  investors  may  be  –  at  least  in  theory  -  positively 
affected by the option. Nevertheless, as MVR share structures in at least some Member 
States  (e.g.  Nordics)  do  not  appear  to  give  rise  to  serious  issues  related  to  corporate 
governance and investor engagement, these benefits are likely to be immaterial in those 
Member States.  
Cost-benefit for exchanges: Same as policy option 1.  

Cost-benefit for NCAs: Same as policy option 1. 

Table 1 - Cost efficiency by stakeholder type (section 6.1) 

Cost efficiency by stakeholder type106 

Issuers 

Investors 

NCAs 

Exchanges 

++ 

+ 

0/- 

0 

0 

0 

0 

0 

Option 1: Minimum 
harmonisation of MVR share 
rules across the EU 

Option 2: Maximum 
harmonisation of MVR share 
rules across the EU (with 
detailed investor safeguards set 
out at EU level) 

Other  economic,  environmental,  social  and  fundamental  rights  impacts  for  the  two 
options 

MVR  share  structures  may  reduce  the  accountability  of  founders  and  could  potentially 
have a negative impact on the company’s governance. However, the introduction of the 
specific  safeguards  should  ultimately  minimise  the  negative  impact  on  corporate 
governance.  

Coherence with other initiatives relating to the two options 

This area is  currently  not  regulated under EU law.  The Shareholders  rights  Directive 2 
requires  institutional  investors  and  asset  managers  to  engage  with  their  investee 
companies.  Under  the  proposed  Corporate  Sustainability  Due  Diligence  Directive107, 
investors are required to engage with investee companies if they identify human rights or 
environmental  adverse  impacts  in  the  investee.  Hence,  the  Member  States  would 
seriously need to consider the introduction of investors’ safeguards in this respect.  

106  Legend:  +++  =  very  positive, ++  =  positive,  +  =  slightly  positive. 0 =  no  effect,  - =  slightly  negative,  -- = negative,  ---  =  very 
negative.  
107 Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending 
Directive (EU) 2019/1937, COM/2022/71 final. 

47 

 
 
 
 
                                                           
6.2.  Options relating to overly burdensome regulatory listing requirements (IPO phase) 

6.2.1.  Option 1 - Scrutiny by exchanges and non-passportable admission documents 

Effectiveness in meeting the specific objectives 

This  option  would  only  in  part  achieve  the  specific  objectives  of  reducing  regulatory 
compliance  costs.  In  case  of  companies  issuing  securities  on  a  regulated  market,  the 
compliance  costs  would  be  reduced  to  an  extent  by  streamlining  the  scrutiny  and 
approval procedure. As companies in the run-up to the IPO already extensively interact 
and exchange information  both  with  exchanges and NCAs, removing the  extra-layer of 
the NCA’s approval is expected to reduce the overall approval time and hence cut down 
some  costs  associated  with  the  preparation  (and  approval)  of  the  prospectus.  However, 
option  1  (unlike  option  2)  would  not  address  the  direct  cost  of  drawing  up  a  standard 
prospectus  (and  some  indirect  costs  associated  with  it),  which  would  stay  largely 
unchanged under this option.  

In  case  of  companies  listing  on  a  SME  growth  market  or  accessing  public  markets  for 
follow-on  or  secondary  issuances,  the  compliance  costs  would  be  reduced  through  a 
possibility to draw up, in the first case, a more streamlined admission document set out 
by  the  exchange,  and  in  the  second  case,  a  more  streamlined  prospectus.  However,  the 
admission document of an SME growth market could not be made “passportable”, as its 
content and format would be decided by the relevant market with no consistency across 
EU jurisdictions, which would raise issues in terms of regulatory arbitrage (e.g. potential 
‘race  to  the  bottom’  on  the  overall  quality  and  soundness  of  the  document)  and  harm 
investor  protection.  Therefore,  issuers  listing  on  an  SME  growth  market  and  offering 
their  securities  to  the  public  in  more  than  one  Member  States  would  need  to  draw  up 
either multiple admission documents, thus, incurring higher costs than it is currently the 
case,  or  a  prospectus  on  voluntary  basis,  in  which  case  there  would  be  little  to  no 
efficiency  gains  compared  to  the  status  quo.  This  (limited  cost  efficiency  gains)  would 
affect  in  particular  SMEs  that  make  up  for  the  majority  of  companies  listed  on  SME 
growth markets. 

Option 1 is deemed to be less effective than option 2 when it comes to ensuring investor 
protection and market integrity. Whilst several issuers that participated in the workshops 
(and  expressed  an  opinion  on  NCAs’  scrutiny  and  approval)  indicated  that  they  are 
unsatisfied with the current process, they also considered that the optimal scenario is the 
one where the scrutiny and approval continues to be performed by NCAs (see Annexes 2 
and 6 for more details), although subject to more safeguards. This view was shared by the 
investors’  representatives,  who  perceive  the  NCAs’  approval  as  a  seal  of  quality,  the 
absence of which would negatively impact the investors’ confidence in investing in the 
company.  Therefore,  some  cost  savings  resulting  from  the  regulatory  changes  foreseen 
under option 1 would be at least somewhat outweighed by a likely increase in the cost of 
capital, as the investors are likely to demand a higher premium for potentially taking up 
higher risk in investing in a company whose listing documentation has not been vetted by 
a public body. This  would  likely  impact  in  particular  securities offered cross-border.  A 
company from abroad without a seal of quality from its NCA could raise caution among 
investors. As the cost reduction for the issuer is likely to be marginal, this option would 
only have a marginal and indirect impact on the issuer’s propensity to go public.  

48 

 
 
Cost-benefit analysis108 

Cost-benefits for issuers. The time for approval of a prospectus varies depending on the 
type of prospectus, complexity of the business, complexity of securities as well as on the 
specific  requests  put  forward  by  NCA  approving  the  prospectus.  Currently,  there  are 
substantial  discrepancies  and  inconsistencies  in  how  different  Member  States  (NCAs) 
approach these aspects. The targeted consultation included a question on whether there is 
alignment in the way NCAs assess the completeness, comprehensibility and consistency 
of the draft prospectuses that are submitted to them for approval and 54% (23 out of 43 
of respondents stated that there wasn’t alignment. Some issuers pointed out to divergent 
scrutiny  and  approval  practices  from  NCAs  and  highlighted  in  particular  the  frequent 
requests to produce additional information going even beyond the Prospectus Regulation 
requirements (even in  presence of clear ESMA’s guidelines)  and the tendency of some 
NCAs  to  challenge  the  issuer  on  most  items  of  the  relevant  prospectus  annexes.  This 
results in some cases in extremely lengthy approval times. Interaction with NCAs often 
starts  long  before the formal submission  of  a  draft prospectus  and continues during the 
review process. In parallel, issuers get in close contact with the exchange and its listing 
specialists,  who  verify  that  the  application  for  admission  to  trading  complies  with  the 
market rules. Should the scrutiny and approval be entrusted to exchanges, one of the two 
interaction channels (e.g. with the NCA) would no longer be necessary. Under option 1, 
the EU average scrutiny and approval  period of  the prospectus  is  therefore expected to 
substantially  decrease  compared to the  case where the scrutiny  and approval  process  is 
handled  by  the  least  efficient  NCAs  and  decrease  only  slightly  for  the  most  efficient 
ones.109  This  also  entails  that  issuers  would  save  on  legal  costs  (i.e.  billable  hours)  of 
lawyers  who  review  any  subsequent  draft  of  the  prospectus  which  is  then  submitted  to 
NCAs.  

There  are  however  notable  downsides  to  option  1,  which  may  lead  to  more  direct  or 
indirect costs, thus possibly outweighing the initial cost decrease:  

(i) 

exchanges, which are commercial entities, might raise the level of fees to scrutinise 
and  approve  prospectuses,  although  this  risk  could  be  mitigated  by  appropriate 
safeguards  set  out  at  EU  level.  The  liability  that  the  exchanges  would  assume  by 
scrutinising and approving prospectuses could also be reflected through higher fees 
charged by exchanges; 

(ii)  prospectuses approved by exchanges would remain to be subject to subsequent (ex-
post) reviews by NCAs, which could fine the company or the exchange or, in the 
worst  case,  even  halt  the  trading  of  an  instrument  in  the  case  of  identified 
violations.  Active  ex-post  scrutiny  may  be  more  likely  for  cross-border  offers  or 
admission  to  trading,  where  NCAs  are  likely  to  be  less  confident  in  the  result  of 
scrutiny  by  exchanges  supervised  by  another  NCA.  This  is  likely  to  create  legal 
uncertainty and translate in more (direct and indirect) costs for issuers who would 
try to minimise the risk by seeking additional legal advice. 

108  For  the  purpose  of  this  analysis,  the  estimated  costs  and  cost  savings  for  different  types  of  prospectuses  are  based  on  the  data 
provided by stakeholders (please see Tables 4, 5, 6 and 7 of Annex 4).  
109 As highlighted in section 4.7 of Annex 6, ESMA’s peer review report indicated that some NCAs can be more efficient, for example 
by  not  using  at  all  or  not  systematically  additional  scrutiny  criteria,  by  having  more  efficient  deadlines  to  ask  for  and  respond  to 
issuers’  comments,  by  allowing  pre-consultations  with  issuers,  by  having  shorter  approval  procedures,  efficient  practices  for 
withdrawal and refusal of prospectuses and adequate liability regime for NCAs’ staff. 

49 

 
 
                                                           
(iii) 

the  lack  of  the  NCAs’  approval  stamp  might  reduce  investors’  confidence  and 
therefore increase the cost of capital for issuers with investors requiring a premium 
to compensate for a (potentially) higher risk. 

On  SME  growth  market,  issuers  (the  majority  of  whom  are  SMEs)  would  only  be 
required  to  file  a  (simpler)  admission  document  with  the  relevant  SME  growth  market 
rather  than  drawing  up  a  dedicated  prospectus,  which  would  entail  lower  costs  of 
drawing  up  this  admission  document  (and  of  a  lighter  scrutiny  and  approval  by  the 
exchange). This would address the concern of the respondents to the public consultation, 
in which the number of stakeholders who consider that the EU growth prospectus did not 
strike  a  right  balance  between  investor  protection  and  the  reduction  of  administrative 
burdens for SMEs (44% or 21 out of 48 respondents) largely outnumbered stakeholders 
who  believe  that  it  did  (13%  or  6  out  of  48  respondents),  while  the  remaining 
respondents  did  not  have  an  opinion  on  that  matter.  Nevertheless,  considering  that 
already  today  no  prospectus  is  required  for  listing  on  an  MTF  (unless  coupled  with  a 
public  offer),  the  only  change  compared  to  the  baseline  would  be  that  the  admission 
document would now also suffice to offer securities to the public.110 However, according 
to  the  feedback  received  from  stakeholders111,  today’s  listings  on  MTFs/SME  growth 
markets are already benefitting from the exemption to draw up a prospectus (e.g. 90% of 
listings  on  Nasdaq  Baltic  Exchange  and  almost  all  listings  on  Euronext  Growth 
Milan).112  Therefore,  only  those  (currently  few)  companies  that  are  planning  a  public 
offer that is currently not in the scope of an existing exemption would benefit from cost 
savings under option 1.  

Extrapolating  from  2021  ESMA’s  data  on  prospectuses  approved  in  2021  for  a  public 
offer  and  initial  listing  on  an  SME  growth  market113  and  the  average  costs  of  an  EU 
growth prospectus114, for primary issuances, the estimated gross cost savings for SMEs 
and  other  issuers  under  option  1  would  amount  to  EUR  6  750  000115,  less  the  cost  of 
drawing up an admission document. Assuming that a cost of an  admission document is 
20%  of  the  total  costs  incurred  by  issuers  to  list  on  an  SME  growth  market,116  the 
estimated  total  net  cost  saving  for  companies  listing  on  an  SME  growth  market  would 
amount to EUR 3 712 500117. This figure is, however, likely to underestimate the actual 
accrued benefits under option 1, as it could be expected that at present some companies 
did not offer securities to the public because of the burdensome requirement to draw up a 
prospectus.  Should  this  requirement  be  lifted,  more  companies  could  be  expected  to 
benefit  from  the  upside  of  a  public  offer,  including  a  wider  investor  base  and  greater 
liquidity,  leading  to  potentially  further  benefits  for  these  companies  (e.g.  lower  cost  of 
capital).118  

For  secondary  issuances,  the  estimated  cost  saving  under  option  1  (thanks  to  the 
requirement  to  produce  the  more  streamlined  EU  Recovery  prospectus  instead  of  the 

110 Although the admission document could still not be used for cross-border offers. 
111 Predominantly business associations representing the banking sector.   
112  In  those  cases,  a  public  offer  falls  under  one  of  the  exemption  provided  in  the  Prospectus  Regulation  (e.g.  offers  to  qualified 
investors only). 
113 See Table 8 of Annex 4. 
114 See Table 6 of Annex 4. 
115 See Table 11 of Annex 4. 
116 See section 4.5 of Annex 4 for more details.  
117 See Table 11 of Annex 4. 
118 These benefits, however, could not be estimated. 

50 

 
 
                                                           
simplified prospectus for secondary issuances) would amount to further EUR 3 816 000 
million.119  Furthermore,  the  scrutiny  and  approval  time  (by  exchanges)  would  fall  (i.e. 
the timeline for NCAs to provide a notification on the decision regarding the approval of 
an EU Recovery prospectus is reduced from 10 to 7 days120). For secondary issuances (by 
the already listed and well-known companies), the level of efficiency121 stemming from 
exchanges scrutinising and approving a 30 page-EU Recovery prospectus (for issuances 
of  non-fungible  securities)  is  expected  to  be  even  greater  than  in  the  case  of  IPOs  (i.e. 
first-time listing by a new/unknown company). 

The estimated quantified cost savings for primary and secondary issuances, however, do 
not take into account possible countervailing costs due to the identified downsides (see 
above). Having said that, as it was not possible to quantify the benefits stemming from a 
more  streamlined  scrutiny  by  exchanges,  it  could  be  assumed  that  benefits  of  option  1 
and additional costs from the identified downsides cancel each other out. 

Table 2 - Estimated potential cost savings for issuers under option 1 

Potential cost-savings for issuers 

Amount in EUR 

Estimated  cost  savings  for  primary  issuances  on  regulated 
markets 

N/A 

Estimated  cost  savings  for  primary  issuances  on  SME 
growth markets (enjoyed in particular by SMEs) 

Estimated cost savings for secondary issuances 

Estimated total cost savings 

EUR  3 712 500 

EUR  3 816 000 

EUR  7 528 500 

Cost-benefits  for  investors. Option  1 is  expected to  have an overall negative impact  on 
investors.  Based  on  the  feedback  received  in  a  dedicated  workshop  with  issuers  and 
investors,  the  investors  felt  more  comfortable  in  investing  where  the  prospectus  is 
approved by NCAs (although the views of other participants were split122). In particular, 
for cross border offers or admission to trading, the lack of convergence on scrutiny and 
approval conducted by exchanges and the uncertainty related to the possibility for NCAs 
to  perform  an  ex-post  review  puts  the  efficiency  and  effectiveness  of  the  passport 
mechanism  with  an  exchange  scrutiny  into  question.  This  would  require  investors  to 
perform additional due diligence checks of the prospectus in order to make an informed 
investment  decision,  which  is  likely  to  translate  into  additional  direct  costs  for 
investors.123  

Furthermore,  for  securities  listed  on  an  SME  growth  market,  which  would  now  be 
exempted from the prospectus requirement, investors would no longer be able to rely on 
an EU document whose content is harmonised across Member States and which would be 
passportable.  Albeit  some  minimum  disclosure  criteria  on  the  admission  document  on 

119 See Table 13 of Annex 4. 
120 Article 20(6a) of the Prospectus Regulation. 
121 It is, however, impossible to quantify the increase in efficiency due to shorter scrutiny/approval by exchanges. 
122 57% of all respondents were in favour of keeping scrutiny by NCAs (4 out of 7), 29% were in favour of ESMA playing a bigger 
role in ensuring more consistency/convergence of scrutiny and approval procedures (2 out of 7) and 14% were in favour of scrutiny 
remaining with the NCAs with a role for exchanges in certain cases (1 out of 7).  
123 It was, however, not possible to quantify those additional costs. 

51 

 
 
 
 
                                                           
SME  growth  markets  may  be  laid  down  at  EU  level,  the  main  disclosure  requirements 
would  be  set  out  in  the  exchanges’  rulebooks,  which  makes  the  content  of  such 
documents inconsistent throughout the EU and therefore only suitable for domestic offers 
and  listings.  This  is,  therefore,  likely  to  further  increase  the  cost  of  scrutiny  and 
assessment of the listing documentation by investors. 

Cost-benefits  for  NCAs.  Option  1  would  have  a  major  impact  on  NCAs,  which  would 
lose  the  power  to  ex-ante  scrutinise  and  approve  most  prospectuses.  NCAs  would, 
however, retain the power to ex-post scrutinise prospectuses and remain responsible for 
the scrutiny and approval of prospectuses relating to  public offers without admission to 
trading  or  listing  (329  prospectuses  only  in  2021,  accounting  for  12%  of  all  approved 
prospectuses during the same year124). 

As NCAs would no longer scrutinise and approve (most of) prospectuses, they are likely 
to lose the associated fees. Consequently, NCAs may be obliged to relocate or even lay 
off  some  staff  (e.g.  reduce  the  number  of  prospectus  supervisors).  Nevertheless,  NCAs 
would still need to keep staff  to  perform  ex-post review of prospectuses  and intervene, 
where  necessary,  to  suspend  or  prohibit  an  offer  of  securities  to  the  public  or  an 
admission to trading on a regulated market, conduct investigations and impose sanctions. 
NCAs would also need to adjust to the new supervisory landscape to account for a larger 
supervisory  role  played  by/power  of  exchanges.  NCAs  can  thus  be  expected  to  devote 
more resources to the supervision of exchanges, notably to ensure compliance with more 
stringent  conflict  of  interest  rules  or  prevent  abuse,  notably  when  charging  excessive 
supervisory fees  to  issuers. Overall,  it can be  expected that  NCAs would be negatively 
impacted  by  the  drop  in  fee  revenue125,  while  not  necessarily  being  able  to 
proportionately  reduce  costs  of  supervision.  It  is  quite  likely  that  NCAs  would  need  to 
receive more financing from the state to support their supervisory action under option 1. 

Cost-benefits for exchanges. Option 1 would have a major impact on exchanges, which 
would  take  a  lead  role  in  the  scrutiny  and  approval  of  prospectuses.  This  new  role  is 
expected to raise both direct costs, in terms of hiring and training staff, and indirect costs, 
associated  with  additional  liability  for  exchanges.  While  exchanges  would  be  able  to 
charge for the scrutiny of prospectuses, it is possible that they would be unable to entirely 
recoup  all  direct  and  indirect  costs,  in  particular  as  NCAs  are  likely  to  put  in  place 
safeguards  to  prevent  a  spike  in  fee  levels.  Furthermore,  being  commercial  entities, 
exchanges  would  be  subject  to  stricter  supervision  from  NCAs,  including  a  framework 
that would seek to prevent the conflict of interest and avoid abuse, which would require 
exchanges to reinforce their compliance departments, thus increasing the cost of running 
business  for  them.  Finally,  prospectuses  would  still  be  subject  to  ex-post  review  by 
NCAs,  which  creates  uncertainty  about  whether  the  latter  might  use  their  powers,  for 
example to  suspend an  offer of securities to  the public or an  admission  to  trading on a 
regulated  market  (which  is  a  currently  a  remote  possibility  given  that  NCAs  approve 
prospectuses).  Any  instance  of  suspended  trading  would  have  reputational  implications 
for exchanges (and hence lead to potential future costs). Nonetheless, there may also be a 
long-term  benefit  for  exchanges  if,  due  to  the  alleviated  rules,  more  companies  are 

124 Out of those, 288 prospectuses  - for primary issuances and 41 prospectuses  - for secondary issuances (prospectuses approved in 
2021 as well as the ISINs related to these 2021 approved prospectuses, independently of when the ISIN was reported). Source:  2021 
ESMA data. 
125 Albeit part of the revenue would still be generated by fees for ex-post supervision. 

52 

 
 
                                                           
seeking  admission  to  trading/listing  in  the  future.  In  the  public  consultation  and  the 
workshop with the industry, no exchanges nor their representative bodies supported the 
transfer of scrutiny and approval of prospectuses from NCAs to exchanges.  

For issuers listing on an SME growth market, exchanges would be required to scrutinise 
and  approve  an  admission  document  based  on  the  rules  laid  down  in  their  rulebooks. 
Given that SME growth markets admission documents are already used for most listings 
on  those  venues,  the  scrutiny  and  approval  of  admission  documents  by  exchanges  is 
expected  to  be  highly  efficient  and  should  not  in  principle  lead  to  further  costs  for 
exchanges.126  

6.2.2.  Option 2 - Shorter prospectuses with streamlined scrutiny by NCAs 

Effectiveness in meeting the specific objectives 

Option 2 is considered to be very effective in meeting the specific objective of reducing 
the  regulatory  and  compliance  costs  for  companies  seeking  to  list  or  already  listed  on 
public markets. Companies would benefit from cost savings due to the reduction of the 
complexity and length of prospectuses as well as from a more efficient, convergent and 
streamlined  scrutiny  and  approval  process  by  NCAs  who  would  retain  their  powers.  In 
particular, under option 2, issuers would benefit from: 

i) 

ii) 

iii) 

the significant streamlining of the standard prospectus; 

the  introduction  of  a  bespoke  EU  admission  document  for  offering  securities  and 
listing on SME growth markets; and  

the exemption  that would cover most cases  of secondary issuances by companies 
already listed.  

Furthermore,  the  higher  extent  of  standardisation  and  comparability  across  EU 
jurisdictions  of  the  prospectus  would  improve  its  readability  and  make  it  easier  for 
investors to  analyse it and navigate through it. Finally,  while significantly reducing the 
burden  for  issuers,  the  enhanced  incorporation  by  reference  of  information  in  the 
prospectus,  would  only  to  a  limited  extent  reduce  the  readability  of  information  for 
investors  (not  all  information  would  be  included  in  the  same  document).  In  the  future, 
these investors could benefit from the company data centralised on the European Single 
Access  Point  (ESAP)127.  While  the  exact  layout  and  perimeter  of  ESAP  are  currently 
debated by the co-legislators, this tool would be expected to allow investors to find in a 
single  place  the  majority  of  the  relevant  information,  hence  largely  mitigating  any 
negative side-effects for investors. 
Cost-benefit analysis128 
Cost-benefits  for  issuers.  Under  option  2,  issuers  are  expected  to  benefit  from  cost 
savings  both  due  to  a  more  streamlined  scrutiny  of  prospectuses  by  NCA  and  to  a 
considerably  streamlined  prospectus  contents  (and  limited  size).  In  the  targeted 
consultation,  within  the  group  of  stakeholders  that  responded  to  the  dedicated  question 

126 It should be noted that, in a technical workshop with exchanges on the Listing Act initiative (Annex 2), one exchange expressed 
the opinion that scrutinising and approving prospectuses is not the role of exchanges and two other exchanges highlighted the fact that 
scrutiny and approval conducted by NCAs instils trust for investors. 
127 See Annex 13 on other ongoing initiatives contributing to improving public markets’ ecosystem. 
128  Like  for  option  1,  for  option  2,  the  estimated  costs  and  cost  savings  for  different  types  of  prospectuses  are  based  on  the  data 
provided by stakeholders (please see Tables 4, 5, 6, and 7 of Annex 4). 

53 

 
 
                                                           
on the standard prospectus, the majority (53% or 18 out of 34 respondents129) indicated 
that the standard prospectus should be significantly alleviated. While some respondents 
(21%  or  7  out  34  respondents130)  would  replace  the  standard  prospectus  with  a  more 
efficient  prospectus  type,  some  others  (24%  or  8  out  of  34  respondents131)  proposed 
different  solutions  (e.g.  set  a  page  limit,  make  the  prospectus  a  standardised  and  fully 
harmonized document) and finally only 1 stakeholder132 (3%) indicated that the standard 
prospectus should be replaced by another document (e.g. an admission document). 
As  regards  the  scrutiny  and  approval  of  the  prospectus  by  NCAs,  under  this  option 
NCAs’  powers  in  scrutiny  would  be  better  framed,  also  taking  into  account  the 
recommendations  stemming  from  the  ESMA  peer  review  report133.  The  latter,  amongst 
other findings, invites the Commission to review the notion of ‘scrutiny criteria’,134 foster 
a  common  approach  regarding  issuers’  turnaround  times  and  NCAs’  deadlines  placed 
upon  issuers  during  the  approval  process,  and  consider  aligning  the  timelines  and 
procedures  for  refusal  of  prospectuses  at  an  EU  level.  In  particular,  as  regards  the  first 
point,  the  more  precise  objective  of  the  scrutiny  and  of  the  type  of  information 
collectable  by  issuers  would  allow  to  reduce  the  time  for  repeated  exchanges  with 
NCAs135  where  additional  information  and  clarifications  are  sought.  These  measures 
would allow to  reduce the scrutiny period, although mostly in  the case of less efficient 
NCAs.136 Issuers would benefit both from direct cost savings, in terms of legal fees paid 
to counsels to respond to numerous requests from NCAs, and from indirect cost savings 
from  the  improved  ability  to  plan  the  expected  scrutiny  duration  (and  the  general  IPO 
process).137  

On cost savings generated by the reduction in the complexity and length of prospectuses, 
option  2  will  accrue  for  public  offers  and  admission  to  trading  on  a  regulated  market, 
public offers coupled with a listing on an SME growth market, and finally for secondary 
issuances  of  securities  by  companies  already  listed.  In  all  aforementioned  cases,  the 
possibility to draw up the prospectus in English is expected to considerably decrease the 
number of pages and translation costs, which are, however, difficult to estimate.138 

Under  option  2,  issuers  offering  securities  to  the  public  and/or  seeking  admission  to 
trading  on  a  regulated  market  would  benefit  from  a  significantly  streamlined  standard 
prospectus,  which  would  be  aligned  to  the  level  of  disclosure  of  the  EU  Growth 

129 Including 11 business associations (of investors, issuers, banks law firms), 4 companies/business organisations (1 trade association, 
1 financial research provider, 1 operator of trading venues and 1 law firm), 1 NGO, 1 NCA, and 1 academic. 
130 Including 3 operators of a trading venue, 2 issuers, 1 law firm, and 1 academic. 
131 Including 6 operators of a trading venue, 1 association of banks, and 1 NCA. 
132 A business association. 
133 See section 4.7 of Annex 6. 
134 To better frame and limit the use of additional criteria for the scrutiny of the completeness, consistency and comprehensibility of 
the information contained in the prospectus that NCAs are allowed to use only where necessary for investor protection, in accordance 
with Article 40 of Commission Delegated Regulation (EU) 2019/980 (and some NCAs use systematically). 
135 ESMA’s peer review report (see Table 8 of section 4.7 of Annex 6) indicates the average number of draft prospectuses submitted 
for approval to NCAs ranges from 4.13 for non-equity securities to 5.3 for an IPO (and 4.28 for an EU Growth prospectus).  
136 The measure would primarily seek convergence among NCAs towards the best performance by the most efficient NCAs (i.e. will 
not have the same impact on all issuers). As highlighted in section 4.7 of Annex 6, ESMA’s peer review report indicated that some 
NCAs can be more efficient, for example by not using at all or not systematically additional scrutiny criteria, by having more efficient 
deadlines  to  ask  for  and  respond  to  issuers’  comments,  by  allowing  pre-consultations  with  issuers,  by  having  shorter  approval 
procedures, efficient practices for withdrawal and refusal of prospectuses and adequate liability regime for NCAs’ staff. 
137 It would, however, not be possible to quantify those benefits. 
138  Under  option  2,  issuers  would  no  longer  be  required  to  produce  paper  copies  upon  request  and  would  be  able  to  publish 
prospectuses only in an electronic format. While option 1 does not foresee any changes to the contents of the prospectus (but rather to 
its  scrutiny/approval),  this  feature  (electronic  format  only)  can  also  be  included  under  option  1  (it  is  not  going  to  decrease  the 
information  available  or  introduce  further  alleviations,  which  may  not  be  compatible  with  the  situation  where  the  scrutiny  of 
exchanges is left to exchanges). 

54 

 
 
                                                           
prospectus,  with  some  necessary  amendments  which  would  concern  in  particular  the 
sections  considered  excessively  burdensome  by  stakeholders  in  their  feedback.139  A 
number of those sections, or information items within those sections, have already been 
alleviated or deleted for the purpose of the EU Growth prospectus140, which remains to 
be a document ensuring an appropriate level of investor protection (and accepted by the 
market  as  such).  Further  benefits  would  accrue  from  additional  streamlining  of  a  few 
additional  items  considered  burdensome  by  issuers  and  unnecessary  (in  their  current 
form)  by  investors  (such  as  some  categories  of  risk  factors  or  the  statement  of 
capitalisation and indebtedness).  For primary issuances, the EU  Growth  prospectus  can 
therefore be taken as a reference in the estimation of possible cost savings under option 
2.  

Extrapolating from ESMA’s 2021 data on prospectuses for 2021, the estimated average 
cost savings (per year) under option 2 could amount to EUR 56 million (cumulatively for 
equity and non-equity prospectuses)141. 

While introducing a page limit (300 pages) to the standard prospectuses for shares should 
not  represent  a problem  for the majority of issuers,  as  also  confirmed by ESMA’s data 
shown in  Table 3142, it would  allow to  address  serious outliers143, in  particular in some 
Member States, where the size of the prospectus is reported to reach 800 pages in some 
cases144. Furthermore, the following elements would safeguard against undue limitation 
of issuers’ flexibility (and hence avoid an increase, rather than a decrease, in the burden 
for issuers): (i) a derogation for issuers with a complex financial history, and (ii) the fact 
that the information incorporated by reference would not be counted for the page size.  

Table 3 - Page length of prospectuses for equity securities by prospectus type145 

Source: ESMA’s data for 2021146. 

Finally,  in  the  case  of  issuers  offering  securities  to  the  public  and  listing  on  an  SME 
growth market, the replacement of the prospectus with a more streamlined EU admission 
document  based  on  the  level  of  disclosure  in  the  EU  Recovery  prospectus  and  SME 
growth market admission documents would significantly reduce costs. The EU Recovery 

139 See Table 4 of Annex 6. 
140 See Table 6 of Annex 6. 
141 See Table 10 of Annex 4. 
142 For a standalone prospectus for equity securities in a single language, the average, median and percentile 75 are below 300 pages. 
143 As indicated by percentile 90. 
144 See Oxera report, Table 4.1 on page 68. 
145 Standalone prospectuses only (e.g. no base prospectuses) and single language only. 
146 Methodological note: data on the length of prospectus documents by document type and home member state (approval/filing date 
between  01/01/2021  and  31/12/2021).  Each  prospectus  is  classified  as  "equity"  (when  the  associated  securities  are  shares  and/or 
depository receipts and/or convertible securities and/or shares in closed end fund and/or other) or "not equity" (when the associated 
securities are debt securities and/or ABS and/or derivatives). 

55 

 
 
 
                                                           
prospectus  is  currently  the  most  streamlined  prospectus  type,  with  a  30  page-size  limit 
(and  2  pages  for  the  summary),  while  SME  growth  market  admission  documents  may 
range  from  20  to  220  pages  according  to  the  feedback  from  some  stakeholders  (20-60 
pages  on  Nasdaq  Baltics,  up  to  100  pages  on  Nasdaq  Nordics,  180-220  pages  on 
Euronext  Growth  Milan).  Assuming  that  the  cost  of  the  EU  admission  document147 
would be equal  to  the cost  of an EU Recovery  prospectus  (on which model  the former 
will be built), the cost savings for issuers  under this  option can be estimated  to  EUR  2 
700 000148. 

The  exemption  from  the  obligation  to  draw  up  a  simplified  prospectus  for  secondary 
issuances  of  securities  fungible  with  securities  already  admitted  to  trading  would 
generate a sizeable cost saving for issuers. These companies would be required to publish 
only a statement of continuous compliance with the reporting and disclosure obligations 
and a short summary document with a few key pieces of information (e.g. on the use of 
proceeds). As these documents would only have to be filed, but not approved by NCAs, 
there will no longer be any cost associated with the NCA’s scrutiny (legal advisory help). 
For the purpose of this analysis, only secondary issuances of equity securities issued by 
means of a simplified prospectus for secondary issuances or an EU Recovery prospectus 
(taking  the  year  2021  as reference)  are  considered  to  be  fungible with  equity securities 
already  admitted  to  trading149.  The  yearly  cost  savings  stemming  from  this  exemption 
could  therefore  be  estimated  at  EUR  7  380  000  (from  which  the  cost  of  producing  the 
compliance statement and the summary document should be deducted, although they are 
likely to be minimal)150. 

For  the  purpose  of  this  analysis,  non-fungible  securities  relate  to  the  situation  where 
issuers, whose equity securities are already admitted to trading on a regulated market or 
listed on an SME growth market, issue non-equity securities. Therefore, only non-equity 
securities issued by means of a simplified prospectus for secondary issuances in 2021 are 
taken  into  account  in  the  analysis.  For  such  non-fungible  issuances,  under  option  2, 
issuers would have to draw up a lighter prospectus (largely mirroring the EU Recovery 
prospectus)  instead  of  the  currently  required  simplified  prospectus  for  secondary 
issuances151. The cost savings of this amendment could be estimated at about EUR 1 056 
000152. 

Table 4 - Estimated potential cost savings for issuers under option 2. 

Potential cost-savings for issuers 

Estimated  cost  savings  for  primary  issuances  on  regulated 
markets 

Amount in EUR 

EUR  55 922 500 

Estimated  cost  savings  for  primary  issuances  on  SME 

EUR  2 700 000 

147 EU admission document should not be confused with existing admission documents of exchanges. 
148 See Table 12 of Annex 4. 
149 Although it is possible that companies issued shares (or other equity) which were not fungible with the shares already in circulation 
(e.g.  type  A  and  type  B  shares),  it  is  also  possible  that  companies  issued  non-equity  securities  that  are  fungible  with  non-equity 
securities already admitted to trading. As the data that would allow to distinguish the latter type of issuances was not available at the 
moment of drafting of this IA, follow-on issuances of non-equity was not included in the calculation of cost savings. On balance, it is 
therefore unlikely that the presented estimate overstates cost savings in any sizeable manner.  
150 See Table 14 of Annex 4. 
151  As  the  EU  Recovery  Prospectus  is  currently  only  available  for  shares,  detailed  templates  (schedules)  for  non-equity  securities 
would have to be laid down in the legislative act. 
152 See Table 15 of Annex 4. 

56 

 
 
                                                           
growth markets (in particular relevant for SMEs) 

Estimated  cost  savings  for  secondary  issuances  of  fungible 
securities 

Estimated  cost  savings  for  secondary  issuances  of  non-
fungible securities 

EUR  7 380 000 

EUR  1 056 000 

Estimated total cost savings 

EUR  67 058 500 

Cost-benefits for investors. Option 2 would provide a number of benefits to investors. As 
regards  the  standard  prospectus,  investors  would  take  advantage  of  a  lighter  and  more 
streamlined  document,  which  is  easier  to  read  and  navigate.  Furthermore,  the 
standardised  format  (i.e.  fixed  order  of  disclosure  of  the  prospectus  sections)  would 
facilitate  the  comprehensibility  of  prospectuses  and  their  comparability  across  the  EU. 
For shares, investors would no longer be analysing long documents that can reach up to 
800 pages in certain jurisdictions153, given that the maximum limit would be 300 pages 
(except  in  the  case  of  issuers  with  a  complex  financial  history,  where  it  would  be 
justified).  While  the  increased  use  of  incorporation  by  reference  might  render  the 
document more complex to analyse, increasing the time spent by investors on its scrutiny 
(and hence the cost  of its assessment), it should not  be an issue for qualified investors, 
and  retail  investors  are  likely  to  focus  on  the  summary  document  in  any  event. 
Furthermore, the upcoming ESAP, once agreed by the co-legislators, will allow investors 
to  find  all  the  information  incorporated  by  reference  in  the  same  place,  hence  limiting 
any  possible  additional  cost  associated  with  scrutiny.  The  possibility  for  the  issuer  to 
draw up the prospectus in English only, while translating the summary, is considered to 
strike  the  right  balance  between  reducing  the  burden  for  issuers,  while  ensuring  the 
protection  of  retail  investors.  The  investors  are  therefore  unlikely  to  be  negatively 
affected  in  terms  of  costs  incurred  to  them  by  the  alleviations  to  the  contents  of  the 
prospectus,  and  might  even  be  positively  affected  by  a  higher  comparability  and  better 
focus of the streamlined document. 

Similar considerations can be put forward in the case of the EU admission document for 
securities,  which  would  be  drawn  up  for  public  offers  and  listings  on  an  SME  growth 
market. This document, which takes as a model the most streamlined prospectus type (i.e. 
the EU Recovery prospectus), is expected to be easier to read and analyse for both retail 
and qualified investors, potentially reducing the (indirect) cost of scrutiny for them.154 

Investors are not expected to be negatively affected by the prospectus exemption relating 
to secondary issuances of securities fungible with securities already admitted to trading. 
Such  exemption,  which  will  be  subject  to  limitations  (e.g.  in  case  of  companies  going 
through considerable transformations in terms of governance or business model), would 
only  apply  to  issuers  with  a  proven  (publicly  available)  track  record  on  EU  public 
markets  and  subject  to  periodic  and  ongoing  disclosures  under  applicable  EU  law  (e.g. 
under  MAR  and  TD).  Furthermore,  investors  would  in  any  event  be  provided  with  a 
summary  document  containing  the  key  pieces  of  information  (e.g.  use  of  proceeds)  to 
support  their  investment  decision,  in  addition  to  the  information  already  publicly 
available. Finally, where the exemption does not apply, such as for the offer or admission 

153 See Table 2 of Annex 6. 
154 In both cases it would, however, be impossible to quantify the effect on investors. 

57 

 
 
                                                           
to trading of non-fungible securities, investors would be provided with the EU Recovery 
prospectus.  A  more  limited  length  of  that  document,  would  make  the  listing 
documentation  more  easily  readable  for  the  investor  than  the  currently  applicable 
simplified  prospectus  for  secondary  issuances,  which  would  render  investor  protection 
more  effective  than  is  the  case  today  (i.e.  more  understandable  disclosures).  Overall, 
benefits  for  investors  are  likely  to  outweigh  any  potential  costs  resulting  from  reduced 
contents of the listing documentation.  The streamlining of the documentation would be 
guided by the principle  of alleviating the burden  on issuers, without impairing investor 
protection. 

Cost-benefits  for  NCAs.  Option  2  entails  improvements  to  the  scrutiny  and  approval 
process,  rendering  it  more  efficient  and  convergent155  also  for  NCAs  themselves.  The 
possibility  for  NCAs  to  go  beyond  the  pre-determined  scrutiny  criteria  for  the 
completeness,  comprehensibility  and  consistency  of  the  information  contained  in  the 
prospectus  (e.g.  to  check  the  correctness  of  the  information,  or  require  additional 
information  that  is  not  mandatory  for  prospectus  purposes)  would  be  limited.  In  the 
public  consultation,  the  majority  of  NCAs  (5  out  of  7  NCAs  that  provided  a  response) 
stated  themselves  that  the  current  process  was  not  sufficiently  efficient.  Framing  the 
flexibility to use additional scrutiny criteria156 beyond exceptional circumstances (e.g. for 
a new financial instrument such as a crypto asset or in cases of possible fraud), instead of 
being  used by  NCAs  as  a legal hook to  systematically  require  extra disclosures, would 
also limit the risk for NCAs to be challenged by investors and hence potentially reduce 
the costs of litigation for NCAs.157 Additional cost savings would stem from the fact that 
NCAs  would  no  longer  have  to  scrutinise  and  approve  prospectuses  for  secondary 
issuances of fungible securities, which would now be exempted. 

Cost-benefits  for  exchanges.  Option  2  does  not  have  any  major  impact  on  exchanges. 
Exchanges  would,  however,  benefit  over  time  from  a  gradual  increase  in  companies 
seeking admission to trading/listing on them, as a result of the regulatory alleviations and 
higher  attractiveness  of  public  listing.  Exchanges  therefore  stand  to  benefit  from  the 
initiative in the longer-term. 

Table 5 - Cost efficiency by stakeholder type (section 6.2). 

Cost efficiency by stakeholder type158 

Issuers 

Investors 

NCAs 

Exchanges 

Option 1: Scrutiny by exchanges and 
non-passportable admission document 

Option 2: Shorter prospectus with 
streamlined scrutiny by NCAs  

++ 

+++ 

- 

+ 

- 

+ 

- 

+ 

Other  economic,  environmental,  social  and  fundamental  rights  impacts  for  the  two 
options 

155 Also taking into account the aforementioned ESMA’s peer review recommendations for the Commission.  
156 Article 40 of Delegated Regulation (EU) 2019/980 
157 It is, however, not possible to quantify those cost savings. 
158  Legend:  +++  =  very  positive, ++  =  positive,  +  =  slightly  positive. 0 =  no  effect,  - =  slightly  negative,  -- = negative,  ---  =  very 
negative. 

58 

 
 
 
                                                           
It  is  considered  that  option  1  does  not  have  any  relevant  impact  on  economic, 
environmental,  social  and  fundamental  rights.  NCAs  are,  however,  likely  to  become 
more reliant on state support. 
Under option 2,159  the prospectus  can only be published in  an  electronic format, which 
prevents requests for paper copies. This feature of option 2 is expected to have a slightly 
positive impacts on the environment.  

Coherence with other initiatives relating to the two options 

Options 1 and 2 are fully coherent with other initiatives, especially in the context of the 
CMU  Action  plan,  which  aim  to  support  companies’  access  to  diversified  sources  of 
funding,  including  through  public  markets,  and  ensure  the  protection  of  investors.  In 
addition, Option 2 can be seen as fully coherent with the ESAP initiative. Both options 
would also be aligned with the “digital by default” principle.  

6.3.  Options addressing the  overly burdensome ongoing  disclosure requirements (Post-

IPO phase) 

6.3.1.  Option  1  -  Review  of  the  definition  of  inside  information  and  of  the  conditions  for 

delaying its disclosure  

Effectiveness in meeting the specific objectives  

Under Option 1, the notion of inside information would be narrowed down for disclosure 
purposes.  It  would  be  accompanied  by  a  list  of  events  triggering  disclosure,  better 
defined  conditions  for  the  use  of  delays  and  a  more  proportionate  sanctions  regime  for 
SMEs for compliance with disclosure obligation. Jointly, these elements would enhance 
legal  clarity  on  what  is  and  what  is  not  to  be  disclosed,  removing  the  problem  with 
disclosing too preliminary information for the issuer. This, in turn, would reduce burden 
for  listed  companies  by  limiting  the  amount  of  time  and  costs,  including  external 
advisers’ fees, currently spent to ensure compliance with the disclosure obligation. This 
can also limit the issuers’ recourse to delayed disclosure. 

Issuers’ and investors’ representatives who participated in the workshop attributed to this 
option an average score of 4.1 on a scale from 1 to 5 in terms of effectiveness in bringing 
legal clarity with respect to disclosure obligation. In the same vein, almost half (49% or 
27 out of 55) of the respondents (representatives of exchanges, issuers, banks, financial 
intermediaries, NCAs and academia) who replied to the questions on the appropriateness 
of  the  notion  of  inside  information  included  in  the  targeted  public  consultation, 
considered  that  the  ESMA  guidelines  would  not  be  enough  to  provide  the  necessary 
clarifications. A vast majority (79%, i.e. 19 out of 24) of these respondents (aside from 
representatives  of  banks  and  some  exchanges)  supported  that  MAR  distinguishes 
between  a  narrower  notion  of  inside  information  for  disclosure  purposes  and  a  broader 
notion for the purposes of prevention of market abuse.  

Moreover,  clarifications  to  the  conditions  to  delay  the  disclosure  of  inside  information 
would help make potential ambiguities of the notion less relevant in practice, and reduce 
the  costs  currently  incurred  by  issuers  in  the  interpretation  and  application  of  these 
conditions.  During  the  industry  workshop,  both  issuers  and  investors  expressed  a  view 
that the clarification of the conditions to delay disclosure would provide more clarity to 

159 And potentially under option 1 (See footnote 129 for more detail). 

59 

 
 
                                                           
issuers  with  respect  to  the  obligation  to  disclose  inside  information  (the  views  of 
representatives of exchanges were less clear-cut on this point). 

Furthermore,  the  parallel  introduction  of  an  indicative  list  of  events  triggering  public 
disclosure  would  help  issuers  have  a  more  efficient  disclosure  practice  and  reduce 
liability  risks160.  The  limitations  of  this  option  relate  to  the  fact  that  the  list  of  events 
would  be  non-exhaustive.  As  a  result,  the  list  would  provide  a  clear  indication  of  the 
events that issuers would be expected to disclose, removing the lack of legal clarity and 
associated costs for issuers in those instances, while leaving room for interpretation for 
events not included in the list. Therefore, on a stand-alone basis, a non-exhaustive list of 
events under option 1 would only be partially effective in addressing the issue of lack of 
clarity  in  MAR  provisions.  However,  if  seen  jointly  with  a  clearer  and  narrower 
definition  of  inside  information  for  the  purpose  of  disclosure  and  fine-tuning  of  the 
conditions  for  delay,  as  set  out  above,  it  could  adequately  address  the  issue,  by 
complementing and illustrating the narrower definition. Option 1 can therefore be seen as 
effective in removing the identified obstacle to issuers, stemming from legal uncertainty 
of the current provisions in MAR. In addition, by maintaining the obligation to disclose 
inside information that is not restricted to a limited set of information, this option would 
ensure a high level of overall transparency on inside information for investors, allowing 
them to make well-informed investment decisions. It would also help NCAs maintain a 
high level of market surveillance and enforcement. 

From the investors’ perspective, a narrower and clearer notion of inside information for 
disclosure  purposes  may,  to  a  certain  extent,  reduce  transparency  on  the  issuer.  On  the 
scale from 1 to 5, a large majority of investors and issuers (7 respondents out of 8) at the 
industry’s  workshop  agreed  that  the  introduction  of  a  narrower  definition  of  inside 
information for the purpose of disclosure would bring clarity for issuers with respect to 
the  obligation  to  disclose  inside  information161.  Nevertheless,  less  uncertainty  over  the 
notion  would  reduce  the  cases  of  over-disclosure  making  the  existing  disclosures  more 
relevant  and  informative.  More  specifically,  by  avoiding  the  disclosure  of  information 
which  is  too  preliminary  (which  may  be  even  more  harmful  for  investors  than  no 
disclosure at  all), it  would prevent  investors  from taking actions that could  prove to  be 
suboptimal  (e.g.  divesting  the  stock  too  soon).  Removing  premature  disclosure  would 
therefore likely decrease the opportunity cost for investors and better protect them from 
immature disclosures that can be misleading. Overall, a clarification around the notion of 
inside  information  foreseen  under  option  1  would  allow  investors  to  make  better 
informed  decisions,  thus  further  strengthening  investor  protection  (or  rendering  it  more 
effective).  

Currently, in the majority of Member States, the maximal penalty expressed in absolute 
amounts  for  disclosure-related  infringements  corresponds  to  the  minimum  of  the 
maximal  level  of  sanctions  prescribed  by  MAR.  This  indicates  that  the  majority  of 
Member  States  opted  for  the  lowest  level  of  maximum  pecuniary  sanctions.  The 
provisions  of  a  more  proportionate  sanctions  regime  (such  as  a  lower  minimum  of  the 
maximum  amount)  applicable  to  SMEs  for  breaches  of  the  disclosure  regime  would 

160  In  the  workshop,  issuer  and  investor  representatives  considered  the  introduction  of  such  a  list  of  events  more  relevant  than 
irrelevant (this solution received the average score of 3.1 on a scale from 1 to 5 in terms of its effectiveness). 
161 38% gave a score of 4 out 5 in terms of bringing clarity. 50% gave a score of 5 out of 5. The remaining 13% gave 1 out of 5. 

60 

 
 
                                                           
prevent NCA from imposing excessive sanctions in those cases162 and ensure clarity for 
SMEs  as  regards  the  expected  level  of  punitive  measures  in  the  case  of,  for  example, 
accidental late disclosure. Overall, this option is likely to address – at least to some extent 
–  the  issue  of  MAR  sanctions  being  overly  dissuasive  for  SMEs  to  list  (and  to  remain 
listed)  and  render  the  regulatory  treatment  more  proportionate  and  less  burdensome, 
while ensuring market integrity.  In the public consultation, when asked about sanctions 
under  the  current  MAR  regime,  a  half  of  respondents  (22  out  of  44)  composed  of 
representatives  of  banks,  exchanges,  financial  intermediaries,  issuers  and  academia, 
shared the opinion that the current punitive regime was not proportionate to the objective 
sought by legislation.163   

This  option  should  therefore  jointly  be  sufficiently  effective  in  rendering  the  sanctions 
regime for breaches of disclosure obligations for SMEs under MAR more proportionate, 
while nevertheless ensuring that the MAR regime continues to be adequately dissuasive, 
and hence safeguarding market integrity in the EU. 

Finally,  this  option  would  not  have  a  significant  impact  on  the  capacity  of  NCAs  to 
detect market abuses, as: i) the current broad notion of inside information would continue 
to  apply for the purpose of prevention of market  abuses;  ii) sanctions for market-abuse 
infringements,  such  as  insider  dealing  and  market  manipulation,  would  remain 
unchanged;  iii)  the  obligation  for  issuers  to  disclose  as  soon  as  possible  all  inside 
information to the public would remain in place  albeit clarified; iv) transparency would 
not be impaired, as issuers would disclose inside information at the right moment - and 
not earlier than necessary in order to minimise the risk of being sanctioned.  

Cost-benefit analysis 

Costs-benefit  for  issuers:  This  option  would  contribute  to  decreasing  the  costs  of 
compliance for issuers by reducing the efforts required to assess whether or not a certain 
piece  of  information  qualifies  as  inside  information  in  each  specific  case/event.  In 
companies,  where  such  checks  are  routinely  delegated  to  internal  or  external  legal 
counsels, it would decrease the need to make use of such services and reduce the risk of 
errors. This would bring down both direct and indirect (e.g. related to liability) costs for 
these companies. Additional cost savings would derive from a less frequent  recourse to 
delay. For those (residual cases) where delay would still come into play, clarification of 
the conditions to be met would provide more legal certainty and also reduce the need to 
pay for legal advice.  

Option 1 could lead to a reduction in compliance costs for issuers of EUR 89 149 000, 
broken down into EUR 24 600 000 for SMEs and EUR 64 600 000 for non-SMEs.164 The 
delayed disclosure could reduce costs for companies by EUR 11 200 000, of which EUR 
1 200 000 for SMEs and EUR 10 000 000 for non-SMEs (see Annex 4 for more detail). 

162 For example, the maximum amount of sanctions for infringement of Articles 17-19 (breaches of disclosure requirements) of MAR 
in France is EUR 100 million.  
163 The respondents that believed that the current regime is proportionate were mainly NCAs. 
164 The estimated cost reduction is calculated, considering the average costs of compliance, the fact that about 3 200 SMEs are listed 
on the EU regulated markets or SME growth markets, and about 6 400 other firms are listed on the EU regulated markets or MTFs 
(2021), See Table 18 in Annex 4. 

61 

 
 
 
                                                           
Finally, a more proportionate level of sanctions for breaches related to disclosure would 
avoid a disproportionate burden on SMEs, thus reducing the disincentive for them to list 
in  the  first  place  and  allowing  them  to  better  diversify  their  sources  of  financing  (e.g. 
funding  through  private  or  public  markets).  Furthermore,  a  single  cap  for  maximum 
sanctions  prescribed  in  MAR  would  remedy  divergent  levels  of  maximum  sanctions 
across Member States that create an unlevel playing field for SMEs and asymmetrically 
affect  their  incentives  to  list  across  the  EU.  For  some  infringements  related  to 
disclosures, the cap of maximal sanctions varies from EUR 1 000 000 to EUR 100 000 
000.165 

Costs-benefit  for  investors:  While  a  clearer  and  narrower  scope  of  the  disclosure 
obligation  could  be  perceived,  on  the  one  hand,  as  reducing  the  level  of  available 
information and increasing information asymmetries, it would, on the other hand, benefit 
investors by removing unnecessary (or even misleading) disclosures and increasing legal 
certainty  with  respect  to  the  information  issuers  would  be  expected  to  disclose.  This 
would avoid the costs (including the opportunity costs) of suboptimal decisions made by 
investors based on the prematurely disclosed information. In addition, the introduction of 
an  indicative  list  of  events  would  mitigate  the  risk  of  divergent  interpretations  of  the 
notion  of  inside  information  across  Member  States  and  thus  ensure  better  alignment  in 
the way issuers comply with the obligation to disclose inside information. This would in 
turn benefit investors, who could more easily compare the information they receive.  

Costs-benefit for exchanges: From an exchange’s perspective, this option would entail no 
changes.166  

Costs-benefit  for NCAs: The  clarification of the notion of inside information  as well as 
the  introduction  of  an  indicative  (yet  comprehensive)  list  of  events  would  make  the 
supervision of compliance with the disclosure obligation easier for NCAs and reduce the 
administrative burden. Moreover, option 1 would lower the administrative costs incurred 
by  NCAs  to  review  the  notifications  of  delays  received  from  issuers,  as  issuers  would 
need  to  delay  disclosure  in  more  limited  circumstances.  The  process  to  assess  whether 
the conditions to delay disclosure have been met by issuers would also be comparatively 
easier  and  require  less  work  by  NCAs’  staff.  The  cost  savings  for  NCAs  due  to  a 
potentially lower number of delay notifications (due to the fact that companies would no 
longer  be  under  the  same  pressure  to  over-disclose)  under  option  1  are  estimated  to  be 
EUR 77, 018 (see Annex 4 for more details). 

6.3.2.  Option 2 - Introduction of a closed list of events  which qualify as inside information 

for the purposes of disclosure 

Effectiveness in meeting the specific objectives  

The introduction of a closed list of material events for the purposes of disclosure  under 
option  2  would  reinforce  legal  clarity  for  issuers  to  the  highest  degree  possible  and 
therefore be very effective in reducing the unnecessary regulatory burden created by the 
lack of such clarity. As very limited room for interpretation would remain in relation to 
the  specific  material  events  requiring  disclosure,  issuers  would  have  a  reduced  need  to 

165 ESMA Report Enforcement and regulatory activities of European enforcers in 2020, April 2021 
166 Representatives of the exchange that responded to the public consultation noted that either more concrete guidelines from ESMA 
or amendments to the Level 1 text of MAR are necessary to further clarify the applicability of the definition of “inside information”. 

62 

 
 
                                                           
seek legal advice to ensure compliance with such obligation (if not entirely removed) and 
a minimised risk to inadvertently breach the disclosure obligation. 

While  bringing  the  highest  level  of  legal  certainty  for  issuers,  Option  2  would  be  less 
effective  in  ensuring  a  high  level  of  investor  protection  and  market  integrity.  With 
disclosure being limited to a pre-defined sub-set of information, it would not be possible 
to ensure that all price-sensitive information would de facto be made public. Firstly, the 
exhaustive  list  of  events,  even  if  set  in  a  delegated  act  (level  2  legislation),  would  be 
rather static, at least in the short-term (or would be adapted only with a time gap), thus 
not  always  including  all  the  relevant  events  potentially  triggering  the  disclosure. 
Secondly,  it  would  be  difficult  to  compile  a  truly  comprehensive  list  that  would 
effectively capture all possible instances of inside information appropriate to disclose. In 
such  a  situation,  the  issuer  would  instead  be  obliged  to  protect  this  inside  information 
within  the  organisation  (rather  than  timely  disclose  it).  Such  circumstances  would 
increase the risk of insider dealing, lower investor protection and increase risks to market 
integrity.  This  is  backed  by  the  feedback  to  the  targeted  consultation,  with  47%  of  the 
respondents  (23  out  of  49,  mainly  representatives  of  banks,  NCAs,  financial 
intermediaries and academia)  considering  that a system, such as the one existing in  the 
US167, would pose challenges to market integrity if introduced in the EU. Option 2 would 
also  be  a  radical  departure  from  the  existing  framework  with  regard  to  the  notion  of 
inside  information,  while  ESMA  estimated  that  the  framework  works  overall  relatively 
well. Furthermore, responses to the public consultation168 showed that many stakeholders 
would  not  want  the  complete  overhaul  of  the  framework,  but  rather  called  for  some 
guidance and clarifications. 

Cost-benefit analysis 

Costs-benefit  for  issuers:  Having  a  comprehensive  list  of  events  to  be  disclosed  would 
enhance legal certainty for issuers as to their disclosure duty. This will decrease the costs 
of  compliance  for  issuers,  removing  the  need  to  compile  such  lists  internally  and 
removing  the  risk  that  such  lists  would  be  incorrect,  as  well  as  removing  or  at  least 
reducing the need for additional legal advice to assess whether the obligation to disclose 
is triggered in each individual case. 

The  introduction  of  a  comprehensive  list  of  events  under  option  2  would  lead  to  a 
reduction in related compliance costs of EUR 118 865 000,169 with EUR 32 738 000 for 
SMEs  and  86  127  000  for  non-SMEs.170  The  delayed  disclosure  could  reduce  costs  in 
firms by EUR 11 200 000,171 among which 1 200 000 for SMEs and 10 000 000 million 
for non-SMEs (See Annex 4 for more detail). 

167 In the US, the regime is based on an obligation for issuers to publish updates to the market concerning material changes regarding 
the issuer that occur between the required quarterly reports ‘on a rapid and current basis’. The obligation to file a form 8-K, to update 
the market as to these material changes, is linked to a list of specified events that trigger the requirement for disclosure, such as the 
issuer  filing  for  bankruptcy  or  receivership,  a  material  modification  of  the  rights  of  security  holders,  or  significant  acquisitions  or 
dispositions. Issuers can choose to disclose material information falling outside the specified categories if they wish to do so.  
168 See Annex 2 for more details.  
169 Higher compliance cost savings under option 2 (compared to option 1) are due to more  legal certainty provided by an exhaustive 
list of events that reduces to a larger extent the need to seek (external) legal advice. 
170 Similarly to estimated cost reduction in option 1, the estimated cost reduction in option 2 is calculated, considering the average 
costs of compliance (see Table 17 in Annex 4 based on data collected by a European trading venue), the fact that about 3 200  SMEs 
are listed on the EU regulated markets or SME growth markets, and about 6 400 other firms are listed on the EU regulated markets or 
MTFs in 2021 (see Table 1 in Annex 4). 
171 The cost savings from a reduced number of requests to delay disclosure to NCAs are considered to be identical under options 1 and 
2 (in both cases, it is expected that requests to delay disclosures would go down equally). 

63 

 
 
                                                           
Costs-benefit  for  investors:  MAR  provides  for  the  protection  of  both  existing  and 
potential investors of the company. More specifically, MAR prohibits for anyone to take 
advantage of the access to inside information by outlawing the possibility to negotiate on 
a financial instrument, when inside information is not disclosed to the public, against the 
interest of other investors. Those safeguards would not be removed, as the notion of the 
inside information would still apply to the prohibition of inside dealing. In addition, all 
investors  would  gain  more  clarity  on  the  scope  of  information  they  should  get  from 
issuers,  once  particular  events  occur.  However,  a  fixed  (“static”)  pre-determined  list 
could give rise to the risk that inside information is not always disclosed, to the detriment 
of investors who would not be in a position to take this information into account in their 
decisions.  It  is  therefore  likely  that  investors  in  those  circumstances  could  incur 
additional costs (including opportunity costs) and be negatively impacted as a result of a 
higher  probability  of  market  manipulation  by  those  in  possession  of  inside  information 
(that should have been disclosed under other circumstances).  

Costs-benefit for exchanges: Similarly to option 1, exchanges would not be expected to 
be affected under option 2. 

Costs-benefit for NCAs: The introduction of the exhaustive list of events would make the 
supervision of MAR disclosures easier for NCAs and reduce the administrative burden. It 
is likely to decrease the time spent by NCA staff on supervision and subsequently reduce 
the  cost  of  supervision.  At  the  same  time,  with  less  information  on  events  occurring 
outside  the  closed  list  of  events,  it  is  possible  that  NCAs  would  have  to  enhance  their 
market surveillance of market trends to spot possible irregularities due to market abuse.  

Table 6 - Cost efficiency by stakeholder type (Section 6.3). 

Cost efficiency by stakeholder type172 

Issuers 

Investors 

NCAs 

Exchanges 

Option 1: Review of the 
definition of inside 
information and of the 
conditions for delaying its 
disclosure, as well as 
more proportionate 
sanctions for SMEs 

Option 2: Introduction of 
a closed list of material 
events for the purpose of 
disclosure. 

++ 

+++ 

+ 

-- 

+ 

- 

0 

0 

Other  economic,  environmental,  social  and  fundamental  rights  impacts  for  the  two 
options 
Neither option 1, nor option 2 has any relevant impact on other economic, environmental, 
social and fundamental rights.  

Coherence with other initiatives relating to the two options 

While  option  1  would  be  coherent  with  the  existing  legal  framework,  option  2  would 
give rise to risks that may go against the primary objective of EU financial legislation to 
ensure effective investor protection and high market integrity.  

172  Legend:  +++  =  very  positive, ++  =  positive,  +  =  slightly  positive. 0 =  no  effect,  - =  slightly  negative,  -- = negative,  ---  =  very 
negative. 

64 

 
 
 
                                                           
7.  HOW DO THE OPTIONS COMPARE? 

7.1. Options addressing unequal opportunities for EU companies regarding governance 
structure, when listing, due to different rules on MVR share structures (Pre-IPO) 

Option  1  ranks  higher  than  option  2  on  the  effectiveness  in  addressing  the  unequal 
opportunities  for  EU  companies  regarding  governance  structure,  when  listing,  due  to 
different national rules on MVR share structures. Option 1 sets out in EU law only high-
level  principles  on  MVR  share  structures,  providing  for  more  flexibility  for  Member 
States  to  design  a  more  bespoke  (and  hence  more  suitable  for  companies  in  those 
Member States) regime. At present, some Member States (e.g. the Nordics) have already 
developed very flexible MVR share frameworks that have proven to be attractive for both 
issuers and investors and have contributed to the high numbers of companies accessing 
public markets  in  those  Member States. Option  1, will deliver on the key  objectives of 
removing fragmentation and unequal opportunities across Member States and increasing 
flexibility in those Member States where MVR share structures have been banned until 
now, while not interfering with the existing well-functioning MVR share systems, hence 
limiting  negative  side-effects  (and  potentially  costs)  for  companies  in  those  Member 
States. 

Despite  the  fact  that  option  2  would  provide  for  a  more  comprehensive  MVR  share 
regime at EU level, it is likely to be more rigid and less adapted to specific national needs 
of companies, straightjacketing them into the same set of detailed rules developed at EU 
level.  Therefore  while  option  2  would  generate  a  higher  degree  of  harmonisation 
regarding MVR share structures in the EU option it would also offer less – and not more 
-  flexibility  for  issuers  in  those  Member  States,  where  flexible  regimes  are  already  in 
place.  

Regarding  cost  efficiency,  policy  option  1  would  also  be  more  cost-efficient  for 
stakeholders,  specifically  issuers,  since  Member  States  that  already  have  MVR  share 
structures  in  place  would  not  have  to  amend  their  rules  (or  at  least  in  no  significant 
manner) and companies in those Member States – would not have to adapt. A much more 
prescriptive option 2 is likely to lead to much higher (adjustment) costs for both issuers 
across the EU. While overall investors’ interests might be better safeguarded at EU level 
under option 2, in reality it may be unfit for some Member States, where investors do not 
appear to be negatively affected under the current (flexible) MVR share arrangements in 
some Member States due to high levels of minority investor protection.  

Option 1 is therefore preferred over option 2 due to its higher effectiveness in achieving 
the objective and a slightly higher cost efficiency.  

7.2. Options relating to overly burdensome regulatory listing requirements (IPO phase) 

Option 1 and 2 differ in terms of their effectiveness, as regards the specific objectives of, 
on the one hand, reducing  regulatory compliance costs for companies issuing securities 
on  public  markets  and,  on  the  other  hand,  ensuring  adequate  information  for  investors. 
Their respective effectiveness differs for different categories of stakeholders. 

Length  and  complexity  of  prospectuses.  Concerning  the  issue  of  the  length  and 
complexity  of  the  prospectus,  option  2  is  considered  to  be  overall  more  effective  than 
option 1.  

65 

 
 
On  the  format  and  content  of  the  standard  prospectus  for  an  offer  of  securities  to  the 
public or an admission to trading on a regulated market, option 1 would broadly maintain 
the  status  quo.  In  contrast,  option  2  would  significantly  streamline  the  standard 
prospectus, allow to draw it up in English and further standardise its format. Therefore, 
only  option  2  -  and  not  option  1  -  would  address  the  concern  of  the  majority  of 
stakeholders in the public consultation173 that the standard prospectus in its current form 
does  not  strike  an  appropriate  balance  between  effective  investor  protection  and  the 
proportionate administrative burden for issuers. On balance, option 2 is considered to be 
more  effective  in  reducing  the  burden  for  issuers  and  enhancing  comprehensibility  and 
readability  of  the  prospectus  for  investors.  Option  2  is  also  more  cost  efficient  than 
option 1. 

For issuers, mainly SMEs, offering securities to the public and listing on an SME growth 
market, option 1 could be considered highly effective for domestic issuances, as it would 
exempt  from  the  obligation  to  publish  a  prospectus  (which  would  be  replaced  by  the 
admission document). However, option 1 would lack effectiveness as far as cross-border 
public offers and listings are concerned, as the admission document, vetted by exchanges, 
would  not  be  passportable  (i.e.  issuers  would  still  have  to  produce  an  old-form 
prospectus if they wanted to go cross-border). Furthermore, given the lighter prospectus 
regime for MTFs/SME growth markets that exists currently, it is already relatively easy 
for issuers to avail themselves of a prospectus exemption (e.g. an offer solely addressed 
to  qualified  investors).174  Option  2  can,  therefore,  be  considered  more  effective  overall 
(i.e. for both domestic and cross-border issuances), as, compared to the already existing 
possibility  for  issuers  to  opt  for  a  local  admission  document  (and  not  produce  a 
prospectus),  it  would  create  a  short(er)-form  passportable  EU  admission  document. 
Option  2  would  also  be  more  cost  efficient,  decreasing  the  cost  of  producing  a 
passportable  EU  admission  document  compared,  for  example,  to  a  more  extensive  in 
contents SME growth prospectus that would still need to be produced under option 1 for 
cross-border public offers and listings on SME growth markets. 

Finally, for secondary issuances of securities fungible with securities already admitted to 
trading,  option  2  is  considered  to  be  more  ambitious,  effective  and  cost-efficient  than 
option  1.  In  fact,  option  1  would  replace,  in  all  cases,  the  simplified  prospectus  for 
secondary issuances with a more streamlined EU Recovery prospectus.  Option 2 would 
take  a  step  further  and  introduce  a  prospectus  exemption  for  secondary  issuances  of 
securities  fungible  with  securities  already  admitted  to  trading,  while  requiring  the  EU 
Recovery prospectus only for secondary issuances for non-fungible issuances (and other 
cases not covered by the exemption). 

Scrutiny and approval of the prospectus. Option  1 confers the scrutiny and approval of 
prospectuses to exchanges, while option 2 aims to streamline and make more convergent 
the  scrutiny  practices  and  approval  procedures  of  NCAs.  While  exchanges  might  be 
expected  to  use  a  more  “business-friendly”  approach  than  NCAs  in  scrutinising  and 
approving  prospectuses,  it  is  unclear  whether  the  additional  costs  (e.g.  staffing)  and 
liability  of  exchanges  might  lead  to  the  same  inefficiencies  (and  lack  of  convergence) 
which,  according  to  stakeholders,  affect  the  scrutiny  and  approval  of  prospectuses 
performed  by  (some)  NCAs  and  render  them  inefficient.  Furthermore,  option  1  would 

173 35 stakeholders, accounting for 59.3%. 
174 See section 6.1.1 and 6.1.2 of this IA for more detail. 

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entail  expensive  structural  changes  for  both  exchanges  and  NCAs  (which  may  become 
more reliant on state subsidies), and should be accompanied by regulatory safeguards to 
prevent  the  conflict  of  interest  to  protect  issuers  from  excessive  scrutiny  fees.  Finally, 
few  stakeholders  that  expressed  an  opinion  in  that  regard,  highlighted  that  the  NCAs’ 
scrutiny and approval is the preferred option as it provides investors with confidence in 
investing.  Option  2  is  therefore  considered  to  be  overall  the  preferred  option  both  in 
terms  of  rendering  the  scrutiny  process  more  effective  and  more  cost  efficient  (due  to 
high liability for exchanges, risk of higher scrutiny fees charged to issuers and increased 
state support for NCAs). 

7.3. Options addressing the overly burdensome ongoing disclosure requirements (Post-

IPO) 

Both options 1 and 2 are deemed effective in addressing the lack of clarity of the notion 
of  inside  information  and  the  excessive  scope  of  disclosures  when  interpreting  this 
notion.  

A closed list of material events under option 2 would bring a higher level of legal clarity 
to issuers than option 1, largely removing – and not only partially mitigating - the risk for 
issuers  to  be  sanctioned  for  not  disclosing  the  relevant  information  due  to  wrong  legal 
interpretation. Option 2 is therefore likely to be more effective in addressing the specific 
objectives  related  to  the  unnecessary  regulatory  burden.  At  the  same  time,  this  option 
would limit the accountability of issuers and introduce additional risk of insider dealing 
practices  as  described  in  section  6.  This  could  potentially  weaken  the  market  abuse 
framework. Option  1 is  therefore likely to  be much more effective in  delivering on the 
specific objective of investor protection and market integrity than option 2. In addition, 
option 2 involves practical difficulties related to the design of the exhaustive list covering 
all  possible  scenarios  and  to  its  static  (at  least  in  the  short-term)  nature.  An  open 
indicative list, complemented by clarifications related to delayed disclosures under option 
1, would not suffer from those weaknesses. In addition, a more proportionate regime for 
sanctions imposed on SMEs under option 1 would also allow to better calibrate the MAR 
regime for smaller companies, thus (indirectly) further reducing the regulatory burden. 

In  terms  of  costs,  both  options  are  expected  to  significantly  decrease  issuers'  expenses, 
with a slight advantage for option 2. However, this is outweighed by the additional costs 
for  investors  and  supervisors,  due  to  the  potential  weakening  of  the  market  abuse 
framework that option 2 entails. 

On  balance,  option  1  is  therefore  deemed  to  be  both  more  effective  and  more  cost 
efficient than option 2, striking the right balance between the interests of issuers, investor 
protection and market integrity. This option would satisfy the key objective of ensuring 
better legal clarity without jeopardising the other specific objectives of the initiative.  

8.  PREFERRED OPTION 

8.1. Overall impact of preferred options 

The selection of the preferred  option(s) to  achieve an objective has been  done with  the 
aim  to  maximise  the  effectiveness  in  addressing  the  specific  objective  related  to  a 
problem,  while  limiting  the  costs  and  potential  negative  side-effects  on  other  specific 
objectives.  

67 

 
 
 
The  preferred  options  will  contribute  to  the CMU  agenda  and  its  objective  to  diversify 
the  funding  of  EU  companies  and  ensure  the  development  and  further  integration  of 
capital  markets  in  the  EU.  The  regulatory  measures  proposed  in  this  initiative  are 
expected to have an impact on all companies in the EU, but in particular on SMEs which 
are  more  exposed  to  the  (excessive)  regulatory  burden  than  larger  companies  with  a 
higher cost absorption potential. 

Option 1 is the preferred option to remove unequal opportunities for EU companies when 
listing, due to  fragmented national  rules on  MVR shares,  and to  increase flexibility  for 
founders when listing across the EU (pre-IPO stage). Option 1 is likely to lead to more 
incentives  for  issuers  to  list  on  public  markets  across  Member  States  where  these 
structures  are  not  allowed  while  not  impacting  issuers  in  Member  States  with  well-
functioning  regimes.  It  would  seek  to  implement  the  EU-level  principles  of  targeted 
harmonisation  of  national  legislation  on  MVR  shares,  allowing  for  its  use  across  the 
whole EU.175 The preferred option to address the fragmentation of EU legal regimes on 
MVR share structures seeks to provide companies with further incentives to seek listing 
on  public  markets,  while  safeguarding  the  interests  of  investors,  in  coherence  with  the 
objectives  of  EU  legislation  in  the  area  of  company  law, corporate  governance  and 
shareholder  engagement  (e.g.  Shareholder  Rights  Directive  and  Directive  on 
Sustainable Corporate  Governance).  Under  the  preferred  option,  investors  would 
therefore  enjoy  a  minimum  degree  of  protection  across  the  EU  when  investing  in 
companies with MVR shares. Any identified corporate governance risks could be further 
addressed  by  targeting  the  intervention  to  a  specific  subset  of  companies,  e.g.  issuers 
listing on SME growth markets.  

Option 2 is the preferred option to address the overly burdensome listing requirements in 
the EU (IPO phase). Option 2 significantly streamlines the contents of a prospectus and 
provides  significant  cost  and  burden  reduction  for  issuers.  Moreover,  this  option 
combines  the  positive  aspects  of  a  streamlined  prospectus  –  shorter  and  more 
standardised  -  with  a  more  efficient  and  convergent  scrutiny  and  approval  process  by 
NCAs. Investors will also benefit from lighter and more streamlined prospectuses which 
will be easier to read and to navigate through (in compliance with the specific objective 
on  investor  protection).  Furthermore,  the  electronic  format  will  enable  accessing  and 
navigating  the  prospectus  on  an  electronic  support  tool,  which  is  nowadays  more 
commonly  used  by  investors.  This  will  also  be  in  line  with  the  results  of  the  public 
consultation where 93% (50 out of 54) of all respondents agreed with the need to publish 
prospectus  only  in  an  electronic  format.  Under  the  preferred  option,  NCAs’  scrutiny  - 
albeit streamlined - will be maintained, to safeguard a high degree of investor protection 
and to reinforce trust of investors into the capital markets. SMEs will in particular benefit 
from  a  short-form  EU  admission  document  tailored  to  their  needs  which  will  also  be 
passportable.  

While  introducing  considerable  alleviations  for  issuers,  option  2  also  ensures  that  the 
level of transparency for investors is not negatively affected. In case of incorporation by 
reference,  issuers  will  be  required  to  provide  access  to  referenced  documents  via  an 
electronic  link,  so  that  information  can  be  easily  accessed.  The  proposed  prospectus 
exemption for secondary issuances of securities fungible with securities already admitted 

175 The option would also seek to ensure that Member States strike a proper balance between the interests of founders and  minority 
investor protection, as well as reflect sustainability or other relevant policy considerations when designing those safeguards. 

68 

 
 
                                                           
to trading will nevertheless be subject to the requirement to publish and file with NCAs a 
statement  of  compliance  with  the  existing  disclosure  and  reporting  obligations  and  a 
short summary document detailing the use of proceeds and other relevant information not 
yet disclosed publicly.  

to  use  only  English  for  drawing  up 

The  possibility 
the  prospectus  will  be 
counterbalanced with the requirement to have the summary (which contains the essential 
information to take an investment decision and is in many cases the only document that 
retail investors consult) in the language(s) of the Member State where the public offer is 
made.176 As disclosure of and access to all the relevant information are maintained, none 
of the proposed measures will create the need for investors to perform any additional due 
diligence, and a high level of investor protection will be safeguarded.  

level  of  market 

Option  1  is  the  preferred  option  to  address  the  overly  burdensome  ongoing  disclosure 
requirements (Post-IPO phase). It will be both more effective and more cost efficient in 
achieving  the  specific  objective  of  lower  regulatory  and  compliance  costs  for  already 
listed  companies,  while  preserving  a  sufficient 
integrity  and 
accountability of market participants. The preferred option, centred on the inclusion of a 
non-exhaustive  indicative  list  of  material  events,  aims  at  providing  clarification  as  to 
price-sensitive events, which have reached a stage of maturity that makes them suitable 
for disclosure. At the same time, such a non-exhaustive list does not remove the need for 
issuers  to  make  sure  that  they  disclose  also  other,  potentially  price-sensitive  events 
(including the ones that cannot be easily predictable in advance and hence included in a 
list).  It  thus  ensures  that  all  relevant  events  are  disclosed,  hence  maintaining  the 
necessary  high  level  of  market  integrity.  Finally,  the  preferred  option  will  be 
accompanied  by  a  reinforcement  of  the  supervisors'  monitoring  system  for  order  data 
(cross-market  order  book  surveillance,  described  in  Annex  11)  which,  through  the 
standardisation of order data reporting formats and the facilitation of exchanges of such 
data  between  national  authorities,  will  enrich  the  market  abuse  supervisory  toolbox, 
thereby ensuring greater market integrity and enhancing investor confidence. In addition, 
targeted  amendments  to  the  sanctioning  regime  under  MAR  will  create  a  more 
proportionate  level  of  sanctions  for  smaller  issuers  (SMEs),  when  found  in  breach  of 
disclosure-related  rules.  The  preferred  option  strikes  the  right  balance  between  a  cost 
reduction,  on  the  one  hand,  and  the  primary  need  to  safeguard  market  integrity  and 
investor protection, on the other.  

8.2.The scale of magnitude of the expected impacts of the accompanying measures 

Prospectus Regulation 

In  terms  of  the  scale  of  magnitude,  the  accompanying  measures  under  the  Prospectus 
Regulation177  set  out  in  Annex  10  of  this  impact  assessment  are  expected  to  have  an 
impact that ranges from marginal to limited. 

1.  Simplify and alleviate the universal registration document (URD) regime. As the URD 
is built on the registration document which is part of the standard prospectus for equity 

176 In the public consultation, this was the second most popular answer (34% i.e. 20 out of 59 respondents) when respondents were 
questioned about  the  prospectus  language  rules  (mainly  banking  associations,  some  investors,  and  some  NCAs).  The  most popular 
answer (36% 21 out of 59 respondents) was to allow the entire prospectus to be drawn up in English only (mainly exchanges, issuers, 
and some Investors and NCAs).  
177 See Annex 10, section 2. 

69 

 
 
                                                           
securities, by streamlining the latter the URD will automatically become a more efficient 
document. Under the proposal, it would be possible to draw up the document in English 
and  grant  the  status  of  frequent  issuer  after  one  year  of  approval.  Given  that  URDs 
approved in 2020 and 2021 were respectively 56 and 35, and mainly in one jurisdiction, 
the expected impact of this measure is considered to be marginal. 

2.  Harmonise the upper prospectus exemption threshold for small offers of securities to 
the  public  (no  national  discretion)  and  remove  lower  threshold.  The  harmonised 
threshold  across  the  Union  should  be  set  taking  as  reference  the  average  threshold 
proposed by stakeholders (EUR 12 million) and considering that most of EEA Member 
States  are  already  converging  towards  the  upper  threshold  (about  half  have  EUR  8 
million and another quarter - EUR 5 million). It is considered that raising the threshold 
for  exemption  (and  removing  the  national  discretion  below  it)  would  not  affect  large 
issuers  in  a  significant  manner  whose  public  offers  are  generally  much  higher.  Small 
issuers,  including  SMEs,  however,  are  likely  to  benefit  from  the  measure,  as  in  certain 
cases  they  would  no  longer  have  to  produce  a  prospectus,  lowering  substantially  their 
regulatory costs and incentivising them to list on public markets. Furthermore, the lack of 
clarity of the current provision resulted in some Member States exempting every single 
offer  of  securities  that  an  issuer  makes  below  the  applicable  threshold.  The  proposal 
should clarify that the new harmonised exemption threshold refers to the total aggregated 
consideration  of  all  offers  of  securities  to  the  public  that  an  issuer  has  made  in  the  12 
months preceding the start date of a new offer (to be aligned to ESMA’s proposal in its 
response  to  the  targeted  consultation).  In  the  MS  that  are  currently  exempting  any 
issuer’s offer below the applicable threshold, this clarification is expected to reduce the 
overall  number  of  offers  exempted,  even  if  the  harmonised  threshold  is  increased.  As 
described  in  Annex  10  section  2,  the  analysis  carried  out  in  the  impact  assessment 
accompanying the proposal for a Prospectus Regulation178, indicated that at least 3% of 
approved prospectuses in 2013-2014 would have fallen out of the scope if an exemption 
threshold were set at EUR 10 million; this percentage would increase to at least 6% with 
a  threshold  set  at  EUR  20  million.  The  expected  impact  of  this  measure  is  therefore 
considered to be limited (although positive), also considering that this exemption would 
only  apply  to  public  offers  of  securities  but  not  to  securities  admitted  to  trading  on  a 
regulated market.   

3.  Reduce  the  current  minimum  six  day-period  between  the  publication  of  a  prospectus 
and the end of an offer of shares. The expected impact of this measure, which aims to 
facilitating  swift  book-building  processes  (especially  in  fast  moving  markets)  and 
increase the attractiveness of the inclusion of retail investors in the IPOs, is considered to 
be limited (although positive). 

4.  Make the CMRP amendments to the supplement regime permanent. As these measures 
are  currently  in  place,  there  is  no  additional  cost  for  stakeholders  (including  Member 
States  and  public  authorities)  associated  with  this  action.  ESMA’s  proposal  to  specify 
that financial intermediaries are required, where applicable, to contact investors only by 
electronic  means  (given  the  short  timeline  to  do  so)  is  expected  to  have  a  marginal 
(positive) impact (reduction of burden for financial intermediaries and more sustainable 
processes overall). 

178 SWD(2015) 255 final (pages 21 and 45), available at: EUR-Lex - 52015SC0255 - EN - EUR-Lex (europa.eu) 

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5.  Introduce  a  reference  to  environmental,  social  or  governance  (ESG)  matters  in  the 
empowerment for the Commission to adopt delegated acts to lay down the format and 
content of the prospectus. This measure aims to improve consistency and comparability 
of information included in prospectuses and fight greenwashing. It is expected to have a 
marginal impact for equity issuers, who will only be required to incorporate by reference 
the  sustainability-related  information  published,  where  applicable,  under  the  upcoming 
Corporate Sustainability Reporting Directive (amending the Accounting Directive). This 
measure is expected to have a limited impact (i.e. higher cost) on issuers of non-equity 
securities that advertise as taking into account the ESG factors or contributing to the ESG 
objectives:  such  issuers  will  be  required  to  disclose  ESG-related  information,  which 
should  be  targeted  and  light  touch  and  should  not  constitute  an  excessive  burden  for 
issuers,  which  the  Commission  should  set  out  in  a  new  annex  to  Delegated  Regulation 
(EU)  2019/980.  The  measure  will,  however,  provide  better  information  on  the  ESG 
factors  to  investors,  thus  enabling  them  to  better  assess  and  compare  investment 
opportunities on that basis. 

6.  Amend  the  currently  unworkable  equivalence  regime.  The  objective  is  to  render 
operational  the existing  rules on equivalence (Article 29 of the Prospectus Regulation). 
Given that Article 28 of the Prospectus Regulation already allows third country issuers to 
offer  their  securities  to  the  public  in  the  EU  or  seek  admission  to  trading  of  their 
securities  on  EU  regulated  markets  by  drawing  up  a  prospectus  in  accordance  with  the 
Prospectus Regulation, the expected impact of this measure is considered to be marginal. 

Market Abuse Regulation 

Simplify  and  clarify  the  rules  on  market  soundings.  The  expected  impacts  of  a 
simplified and optional regime are considered together, noting that  any quantification is 
difficult  due  to  data  limitations  as  regards  previous  soundings  and  recordkeeping 
practices. Envisaged changes are largely of a streamlining and clarifying nature, leading 
to negligible (positive) impact on the cost of compliance and market integrity compared 
to the status-quo. By clarifying that the sounding regime is optional (constituting a “safe 
harbor”),  the  regulatory  burden  should  be  reduced,  both  at  the  level  of  the  industry  as 
well  as  the  supervisor.  The  clarifications  remove  over  compliance  by  participants  who 
previously filed market soundings, despite no presence of inside information.  

Extend  the  alleviations  on  insiders  lists  to  all  types  of  markets.  This  measure  will 
decrease the burden of drawing up such lists, including for issuers on regulated markets, 
with in particular the difficulty to collect personal data.  

Create a mechanism for the exchange of cross-market order book among authorities. 
The  impact  of  this  measure  will  be  limited,  as  some  Member  States  would  be  able  to 
build on the work already  done under the ongoing pilot  project  run by several  national 
competent authorities. According to the preliminary estimates, an initial total overall set-
up cost of the tool would be around EUR 300 000 – EUR 400 000, that could be funded 
by  the  contributing  Member  States.  Nevertheless,  Member  States,  in  particular  those 
taking  part  in  the  ongoing  project,  would  be  able  to  benefit  from  synergies  with  the 
existing infrastructure (for transaction reporting), thus  brining this cost  down. The total 
annual maintenance cost is estimated at about EUR 150 000 – EUR 200 000.   

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8.3. Coherence of the preferred options 

The  preferred  options  are  coherent  with  the  existing  legal  frameworks.  The  proposed 
alleviations  should  avoid  a  detrimental  impact  on  market  integrity  and  investor 
protection.  

More  specifically,  MAR  already  highlights,  as  one  of  its  objectives,  the  reduction  of 
regulatory  complexity  and  firms’  compliance  costs,  especially  for  firms  operating  on  a 
cross-border basis, while avoiding any detrimental impact on market integrity. Similarly, 
the  Prospectus  Regulation  sets  out  that  the  aim  of  the  regulation  is  to  ensure  investor 
protection and market efficiency, while enhancing the internal market for capital.  

The  adjustments  provided  for  in  the  preferred  options  under  the  Prospectus  Regulation 
and  MAR  to  facilitate  access  to  capital  markets  for  companies  in  the  EU,  while 
preserving the objectives of investor protection and market integrity, are, therefore, fully 
in line with the primary objectives of these regulations.  

All  of  the  amendments  are  in  line  with  the  objectives  of  the  CMU  Action  Plan  and  in 
particular its Action 2 to simplify the listing rules for public markets. 

Impact on competitiveness 

Currently EU public markets are underdeveloped when compared with those in the UK 
or  in  the  US  which  are  the  direct  competitors  in  terms  of  attracting  companies  to  list.  
This  initiative  is  expected  to  increase  the  competitiveness  of  EU  public  market  by 
reducing  the  regulatory  burden  throughout  the  listing  process  and  increasing  the 
flexibility for issuers considering listing which will ultimately make EU public markets 
more attractive. Specifically, the proposal on MVR share structures seeks to provide all 
EU companies with the flexibility that is already available in the US and UK (as well as 
in Asia). Nevertheless, as multiple factors affect the company’s decision to list, many of 
which  this  initiative  cannot  address,  some  challenges  regarding  the  competitiveness  of 
EU public markets are likely to remain. 

Impact on Sustainable Development Goals (SDGs) 

This initiative is expected to directly or indirectly contribute to the achievement of SDG 
8  (Decent  work  and  economic  growth)  and  SDG  9  (Industry,  innovation,  and 
infrastructure). Annex 3 provides more detail. 

Environmental impacts, do no significant harm, including climate consistency check 
The initiative is not expected to have any significant direct environmental impacts.179 A 
significant  number of companies listed on  public markets, however, may  engage in  the 
development and innovation process of new environment-friendly technologies. A better 
access to finance will allow these companies to grow at a more rapid pace and allocate 
more financial resources to respective R&D programmes.  

Social impacts 

The  initiative  is  not  expected  to  have  a  direct  social  impact.  However,  there  can  be  a 
positive indirect impact. Although the (indirect) social impact cannot be quantified, it is 
likely to be positive.  

179 The only exception being the amendment to remove a possibility to request a prospectus in a paper format. 

72 

 
 
                                                           
Provided that the preferred options achieve their objectives to contribute to easing of the 
access to public markets, EU companies would be able to benefit from a more diversified 
and  larger  pool  of  funding  sources,  allowing  them  to  innovate,  grow  and  employ  more 
staff.  

As  the  initiative  targets  in  particular  SMEs  (with  some  measures  directly  addressed  at 
them)180, the (indirect) impact on employment is likely to be particularly relevant. Today 
SMEs provide for employment of around 100 million people, account for more than half 
of Europe’s GDP and play a key role in adding value in every sector of the economy181. 
Significantly, they make up 99.8% of EU enterprises182. 

Provided  that  the  initiative  achieves  its  objectives  to  contributing  to  a  more  conducive 
environment  for  SMEs’  listing  and  to  an  improved  access  to  finance  for  SMEs,  these 
companies  will  be  able  to  grow  at  a  faster  pace,  with  positive  implications  for 
employment.  As  such,  it  is  expected  that  the  measures,  as  part  of  a  wider  package  to 
facilitate  SMEs’  access  to  capital  market  finance,  will  positively  impact  the  EU  labour 
market and increase economic cohesion. 

External impacts 

The initiative is not expected to have any significant direct impacts on third countries. If 
the initiative (in conjunction with  other CMU measures) is  successful in  increasing  the 
overall attractiveness of EU public markets, it may lead (over time) to better integrated, 
deeper and more liquid  EU capital markets, strengthening the EU’s global position and 
positively impacting the EU’s open strategic autonomy. 

Impact on fundamental rights  

The preferred options respect the rights and principles set out in the Charter, in particular 
those  in  Article  16  (freedom  to  conduct  a  business).  The  free  movement  of  persons, 
services and establishment constituting one of the basic rights and freedoms protected by 
the  Treaty  on  the  European  Union  and  the  Treaty  on  the  Functioning  of  the  European 
Union is relevant for this measure. 

Impact on SMEs  

This initiative is considered relevant for SMEs, as companies in the scope of the initiative 
include  SMEs  listing  or  listed  on  a  trading  venue.  Current  listing  requirements  lead  to 
high  costs  of  compliance  for  SMEs,  potentially  reducing  the  relative  benefits  of  listing 
for  especially  SMEs.  This  initiative  would  help  reduce  these  costs  and  make  listing  on 
public  markets  more  attractive  as  an  alternative  source  of  financing.  Overall,  the 
initiative  is  expected  to  bring  about  annual  costs  savings  of  approximately  EUR  167 
million for issuers, including SMEs.  

For more details, please refer to Annex 3.

180 Such as a more proportionate sanctions regime under MAR or a more streamlined EU admission document for public offer/listing 
on SME growth markets. 
181 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and 
the Committee of the Regions COM(2020) 103 final - An SME Strategy for a sustainable and digital Europe, p. 1. 
182 Eurostat, 2018 Key Figures (europa.eu). 

73 

 
 
                                                           
Policy options table 

MVR shares 

Prospectus 

MAR 

Policy option 1: 
Scrutiny by 
exchanges and 
non-passportable 
admission 
document 

Policy option 2: 
Shorter 
prospectuses with 
streamlined 
scrutiny by NCAs 

Policy option 2: 
Enhancing legal 
clarity with a 
closed list of 
events  

Policy option 1: 
Enhancing legal 
clarity with a fine-
tuned definition of 
inside information, 
non-exhaustive list 
of events and more 
proportionate 
sanctions for SMEs 

Policy option 1: 
Minimum 
harmonisation of 
national legislation 
to allow for the 
general principle of 
MVR shares 
adopted across the 
EU (scope possibly 
limited to a specific 
subset of 
companies) 

Policy option 2: 
Maximum 
harmonisation of 
national 
legislation to 
allow for the 
principle of 
MVR shares 
adopted across 
the EU (scope 
possibly limited 
to a specific 
subset of 
companies) 

Effectiveness 

Reduce 
regulatory and 
compliance 
costs 

Ensure investor 
protection and 
market integrity 

Provide more 
incentives for 
issuers to list 

Efficiency (cost effectiveness) 

+ 

≈ 

++ 

+ 

+ 

≈ 

+ 

≈ 

++ 

+++ 

- 

≈ 

- 

+ 

+ 

+ 

+ 

+ 

+ 

+ 

++ 

- 

+ 

0 

Green columns represent the 
preferred policy option. 
Magnitude of impact as 
compared with the baseline 
scenario (the baseline is 
indicated as 0): +++ strongly 
positive; + + positive; + 
slightly positive; – – strongly 
negative; – negative; - slightly 
negative; ≈ marginal/neutral; 
n/a not applicable

74 

 
 
  
8.4.REFIT (simplification and improved efficiency) 

This initiative aims to reduce regulatory costs for issuers on regulated markets as well as 
SME  growth  markets,  while  ensuring  a  high  level  of  investor  protection  and  market 
integrity. This is particularly the case for the amendments envisioned with regard to the 
Prospectus Regulation, Market Abuse Regulation and Listing Directive183.  

The  initiative  takes  into  account  the  evidence  behind  the  opinion  of  the  Fit  for  Future 
Platform on facilitating SMEs’ access to capital and in particular on simplification of the 
procedures  for  the  admission  to  trading  of  securities  of  SMEs  and  other  listing 
obligations. The evidence produced by the Platform informed this impact assessment by 
confirming that, while past alleviations to the Prospectus Regulation and MiFID II have 
eased the access to public markets for SMEs, the access remains to be constrained with 
bank loans still representing the main source of financing in the Union. Furthermore, the 
Platform’s  call  to  focus  on  costs  associated  with  listing  requirements  and  on  costs  of 
regulatory  compliance  for  the  already  listed  companies  allowed  to  better  define  the 
outlines of the preferred option in this impact assessment.  

The  table  in  Chapter  2  of  Annex  3  summarises  the  regulatory  cost  reductions  of  the 
preferred  options  and  quantifies  these  reductions  to  the  extent  possible.  Estimates  are 
with  respect  to  the  baseline  of  the  unchanged  legislation.  With  a  view  to  the 
Commission’s pursuit of OIOO, it is expected that the initiative will provide overall net 
administrative cost savings of EUR 167 million annually. The initiative specifically aims 
at streamlining the current requirements and it is expected that there would be only minor 
adjustment costs arising from its implementation for issuers and NCAs (see Annex 3 for 
more details). 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

The  proposal  is  expected  to  follow  normal  implementation  procedures.  Ex-post 
evaluation  of  all  new  legislative  measures  is  a  top  priority  for  the  Commission.  The 
Commission shall review the outputs, results and impacts of this initiative once the legal 
instrument  becomes  effective.  An  evaluation 
the 
implementation  of  the  measure  and  in  accordance  with  the  Commission's  better 
regulation  guidelines.  The  Commission  presents  below  a  series  of  metrics  that  will  be 
compared  ex-ante  and  ex-post  the  adoption  of  the  changes  included  in  the  initiative. 
These metrics include: 

is  envisaged  5  years  after 

1.  General impacts: 

I.  Number of IPOs, and proceeds raised on EU capital markets ; 

II.  Number of SME IPOs and proceeds raised on EU capital markets 

III.  Number  of  EU  company  IPOs  outside  the  EU,  with  and  without  MVR  share 

structures; 

IV.  Number of secondary issuances; 

V.  Number of delistings in EU capital markets; 

183 See Annex 7 for more details.  

75 

 
 
 
                                                           
VI.  Market funding ratio of EU companies.  

2.  Specific impacts:  

I.  Number  and  average  length  of  a  streamlined  prospectus  approved  for  equity 
securities  and  non-equity  securities  on  regulated  markets  (modelled  on  the  EU 
Growth prospectus); 

II.  Number  and  average  length  of  the  EU  admission  documents  approved  on  SME 

growth markets; 

III.  Number and average length of new short-form prospectuses (modelled on the EU 

Recovery prospectus) for secondary issuances of non-fungible securities; 

IV.  Number  of  compliance  statements  and  summary  documents  filed  with  NCAs  in 

case of an exemption for secondary issuance of fungible securities; 

V.  Average number of follow-on requests by NCAs to the issuer to submit additional 

information after the submission of a draft prospectus; 

VI.  Number and size of IPOs using MVR share structures in the EU; 

VII.  Number  and  size  of  tech  company  IPOs  and  family  owned  company  IPOs, 

including those using MVR share structures; 

VIII.  Number of requested delays for disclosure of inside information to NCAs; 

IX.  Number and size of imposed sanctions on SMEs for disclosure breaches by NCAs. 

The objective of the evaluation will be to assess, among other things, how effective and 
efficient the initiative has been in terms of achieving the objectives presented in this  IA 
and to decide whether new measures or amendments are needed. It should be noted that 
most indicators will provide an indirect measure of the general objective to increase the 
attractiveness  for  corporates  to  list.  While  the  indicators  will  provide  insights  as  to  the 
effectiveness of the initiative, there are a range of other outside factors that are expected 
to impact the listing behaviour of EU companies much more strongly than this initiative. 
These  include  in  particular  the  stage  of  the  economic  cycle,  market  shocks  and  the 
relative  attractiveness  of  debt  (including  monetary  policy,  tax  treatment  etc.).  The 
evaluation  will  attempt  to  account  for  these  factors  by  drawing  data  and  insights  from 
various data sources, including qualitative feedback from stakeholders.  

ESMA,  Member  States,  exchanges  and  issuers  (companies)  could  provide  the 
Commission with the information necessary for the preparation of  the evaluation. More 
concretely, FESE and exchanges could provide most of the general impact indicators and 
the specific impact indicators linked to MVR shares, such as IPOs by tech companies and 
family-owned company. The data for other specific impact indicators, notably related to 
the  number  and  average  length  of  different  types  of  prospectuses,  the  number  of 
requested delays for disclosure of MAR relevant information and the number and size of 
imposed sanctions could be requested from ESMA (and NCAs).  

Other  indicators  will  be  more  difficult  to  establish.  The  Commission  will  rely  on 
engaging with stakeholders in consultations and workshops as part of the regular better 
regulation  cycle  to  gather  further  data  and  qualitative  input.  In  addition,  it  may  be 
necessary to hire and external contractor to collect further data and qualitative input. This 
concerns  in  particular  data  which  will  not  be  available  directly  and  will  require 

76 

 
 
estimation  and qualitative input  of market  participants and supervisors, such as data on 
costs of regulatory compliance.  

ANNEX 1: PROCEDURAL INFORMATION 

1.  Lead DG, Decide Planning/CWP references 

This  Impact  Assessment  was  prepared  by  Directorate  B  “Horizontal  policies”  and 
Directorate  C  “Financial  markets”  of  the  Directorate-General  for  Financial  Stability, 
Financial Services and Capital Markets Union" (DG FISMA). 

The Decide Planning reference of the file entitled “Review of the listing rules applicable 
to companies issuing securities in the EU" is PLAN/2021/1136. 

The amendments to existing legislation supported by this Impact Assessment have been 
announced in the CMU Action Plan. Moreover, on 15 September 2021 President Von der 
Leyen announced in her letter of intent184 addressed to the Parliament and the Presidency 
of the Council a legislative proposal to facilitate SMEs’ access to capital, which has been 
included in the 2022 Commission work programme185.  

2.  Organisation and timing 

Several  services  of  the  Commission  with  an  interest  in  the  assessment  of  this  initiative 
have been associated in the development of this analysis.  

Three Inter-Service Steering Group (ISSG) meetings, consisting of representatives from 
various Directorates-General of the Commission, were held in 2021 and 2022. 

The  first  meeting  took  place  on  28  October  and  gathered  representatives  from  DG 
COMP,  ECFIN,  EMPL,  ENER,  ENV,  GROW,  JUST,  REFORM,  REGIO,  RTD, 
TAXUD, TRADE, LS and the Secretariat General (SG). 

The second meeting was held  on 7 April 2022,  with  representatives from  DG CLIMA, 
COMP,  CNECT,  ECFIN,  ENER,  GROW,  JUST,  REFORM,  REGIO,  RTD,  TAXUD, 
TRADE, LS and the (SG).  

The third meeting was held on 19 May 2022. Representatives from DG, COMP, ECFIN, 
ENER, ENV, GROW, JUST, REGIO, RTD, TRADE, LS and the (SG) participated. This 
was the last meeting of the ISSG before the submission to the Regulatory Scrutiny Board 
on 8 June 2022. 

3.  Consultation of the RSB 

A draft of the impact assessment was submitted to the Regulatory Scrutiny Board (RSB) 
on  10  June  2022  and  presented  during  a  dedicated  meeting  on  6  July  2022.  The 

184 See p. 4: state_of_the_union_2021_letter_of_intent_en.pdf (europa.eu). 
185 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and 
the  Committee  of  the  Regions  Commission  work  programme  2022  Making  Europe  stronger  together  COM  (2021)  645  final 
cwp2022_en.pdf (europa.eu). 

77 

 
 
 
                                                           
Regulatory Scrutiny Board delivered a positive opinion with reservations on the draft on 
8  July  2022.  The  comments  formulated  by  the  Board  were  addressed  and  integrated  in 
the final version of the impact assessment.  

Issue identified by the Board 

Action taken 

The  report  should  better  put  the  initiative 
into  context.  It  should  explain  that  the 
decision to list is affected by a multitude of 
factors  and  the  Listing  Act  proposal  rather 
than  being  a  panacea  instead  is  limited  in 
scope  and  confined  to  a  targeted  set  of 
measures  aimed  at  further  simplifying  the 
Prospectus  Regulation  and 
the  Market 
Abuse  Regulation  to  make  listing  and 
remaining listed more attractive. 

targeted 

the  proposed 

The report should state more clearly upfront 
that 
legislative 
changes  are  unlikely  to  fully  revive  EU 
public  capital  markets  on  their  own.  It 
should  set  out  the  existing 
legislation 
targeting  other  aspects  of  this.  It  should 
present  a  clear  logic  for  how  the  initiative 
will  articulate  with  related  recent  and 
parallel  initiatives  to  solve  the  underlying 
problems, including the recent initiative on 
insolvency law. 

In Chapter 1.1, it was further clarified that the decision to list and 
to  remain  listed  is  affected  by  a  multitude  of  factors,  most  of 
which  are  outside  the  regulators’  reach.  These  factors  include 
geopolitical  instability,  Brexit,  Covid  and  low  interest  rates,  as 
well  as  the  features  of  the  ecosystem  that  determine  the  cost  of 
services relevant for listing (underwriting services, due diligence, 
legal  advice,  etc.).  It  has  now  been  made  clearer  in  the  Impact 
Assessment  that  the  initiative  does  not  claim  to  address  any  of 
those  elements  directly  and  cannot  be  considered  a  silver  bullet 
that – on its own – will change remarkably the situation. However, 
the impact assessment evaluates a targeted set of measures aiming 
to  reduce  the  regulatory  burden,  where  it  is  considered  to  be 
excessive,  increase  flexibility  for  issuers  and  build  the  necessary 
conditions  for  structural  improvements  to  occur  over  time.  The 
targeted  regulatory  changes  envisaged  for  the  Prospectus  and 
Market  Abuse  regulations,  as  delineated  in  Chapter  8.1,  would 
thus  aim  at  improving  the  regulatory  regime  and  generally 
encouraging  the  development  of  a  more  favourable  listing 
ecosystem, contributing to the wider CMU objective of improving 
access to financing by companies.  

In  addition  to  the  above  explanation,  in  Chapter  1.1.  as  well  as 
Annexes  13  and  14,  it  was  noted  that  this  proposal  should  be 
analysed  in  conjunction  with  other  proposed  initiatives.  The 
proposed amendments are part of a broader package of measures 
outlined  in  the  CMU  Action  Plan,  which  aim  to  address  other 
issues  currently  preventing  companies  from  raising  capital  on 
public  markets.  The  Listing  Act  focuses  on  alleviating  the 
regulatory  requirements  that  can  deter  a  company  from  deciding 
to  list  or  to  remain  listed  (‘supply-side’).  However,  other  factors 
may  deter  issuers  from  listing,  such  as  a  narrow  investor  base, 
especially for SMEs, and a more favourable tax treatment of debt 
over equity.  
These elements are addressed by other ongoing initiatives, which 
include the creation of a consolidated tape through the review of 
MiFIR, the creation of an EU Single Access Point (ESAP), as well 
as  the  proposal  to  reduce  the  debt-equity  bias  for  investors 
(DEBRA).  Furthermore,  a  series  of  Commission  initiatives  will 
further seek to strengthen the investor base for listed equity. This 
includes  the  EU  SME  IPO  Fund,  the  CRR  and  Solvency  II 
reviews and, lastly, the Retail Investment Strategy.  
It was also clarified that many of these initiatives are currently in 
the legislative phase and that, as the final contours of the political 
agreement are not known yet, it would be impossible to measure 

78 

 
 
 
problem 

The  report  should  present  the  evidence  on 
for 
the 
intervention  in  a  balanced way,  taking  into 
account all available information both from 
issuer and investor perspectives. 

justification 

and 

in 

failure 

It should present the concrete evidence that 
demonstrates  regulatory 
the 
Market  Abuse  and  Prospectus  regulations. 
In  particular,  it  should  better  explain  the 
rationale  for  proposing  changes  to  the 
Market  Abuse  Regulation  related  to  inside 
information  given 
the  European 
Securities and Markets Authority concluded 
that the notion of inside information should 
be  left  unchanged,  and  their  guidance 
would  suffice  to  provide  the  necessary 
clarification. 

that 

their individual or combined impact, as well as the extent to which 
they  will  contribute  to  a  more  favourable  listing  environment  in 
the EU (including the number of potential additional IPOs). 

A new sub-chapter 2.2.4 was added to better present stakeholder’s 
views on the problem and justification to act. Both favourable and 
dissenting  opinions  on  the  potential  measures  are  presented 
concerning  the  actions  considered  in  the  pre-IPO  phase  (MVR 
share  structures),  the  IPO  phase  (Prospectus)  and  the  post-IPO 
stage (MAR), breaking down the responses received to the public 
consultation  by  stakeholder  type.  The  stakeholder  views  are  also 
now  more  balanced  throughout  the  impact  assessment,  for 
example throughout Chapter 6 (impacts of the policy options).  

in 

In  Chapter  2.2.2,  the  impact  assessment  now  presents  a  more 
detailed explanation of why the Prospectus regulation needs to be 
amended.  It  clarified  both 
that  data  and  responses  from 
stakeholders confirmed that the current rules that lead to excessive 
disclosure contribute to both very lengthy and also very divergent 
prospectuses across Member States, and that the current rules do 
not sufficiently frame supervisory scrutiny by NCAs, which leads 
to further differences in NCAs’ treatment of prospectuses. 
In  Chapter  2.2.3,  the  impact  assessment  now  clarifies  better  the 
rationale  behind  the  proposals  to  review  the  Market  Abuse 
Regulation. It presented evidence (also contained in Annex 8) on 
the  wide  divergences  across  Member  States  in  the  number  of 
disclosures  of  inside  information,  which  is  illustrative  of  the 
interpretation.  Evidence  was  also 
important  differences 
presented around the divergent approaches surrounding the use of 
the  mechanism  for  delaying  the  disclosure  of  inside  information 
across Member States.  
Finally, the impact assessment now explains, in Chapter 2.2.3, that 
while  ESMA in its  Final Report  on the  MAR  Review  concluded 
that the notion of inside information should be left unchanged and 
that  ESMA’s  guidance  would  suffice  to  provide  the  necessary 
clarification,  the  slight  majority  of  the  stakeholders  (52%)  that 
expressed  an  opinion  on  this  public  consultation’s  question 
considered  that  ESMA’s  guidance  would  not  be  fully  sufficient. 
Similarly,  both  the  CMU  HLF  and  the  TESG  concluded  that 
changes to the level 1 text would be needed in order to instil full 
legal clarity and reduce compliance costs for issuers. Annex 2 and 
8 contain more details on this. In particular, Annex 8 summarises 
the  assessment  carried  out  by  the  Commission  in  relation  to  the 
most relevant MAR provisions for which ESMA’s conclusions are 
not  in  line  with  the  feedback  received  from  experts  and 
stakeholders.  

79 

 
 
The  report  should  be  clearer  on 
the 
available  evidence  on  the  effects  of  MVR 
share  structures  on  listing  decisions  and 
investors  willingness  to  invest  in  these 
trade-offs).  It  should 
shares  (potential 
acknowledge 
the 
the  uncertainties 
conclusions reached in the analysis 

in 

Given the uncertainties related to the effects 
on incentives both for issuers and investors, 
the  report  should  explain  the  risk  that  the 
expected increase in Initial Public Offerings 
may not fully materialise. 

The  main  text  of  the  impact  assessment,  in  Chapter  2.2.1,  now 
further  clarifies  why  loyalty  shares  and  other  alternative  share 
structures  (other  than  MVR  share  structures)  do  not  constitute 
viable options and were hence discarded at an early stage: loyalty 
shares are enhanced control mechanisms designed to foster long-
term  shareholding  among  existing  investors  rather  than  for 
founders  and  issuers  to  maintain  control  of  their  company  when 
listing (i.e. when issuing new equity).  
Moreover,  the  impact  assessment  (Chapter  2.2.1)  now  explains 
that  it  is  difficult  to  show  a  direct  positive  correlation  between 
MVR share structures and the number of IPOs, as the decision to 
list is complex and is influenced by many factors: controlling for 
the idiosyncratic factors would require a large data set that covers 
macro, financial and firm-specific variables, which, unfortunately, 
is not available in this case. It would thus be impossible to draw 
any  meaningful statistical inferences based on the available data. 
By  way  of  an  imperfect  proxy,  it  can  however,  be  observed  that 
there  were  276  IPOs  in  2021  in  the  jurisdictions  that  allowed 
MVR  share  structures  (representing  38%  of  the  EU  GDP)  and 
only  103  IPOs  in  those  that  did  not  (representing  62%  of  EU 
GDP).  In  the  US,  the  popularity  of  MVR  share  structures  has 
grown  noticeably  in  the  last  years,  reaching  33%  of  all  IPOs  in 
2021. Nevertheless, it would not be possible to ascertain that those 
98  companies  that  listed  in  the  US  in  2021  with  MVR  share 
structures  would  not  have  listed if  these  share  structures  had  not 
been allowed in the US (or would have listed elsewhere). It  can, 
however, be assumed with a reasonable degree of certainty, based 
on  the above  mentioned  research and  surveys  of issuers,  that  the 
ability  to  list  with  MVR  share  structures  was  an  important 
consideration in the overall decision to list. 

The  impact  assessment  now  further  details  in  Chapter  6  the 
analysis carried out to identify the magnitude of costs involved in 
listing and staying listed. However, it also clarifies that there is no 
good  empirical  basis  to  translate  the  cost  savings  expected  from 
this initiative into a number for the increase in future IPOs. This is 
because  the  decision  to  list  is  complex,  and  this  Impact 
Assessment  refrains  from  putting  forward  any  estimate  of  how 
many IPOs an individual (or joint) envisaged cost saving(s) would 
lead  to  (with  one  notable  exception,  where  such  an  exercise 
appears justifiable (see section 6.1.1.)). It is made clear, however, 
that  the  result  should  be  considered  as  a  mere  illustration  of  the 
possible magnitude of the effect, rather than its exact estimate.  

Nevertheless, the impact assessment now makes it clear that while 
the initiative will not address all obstacles to listing, it will remove 
those related to the EU regulation from the list of factors that are 
holding  back  the  development  of  more  active  equity  markets  in 
the EU.  

80 

 
 
reduction 

It  should  explain  why 

It should discuss how the preferred options 
would affect investor protection and market 
the 
integrity. 
proposed 
reporting 
requirements  will  not  lower  the  level  of 
necessary  safeguards  requested  under  the 
Market  Abuse  Regulation,  the  Markets  in 
Financial  Instruments  Directive  II  and  the 
Prospectus  Regulation  and  how  this  will 
affect investor confidence. 

of 

It  should  discuss  the  risk  of  the  proposed 
initiatives  resulting  in  unintended  legal 
loopholes. 

The  way 
that  stakeholder  views  are 
reported gives the impression that the views 
are  only  taken  into  account  when  they 
support  the  argument.  The  report  should 
provide a more balanced presentation of the 
different  views  expressed  by  different 
categories  of  stakeholders  on  the  problem 
definition,  the  options  and  their  impacts. 
Dissenting  views  should  also  be  presented 
clearly  to  allow  the  reader  to  gain  a 
level  and 
impression  of 
balanced 
sources of support for the initiative. 

the 

In  Chapter  6,  the  impact  assessment  now  elaborates  on  how  the 
preferred  options  affect  investor  protection  and  market  integrity. 
When  considering  options,  it looks  at  how  each  of  those  options 
would  maintain  an  appropriate  balance  between  adequate  and 
effective  investor  protection,  safeguarding  market  integrity  and 
reducing the administrative burden for issuers. 
Regarding  Prospectus  and MAR,  the  impact  assessment  explains 
now  in  more  detail  in  Chapter  8.1  the  impact  of  the  proposed 
changes on investor protection and confidence. On Prospectus, it 
underlined that disclosure of and access to all relevant information 
are maintained, to ensure that none of the proposed measures will 
create  the  need  for  investors  to  perform  any  additional  due 
diligence  and  that  a  high  level  of  investor  protection  will  be 
safeguarded.  On  MAR,  the  impact  assessment  explained  that  the 
proposed  alleviations  to  reduce  costs  and  the  administrative 
burden for issuers were carefully calibrated to avoid a detrimental 
impact on market integrity and investor protection, which are the 
core  objectives  of  MAR.  No  negative  impacts  on  investor 
protection  or  investor  confidence  were  identified  in  the  case  of 
MiFID II, due to a limited nature of considered changes. 

Chapter  8.1  was  expanded  to  better  present  the  result  of  the 
assessment of the overall impact of the preferred option, including 
the  risk  of  creating  unintended  loopholes  for  each  phase  of  the 
IPO.  Unintended  legal  loopholes  arising  from  the  proposed 
changes to the Prospectus Regulation were carefully assessed and 
addressed.  Incorporation  by  reference  and  broader  an  exemption 
from  the  obligation  to  draw  up  a  prospectus  are  counteracted  by 
other  requirements  to  safeguard  the  high  level  of  investor 
protection  (e.g.  on  the  access  to  information  or  additional 
documents that would need to be made public).In the case of the 
post-IPO phase (MAR), it is explained why by opting for a non-
exhaustive  list  of  events  the  possibilities  of  leaving  out  certain 
events is voided therefore averting any potential loopholes. 

As  noted  above,  the  impact  assessment  was  complemented  by  a 
new dedicated section (Chapter 2.2.4) on “Stakeholders’ views on 
problem  drivers”,  where  more  precise  figures  on  stakeholders’ 
views are presented, breaking them down by stakeholder type and 
including also minority opinions.  
In addition, section 6 was extended to better lay out stakeholders’ 
views in the context of the impact of the policy options on MVR 
share  structures,  Prospectus  and  MAR.  Finally,  Annex  2  was 
further  expanded  to  cover  the  views  of  stakeholders  in  more 
detail.  

81 

 
 
impact  assessment  now 

The 
the 
accompanying  measures  in  annexes  10  and  11,  which  included 
measures related to MAR, Prospectus and MVR share structures. 
Here  are  some  examples  of  how  RSB’s  comments  for  specific 
accompanying measures were addressed: 

further  elaborates  on 

Annexes 10 and 11 provide an extensive list 
of  accompanying  measures  that  have  not 
been  impact  assessed.  The  analysis  should 
give  some  scale  of  magnitude  on  the 
these  accompanying 
expected 
measures  may  have 
the 
in  achieving 
objectives at minimum cost. 

impacts 

  Market  soundings:  the  impact  assessment  now  explains  that  the 
effects  of  a  simplified  and  optional  regime  had  been  considered 
together,  taking  into  account  that  quantifications  would  prove 
difficult.  By  gearing  the  safe-harbour  clause  towards  the  most 
sensitive  market  sounding  cases,  the  regulatory  costs  would 
decrease,  without  compromising  market  integrity.  Overall,  the 
envisaged  changes  would  be  of  a  streamlining  nature,  leading  to 
negligible impacts on the cost of compliance and market integrity 
compared to the status-quo. 

  URD:  the  impact  assessment  now  clarifies  that  the  current  URD 
regime  is  not  functioning  correctly.  It  is  explained  how  the 
measures that would be introduced would not have any impact on 
market  integrity  and  investor  protection.  By  streamlining  and 
allowing  the  use  of  English  to  elaborate  the  URD,  it  is  expected 
that there will be a minor positive change in the use of this type of 
a document compared to the current situation. 

  Cross  market  order  book  framework  (Annex  11):  More 
information  was  gathered  from  ESMA  and  an  NCA  on  the 
potential  costs  and  interests  of  regulators  in  this  measure  and  its 
potential impacts. 

4.  Evidence, sources and quality 

For  the  purpose  of  the  impact  assessment,  the  Commission  services  collected  a 
significant  amount  of  data  directly  from  securities  exchanges,  issuers  and  SME 
associations  as  well  as  ESMA.  Moreover,  TESG  (in  force  between  October  2020  and 
May  2021)  provided  some  evidence  as  well  as  the  input  from  the  market  itself.  In 
addition, the Commission contracted a study on Primary and Secondary Equity Markets 
in the EU from Oxera in November 2020, which provides a very detailed overview of the 
market supported by useful data.  

The  data  collected  include  statistics  on  the  activity  of  companies  listing  on  EU  public 
markets and characteristics of documents used to do so. Furthermore, the data collected 
from  stakeholders  informed  of  the  monitoring  activity  of  national  regulators  on  market 
abuse. Summaries of these data can be found in Annexes 2 and 4. 

DG  FISMA  also  organised  two  technical  meetings  with  industry  stakeholders.  These 
meetings  were  held  on  5  and  8  April  2022  (See  Annex  2  for  more  details  on  those 
technical meetings). 

The  impact  assessment  was  conducted  based  on  extensive  qualitative  and  quantitative 
evidence from the public and targeted consultations on  the ‘Listing act’: making public 

82 

 
 
 
 
 
capital  markets  more  attractive  for  EU  companies  and  facilitating  access  to  capital  for 
SMEs’ (which run between 19 November 2021 and 25 February). Moreover, it was based 
on  a  number  of  ESMA’s  Reports:  MAR  Review  report186  as  well  as  the  Consultation 
paper  on  MAR  review  report187,  Report  on  EEA  prospectus  activity  and  sanctions  in 
2020188,  Report  on  trends,  risks  and  vulnerabilities  no.  1  2022  –  structural  market 
indicators189, MiFID II Review report on the functioning of the regime for SME Growth 
Markets190, in addition to specific data requests (see Annex 4 for more details).  

Other  sources  used  included  extensive  academic  literature  and  research,  notably  from 
various industry associations (AFME, EuropeanIssuers, FESE, ICMA, World Federation 
of Exchanges, etc). 

186 ESMA MAR Review report, 23 September 2020, ESMA publishes outcomes of MAR Review (europa.eu).  
187 Consultation paper on MAR review report, October 2019 mar_review_-_cp.pdf (europa.eu). 
188 ESMA report on EEA prospectus activity and sanctions in 2020, July 2021  
esma32-382-1153_prospectus_activity_and_sanctions_report_2020.pdf (europa.eu). 
189 ESMA report on trends, risks and vulnerabilities no. 1 2022 – structural market indicators xls  
esma50-165-2058_trv_1-22_risk_monitor.pdf (europa.eu) 
190 ESMA MiFID II Review report on the functioning of the regime for SME Growth Markets, March 2021  
final_report_on_sme_gms_-_mifid_ii.pdf (europa.eu). 

83 

 
 
 
 
 
                                                           
 
ANNEX 2: STAKEHOLDER CONSULTATION  

Throughout  the  Commission’s  mandates,  companies’  and  especially  SMEs’  access  to 
public markets has been continuously evaluated. Issues relating to regulatory burden on 
companies when accessing public markets were raised in the context of the CMU HLF, 
TESG and the 2020 CMU Action Plan. To obtain further evidence on these issues, a Call 
for  Evidence  as  well  as  public  and  a  targeted  consultations  on  the  listing  act  were 
launched in November 2021. The consultations remained open for a period of 14 weeks 
(between 19 November 2021 and 25 February). 

The  Commission  services  also  organised  two  technical  meetings/workshops  with 
industry stakeholders in April 2022. 

1.  Public and targeted consultations on the listing act: making public capital markets 

more attractive for EU companies and facilitating access to capital for SMEs  

The  consultation  focused  on  four  main  areas  with  specific  questions  on  the  existing 
regulatory  framework:  (1)  Prospectus  Regulation;  (2)  Market  Abuse  Regulation;  (3) 
MiFID  II  and  (4)  other  possible  areas  of  improvement.  The  public  section  of  the 
consultation included general questions regarding the overall attractiveness of listing on 
EU markets and the potential hindrances caused by the current regulatory framework.  

The Commission received 109 responses, sent by stakeholders from 22 Member States, 
the US, the UK and Switzerland191. 

The type of organisations most widely represented were company/business organisations, 
which  accounted  for  35%  of  the  total,  followed  by  business  associations  (32%)  and 
public authorities (16.5%). The sector of activity with the strongest representation were 
operators  of  trading  venues  (20%),  followed  by  investment  banks  (10%)  and  corporate 
issuers (9%).  

General Questions 

The questionnaire enquired about respondents’ views on whether EU legislation has been 
successful  in  achieving  certain  objectives.  While  the  overwhelming  majority  of 
respondents  (70%,  or  59  respondents)  stated  that  EU  legislation  has  been  successful  in 
providing  an  adequate  level  of  investor  protection,  respondents’  views  were  split  on 
whether  EU  legislation  has  been  successful  in  i)  ensuring  adequate  access  to  finance 
through EU capital markets; ii) attracting an adequate base of professional investors, and 
iii)  providing  a  clear  legal  framework.  A  majority  of  the  respondents  believed  that  EU 
legislation has not been successful in attracting an adequate base of retail investors and in 
integrating  EU  capital  markets  (48%,  or  41  respondents  and  40%,  or  33  respondents 
respectively).  

191In  particular,  responses  came  from  15  public  authorities  (4  ministries  of  finance,  10  NCAs,  1  national  agency);  3  chambers  of 
commerce,  17  exchanges  and  2  operators  of  market  infrastructure  other  than  trading  venues;  40  industry  associations,  4  NGOs,  4 
consultancies/law firms, 4 academic institution and 5 private citizens. Those stakeholders come from 22 Member States: AT, BE, DE, 
DK, EE, EL, ES, FI, FR, HR, HU, IT, LI, LV, LU, MT, NL, PL, PT, RO, SK and SE. 

84 

 
 
 
 
 
 
                                                           
Respondents were then asked on the relevance of a group of specific factors in explaining 
the  lack  of  attractiveness  of  EU  capital  markets.  As  regards  regulated  markets, 
respondents identified the compliance costs linked to regulatory requirements as well as 
the lack of liquidity of securities as the most important factors (72%, or 66 respondents 
and  53%,  or  44  respondents,  respectively,  considered  them  as  important  -  this  includes 
the vast majority of issuers, exchanges, investors and some NCAs), followed by the lack 
of  flexibility  for  issuers  due  to  regulatory  constraints  around  certain  shareholding 
structures  and  listing  options  and  the  lack  of  attractiveness  of  SMEs’  securities  (which 
were  considered  important  by  47%,  or  39  respondents  and  46%,  or  39  respondents 
respectively). As regards SME growth markets, respondents expressed the same views to 
those related to regulated markets except for the lack of liquidity of securities, which was 
deemed as an important factor by 58% (45 respondents).  

When asked about the most the most important costs faced by issuers in the IPO process, 
respondents  mentioned  fees  and  commissions  charged  by  banks  for  the  coordination, 
book  building,  under-writing,  placing,  marketing  and  the  roadshow  (36%,  or  25 
respondents, stated it is “very important” and 23%, or 16 respondents, stated it is “rather 
important”). Another cost that was cited as “very important” were the fees paid to legal 
advisers  for  the  tasks  linked  to  the  preparation  of  the  IPO  (24%,  or  17  respondents 
replied “very important” and 30%, or 21 respondents, answered “rather important”). 

When asked about the most important costs of remaining listed, respondents pointed to 
fees to auditors, to ensure compliance with the listing regulation (19%, or 12 respondents 
replied  “very  important”  and  33%,  or  21  respondents  answered  “rather  important”). 
Respondents also pointed to significant corporate governance costs (8%, or 5 respondents 
stated  that  this  cost  is  “very  important”  and  27%,  or  17  respondents  replied  “rather 
important”)  and  ongoing  fees  to  legal  advisors  (18%,  or  11  respondents  replied  “very 
important” and 24%, or 15 respondents answered “rather important”). 

Respondents  were  further  asked  if  the  rules  related  to  listing  and  the  rules  related  to 
remaining listed created a burden disproportionate with the investor protection objectives 
that  these  rules  are  meant  to  achieve.  The  majority  of  respondents  answered  that  both 
listing  and  post-listing  rules  create  a  disproportionate  burden  (52%,  or  42  respondents 
and 57%, or 45 respondents respectively). 

A  large  majority  of  39  respondents  (62%)  agreed  that  allowing  issuers  to  use  MVR 
shares  when  going  public  would  increase  the  propensity  of  EU  companies  to  list.  This 
included  issuers,  exchanges,  NCAs  and  financial  intermediaries.  A  majority  of 
stakeholders  also  agreed  that  clarifying  the  conditions  around  dual  listing  (51%,  or  25 
respondents)  and  lowering  the  minimum  free  float  requirements  (48%,  or  27 
respondents) would increase the propensity of issuers to list. 

Finally, when asked about the main reasons behind the low level of investments in SME 
shares and bonds, a large majority of 34 respondents (73%) cited the lack of visibility of 
SMEs,  which  results  in  low  liquidity  for  these  securities,  as  the  most  important  factor, 
followed  by  the  lack  of  tax  incentives  to  invest  in  SME  securities  (64%,  or  27 
respondents). 

Questions on the Prospectus Regulation 

Overall, a large amount of respondents admitted that the average cost of the prospectus is 
difficult  to  estimate.  These  respondents  stated  that  the  cost  depends  on  various  factors, 

85 

 
 
including legal fees, audit costs, complexity of the business. The general range given by 
respondents was between EUR 1 000 and EUR 1 000 000.192 Respondents gave different 
responses  regarding  what  they  find  most  cumbersome  and  costly  when  drawing  up  the 
prospectus.193  Most  respondents  claimed  that  they  did  not  have  the  relevant  data  to 
calculate how much costs they are saving with the EU growth prospectus compared with 
using a standard prospectus. In a similar vein, most respondents answered that they did 
not  have  sufficient  data  to  estimate  the  cost  of  an  EU  Recovery  prospectus  (only  few 
indications of costs were provided).  
The majority of respondents (35 stakeholders accounting for 59%194) considered that the 
standard  prospectus  in  its  current  form  does  not  strike  an  appropriate  balance  between 
effective investor protection and the proportionate administrative burden for issuers and 
that  it  should  be  significantly  alleviated.  This  was  in  particular  the  view  of  exchanges, 
banking associations and issuers. Amongst those who believed that the prospectus regime 
strikes  an  appropriate  balance  were  ESMA  and  some  NCAs.  Many  stakeholders 
highlighted that prospectuses are too lengthy for investors. Some respondents suggested 
to  replace  a  prospectus  by  a  more  streamlined  and  efficient  type  of  a  document.  The 
majority of respondents (18 stakeholders, or 53%195) believed that the prospectus should 
be further alleviated rather than replaced outright.  
48% (20 respondents196) believed that the prospectus regime for non-equity securities has 
been  successful  in  facilitating  fundraising  through  capital  markets,  while  only  19%  (8 
respondents)  noted  that  such  regime  has  not  been  successful.  Some  respondents, 
however,  suggested  limited  improvements  to  the  wholesale  non-equity  prospectus 
regime, notably in the case where a lot of information is already available in published 
financial reports (reinforcing the case for more intensive incorporation by reference). 
19 respondents (48%197) supported the alignment of the prospectus for retail non-equity 
securities  with  the  prospectus  for  wholesale  non-equity  securities  (against  25%,  or  10 
respondents that would disagree, and the rest that expressed no opinion). Some suggested 
making a distinction depending on whether the issuer is well known and a large amount 
of  information  is  publicly  available.  Some  respondents  considered  that  retail  investors 
needed  more  comprehensive  information.  For  most  respondents,  the  accessibility  for 
retail investors is of most importance. Opinions of NCAs on this subject differed.  

Many  respondents,  mainly  NCAs,  representatives  of  exchanges,  issuers,  institutional 
investors,  academics  and  financial  intermediaries  (21  respondents  accounting  for 
44%198), did not believe that the EU Growth prospectus strikes a proper balance between 
investor  protection  and  the  reduction  of  administrative  burdens  for  SMEs  (while  only 
13%  (respondents)  believe  it  does,  and  the  rest  expressed  no  opinion).  A  majority  of 
those  who  responded  to  this  question  stated  that  the  EU  Growth  prospectus  should 
remain the prospectus for SMEs but should be alleviated.  

192 However, for the purposes of the IA, the estimation provided by Deutsche Börse (and validated by Euronext in a bilateral email 
exchange), encompassing all types of prospectuses were taken as reference. Those estimation range from EUR 20 000 to EUR 300 
000 (See Tables 4 and 5 of Annex 4).  
193 See Table 4 of Annex 6. 
194 See section 4.1 of Annex 6 for more details. 
195 See section 4.1 of Annex 6 for more details. 
196 See section 4.1 of Annex 6 for more details. 
197 See section 4.1 of Annex 6 for more details. 
198 See section 4.3 of Annex 6 for more details. 

86 

 
 
                                                           
Regarding how the prospectus should be prepared and presented, a vast majority made up 
of  50  respondents  (93%199)  believed  that  it  should  only  be  provided  in  an  electronic 
format  (as  long  as  it  is  published  in  accordance  with  Article  21  of  the  Prospectus 
Regulation). Furthermore, 36%200 (21 respondents) agreed that the prospectus should be 
drawn up only in English as the language customary in the sphere of international finance 
and  an  additional  34%  (20  respondents)  agreed  on  the  same  statement  except  that  the 
summary should be exempted from this rule).  

Regarding secondary issuances, respondents’ views were split. Despite a slight majority 
composed of 31 respondents (51%201) considered that the prospectus requirement should 
not  be  lifted  for  secondary  issuances,  a  significant  minority  of  26  respondents  (43%) 
considered that issuers listed continuously for at least 18 months on a regulated market or 
an  SME  growth  market,  should  not  be  required  to  publish  a  prospectus  for  subsequent 
issuances (of fungible securities already covered by a published prospectus).  

Regarding the EU Recovery prospectus, there were only few responses with most of the 
respondents indicating that they have not  yet  seen a major uptake in  the use of  the EU 
Recovery  prospectus,  and  some  stakeholders  pointing  out  that  the  application  of  the 
CMRP is very recent (March 2021). As shown in Figure 19 of Annex 6, the largest share 
of  stakeholders  who  responded  to  the  question  were  in  favour  of  making  the  EU 
Recovery  prospectus  permanent.  They  also  supported  its  introduction  on  a  permanent 
basis  for  secondary  issuances  of  all  types  of  securities  (both  equity  and  non-equity 
securities).  
A majority of 23 respondents (54%202) did not think that there is alignment/convergence 
in  the  way  NCAs  assess  the  completeness,  comprehensibility  and  consistency  of  draft 
prospectuses  that  are  submitted  to  them  for  approval.  The  majority  of  26  respondents 
(58%203)  noted  that  the  minimum  period  of  6  working  days  between  the  publication  of 
the prospectus  and the end of an offer of shares  should be relaxed in order to  facilitate 
swift  book-building  processes.  Views  were  evenly  split  among  respondents  on  whether 
the timeliness for approval of the prospectus are adequate as prescribed in Article 20 of 
the Prospectus Regulation.  

Respondents could not agree on why there is a small uptake of the URD among issuers 
across  the  EU.  Respondents  generally  saw  the  URD  contents  requirements  as  too 
burdensome,  with  excessive  costs  associated  to  regularly  updating,  supplementing  and 
filing the URD, a small time period required to benefit from the status of frequent issuer, 
and  the  URD  supervisory  process  being  too  lengthy.  A  majority  (16  respondents,  or 
52%204) believed that, since the URD can only be used by companies already  listed, its 
contents should be aligned to the level of disclosures for secondary issuances (instead of 
primary issuances as currently is the case) to increase its uptake by both equity and non-
equity  issuers.  Many  respondents  (17  stakeholders  accounting  for  49%)  believed  that 
issuers  should  be  granted  the  possibility  to  draw  up  the  URD  only  in  English  for 
passporting purposes, notwithstanding the specific language requirements of the relevant 
home  Member  State  (20%,  or  7  respondents  would  disagree,  and  the  rest  expressed  no 

199 See section 4.1 of Annex 6 for more details. 
200 See section 4.1 of Annex 6 for more details. 
201 See section 4.4 of Annex 6 for more details. 
202 See section 4.7 of Annex 6 for more details. 
203 See section 4.1 of Annex 6 for more details. 
204 See section 4.5 of Annex 6 for more details. 

87 

 
 
 
 
 
 
                                                           
opinion).  As  regards  the  way  how  the  URD  regime  could  be  further  simplified, 
respondents noted that the URD should not duplicate the information already disclosed.  
The majority of respondents (21 respondents accounting for 53%205) considered that the 
temporary  regime  for  supplements  laid  down  in  Articles  23(2a)  and  23(3a)  of  the 
Prospectus  Regulation  provided  additional  clarity  and  flexibility  to  both  financial 
intermediaries and investors and should be made permanent. 

As  regards  the  equivalence  regime  under  Article  29  of  the  Prospectus  Regulation,  the 
number  of  stakeholders  who  considered  that  it  should  be  amended  (12  respondents 
accounting  for  385%206)  outnumbers  the  share  stakeholders  that  believed  otherwise  (5 
respondents accounting for 16%).  
Finally, the majority of stakeholders (27 respondents accounting for 56%207) considered 
that  Member  States  should  not  be  allowed  to  exercise  discretion  over  the  exemption 
threshold set out in Article 3(2) of the Prospectus Regulation with a view to tailoring it to 
national specificities of their markets (see section 4.7 of Annex 6 for more details). 

Questions on the Market Abuse Regulation 

When  asked  if  ESMA’s  clarifications  on  the  notion  of  inside  information  would  be 
sufficient,  respondents’  views  were  split.  However,  a  slight  majority  of  those  who 
expressed an opinion believed that ESMA’s guidelines would not be sufficient to provide 
the necessary clarifications around the notion of inside information.208 Those respondents 
(which 
financial 
intermediaries  and  NCAs)  expressed  concerns  that  ESMA’s  guidance  would  not  be 
effective in removing legal uncertainty. They stated that the notion of inside information 
is too broadly defined and that too much information has to be published. According to 
them, a rethink of the notion of inside information is required, which can only be carried 
out in the context of the Level 1 regulation.  

representatives  of  banks, 

trading  venues, 

included 

issuers, 

Respondents  were  further  asked  whether  MAR  should  distinguish  between  a  notion  of 
inside information for the purposes of prevention of insider dealing and a notion of inside 
information  triggering  the  disclosure  obligation.  A  majority  of  respondents  who 
expressed  an  opinion  believed  that  a  distinction  between  the  two  notions  would  be 
appropriate.209 Moreover, a majority of respondents who expressed an opinion noted that 
it should be clarified that inside information relating to a multi-stage process need only 
be made public once the end stage is reached, unless a leakage has occurred.210  

The  majority  of  respondents  did  not  share  the  opinion  that  relying  on  a  concept 
(definition) of material events to clarify the notion of inside information would be useful. 
They  were  concerned  that  such  an  amendment  would  only  shift  uncertainty  from  the 
notion  of  inside  information  towards  the  concept  of  material  events.  They  furthermore 
highlighted  that  such  a  change  would  affect  market  integrity  because  it  would  add 

205 See section 4.8 of Annex 6 for more details. 
206 See section 4.9 of Annex 6 for more details. 
207 See section 4.6 of Annex 6 for more details. 
208 For 52 respondents who expressed opinion on that matter, 25 thought that ESMA’s guidelines would be sufficient and 27 were of 
the opposite opinion.  
209 19 respondents for 23 respondents who expressed a view in that regard. 
210 16 respondents for 21 respondents who expressed a view in that regard. 

88 

 
 
                                                           
complexity  and  require  time  to  adapt  the  established  case  law,  thus  ensuing  (at  least 
temporary) legal uncertainty and raising compliance costs. 

Half  of  respondents  who  expressed  an  opinion  (25  stakeholders  accounting  for  50%) 
considered  that  the  revision  of  ESMA’s  guidelines  on  delayed  disclosure  under  MAR 
would be sufficient to provide the necessary clarifications around the conditions to delay 
disclosure. They argued that ESMA guidelines are a flexible tool that may be easily and 
quickly  amended  if  the  guidelines  eventually  prove  to  be  inadequate  (contrary  to  EU 
legislation that follows a lengthy adoption process). The respondents who did not believe 
that ESMA’s guidelines on delayed disclosure would be sufficient argued that difficulties 
of interpretation stem from notions set out in Level 1 and thus should not be addressed by 
supervisory guidance. They also noted that the current conditions allowing a company to 
delay the disclosure of inside information appear to be overly restrictive and contribute to 
legal  uncertainty  for  issuers.  Specifically,  the  condition  requiring  that  “the  delay  is  not 
likely to mislead the public” is deemed as difficult to assess.  

Respondents were asked if issuers of plain vanilla bonds should have the same disclosure 
obligations as issuers of equity instruments or if it would suffice to limit the disclosure 
obligation only to information regarding their ability to repay their debt. The majority of 
respondents were in favour of the second option and stated that information regarding the 
ability  to  repay  the  debt  was  sufficient  given  that  bonds  are  priced  differently  in 
comparison to equity products. 

The  overwhelming  majority  of  39  respondents  (72%)  were  in  favour  of  an  increased 
threshold  for  the  reporting  of  managers’  transactions  under  Article  19(8)  MAR.  They 
stated that such an increase would not harm market integrity. The respondents however 
maintained that managers’ transactions should be publicly disclosed by NCAs.  

Regarding  insider  lists,  there  was  consensus  among  respondents  that  the  requirement 
needs to be simplified for all issuers to ensure that only the most essential information for 
identification purposes is included. 

When asked if respondents considered that the ESMA’s limited proposals to amend the 
market sounding procedure are sufficient, while providing a balanced solution to the need 
to simplify the burden and maintaining the market integrity, the majority of respondents 
disagreed (28 stakeholders accounting for 62%). Furthermore, while respondents were in 
favour of the TESG proposal to exempt private equity placements from market sounding 
rules,  they  did  not  consider  the  extension  of  this  rule  only  to  SME  growth  markets  as 
useful. 

When asked about sanctions under the current MAR regime, the majority of respondents 
(22 respondents accounting for 51%), including representatives of banks, trading venues, 
issuers and financial intermediaries, shared the opinion that the current punitive regime is 
not  proportionate  to  the  objective  sought  by  legislation.  They  stated  that  there  is  no 
differentiation based on the size of an issuer and the market size and that it is not clear 
which infringements can fall under criminal sanctions. Respondents were concerned that 
a  possible  jail  sentence  may  be  excessive,  especially  for  unintentional  violations  (i.e. 
related to disclosures). 

Respondents  seemed  divided  in  their  opinion  on  whether  the  maximum  administrative 
pecuniary sanctions are a detrimental factor when making a decision to list. A majority of 
the  respondents  that  responded  to  the  question  (63%  of  SME  issuers  and 53%  of  other 

89 

 
 
issuers), however, noted that the administrative pecuniary sanctions is an important factor 
on  a  company’s  decision  to  list  and  it  has  a  higher  impact  in  case  of  companies 
concerning  potential  listing  on  an  SME  growth  market  (i.e.  of  higher  relevance  for 
smaller issuers).  

The  majority  of  respondents  expressed  a  preference  for  a  decrease  of  maximum 
administrative pecuniary sanctions for infringements of Articles 17, 18 and 19 for SME 
growth  markets  and  of  Article  17  for  other  markets.  They  were  also  in  favour  of 
decreasing the maximum administrative pecuniary sanctions for infringements of Article 
30(1)(a)  other  than  the  ones  defined  in  Articles  16,  17,  18  and  19  for  issuers  on  SME 
growth markets. 

Almost  40%  of  respondents  that  responded  to  the  question  found  that  the  total  annual 
turnover according to the last available accounts approved by the management body as an 
inadequate  criterion  for  imposing  sanctions  that  should  be  replaced.  Respondents  also 
were in favour of removing the possibility of applying criminal sanctions in the case of 
non-compliance with the requirements set out in Articles 16, 17, 18, 19 and 30(1)(b) and 
highlighted  that  these  infringements  are  mostly  administrative  in  nature  and  the  breach 
would not have a direct impact on market integrity. 

Questions on MiFID II 

The majority of respondents (21 respondents accounting for 60%) saw merit in including 
in Level 1 the conditions under which an operator of an MTF may register a segment of 
the  MTF  as  an  SME  growth  market.  They  highlighted  that  this  would  enhance  legal 
clarity. They added that such an amendment could also incentivise more MTFs to register 
SME GM segments.  

The overwhelming majority of respondents (59%, or 23 respondents) were in favour of 
further  clarifying  Article  33(7)  of  MiFID  II  with  a  view  to  ensuring  an  interpretation 
whereby the issuers themselves can request a dual listing. Respondents pointed out that if 
the  dual  listing  was  not  possible  upon  request  of  the  issuer,  it  would  constitute 
discrimination of such issuers against issuers whose financial instruments are traded on 
other  MTFs.  Moreover,  the  rationale  for  the  Article  33(7)  was  to  limit  dual  listing  in 
order to concentrate the liquidity of SMEs and reduce fragmentation, given SMEs’ lower 
liquidity, and so it should be the issuers’ choice whether to opt for a dual list or not (and 
not that of a third party as currently seems to be the case).  

A small majority of 26 respondents (51%) viewed the new research regime introduced by 
the  CMRP  as  positive  to  support  SMEs’  access  to  capital  markets.  Most  of  those 
respondents  pointed  out  that  the  impact  of  the  CMRP  is  however  very  limited.  Some 
pointed  out  that  research  coverage  for  SMEs  is  considered  uneconomic  for  asset 
managers and research providers and that this appears as a long-term trend. Nevertheless, 
business associations, in particular, and NCAs pointed out it is still too early to tell what 
the overall impact of the new regime is.  

The overwhelming majority of 35 respondents (73%) would see merit in alleviating the 
MiFID  II  regime on research even  further. While some suggested to lift  the exemption 
threshold  in  order  to  fully  cover  the  small  and  mid-cap  segment,  several  business 
associations considered that going back to fully bundled execution and company research 
pricing is the only solution to boost research for SMEs (which dropped to an almost non-
existent level). Some also considered that the MiFID II regime was wrongly designed for 

90 

 
 
companies  of  any  size.  They  claimed  that  MiFID  II  regime  has  indirectly  become  an 
incentive  to  allocate  a  larger  part  of  research  services  value  in  the  hands  of  a  few  big 
players (i.e. leading to consolidation in the industry).  

A majority of 19 respondents (61%) recommended to fully exempt from the unbundling 
rule research on fixed income, as the reform has not produced any impact on the spreads, 
nor led to more research by independent providers. However, 3 respondents (10%) were 
also  strongly  opposed  to  the  full  re-bundling,  arguing  that  this  would  create  an 
unacceptable non-level playing field between research provided by investment firms and 
other research producers - research has to be independent regardless of the fact that the 
entity issuing it may run other activities or may belong to a group. Many respondents (18 
stakeholders accounting for 55%) suggested to encourage research sponsored by issuers 
and argued that this is the sole way to develop research on SMEs (both equity and fixed-
income  products).  They,  however,  suggested  safeguards  to  increase  its  acceptability  by 
investors, such as by making it subject to a code of conduct rules and clearly labelling it 
as issuer-sponsored research (and not as a marketing communication). 

Questions on other possible areas of improvement 

Questions on SPACs 

As regards SPACs, the answers to the consultation revealed divergent views as to what 
should be considered for the development of EU SPACs and if an intervention would be 
necessary.  

While  the  vast  majority  of  33  respondents  (75%)  viewed  SPACs  as  an  effective  and 
efficient  alternative  to  traditional  IPOs  that  could  facilitate  more  listings  on  public 
markets in the EU, a few argued nonetheless that SPACs are difficult to understand and 
would be an instrument  that could harm the traditional  IPO market. According to other 
respondents, SPACs, on the contrary, could be the only way to attract a certain type of 
private  companies,  especially  SMEs,  to  public  markets.  Some  respondents  claimed, 
however, that it is too early to tell what the future role of SPACs will be.  

A majority of 24 respondents (59%) believed that SPACs, via an IPO or on the secondary 
market, should be open to retail investors. Various respondents argued, on the contrary, 
that investing in SPACs is highly complex and presents substantial risks, in particular for 
retail  investors. One regulator considered that investors should be made aware of those 
risks, and saw SPACs as being only useful to a limited group of investors.  

Most  respondents  that  expressed  concerns  with  SPACs  pointed  to  a  general  lack  of 
transparency, in particular with respect to the dilutive effects of the warrants subscribed 
by  sponsors  and/or  initial  shareholders.  Those  respondents  also  saw  potential  concerns 
with  an  emerging  gap  between  the  interest  of  the  SPACs’  sponsors  and  investors.  The 
views were evenly split (12 in favour and 12 against, with 11 respondents providing no 
opinion)  as  to  the  need  of  a  clear  framework  for  the  deposit  and  management  of  the 
securities  and  proceeds  held  in  escrow  by  a  SPAC.  Some  agreed  that  it  is  safer  to  put 
proceeds on an escrow account to minimize the risk for investors. Various respondents, 
however, did not view the need for further rules beyond the transparency requirements. 

If many respondents pleaded in favour of harmonisation across Member States to avoid 
SPACs  becoming  unpopular  in  the  EU,  some  respondents,  however,  believed  that  the 
current  rules  should  be  maintained  as  they  are.  A  number  of  respondents  argued  that 

91 

 
 
overregulation,  as  well  as  limiting  the  retail  investment,  beyond  product  governance 
rules, would be detrimental to SPACs’ development in the EU. 

As regards SPACs putting sustainability as a selling point, a majority of 23 respondents 
(62%)  did  not  believe  that  SPACs  should  be  subject  to  specific/different  disclosures 
and/or  standards.  Various  respondents,  however,  stated  that  in  order  to  avoid 
greenwashing or other misleading behaviour, it is key that each NCA ensures a thorough 
scrutiny process during the prospectus approval phase.  

Questions on the Listing Directive 

A large majority of 24 respondents (59%) considered that the Listing Directive needs to 
be amended. The opinions of respondents were divided on whether the Listing Directive 
should  be  incorporated  in  another  piece  of  legislation,  amended  as  a  Directive  or 
amended  and  transformed  in  a  Regulation,  or  repealed.  Over  33%  of  respondents 
(accounting  for  10  stakeholders)  believed  that  the  definitions  laid  down  in  Article  1  of 
the Listing Directive are outdated, with an almost 47% of the respondents (accounting for 
14  stakeholders)  not  being  able  to  answer  the  question  and  with  only  six  respondents 
(20%) stating that the definitions are not outdated.  

Most  respondents  (19  stakeholders  accounting  for  54%)  considered  that  the  broad 
flexibility  that  the  Listing  Directive  leaves  to  Member  States  and  NCAs  on  the 
application  of  the  rules  for  the  admission  to  the  official  listing  of  shares  and  debt 
securities is appropriate in light of local market conditions. The majority of respondents 
(67%,  or  18  respondents)  who  expressed  their  opinion  considered  the  expected  market 
capitalisation  (Article  43(1)  of  the  Listing  Directive),  (68%,  or  22  respondents)  the 
disclosure pre-IPO (Article 44 of the Listing Directive) and (72%, or 22 respondents) the 
free float requirement (Article 48(5) of the Listing Directive) as very or rather relevant. A 
vast  majority  of  respondents,  however,  considered  necessary  to  maintain  the  national 
discretion to  depart from the recommended thresholds for free float.  Some respondents 
reasoned that flexibility is needed to adjust the requirements according to the size of the 
market  or  issuer  (to  have  the  possibility  to  lower  the  free  float  threshold).  Some 
respondents  argued  that  national  discretion  would  not  be  necessary  if  an  appropriate 
minimum threshold is set at EU level.  

Questions on MVR shares 

Some  respondents  stressed  that  one  of  the  key  reasons  for  the  wave  of  hi-tech,  high 
growth  issuers  choosing  to  list  in  third  countries  (such  as  the  US  or  the  UK)  is  the 
flexibility  that  these  jurisdictions  grant  to  issuers  with  respect  to  MVR  shares.211 
Similarly, some respondents212 highlighted that a number of EU companies have recently 
transferred their statutory seats from countries with limited possibilities for issuing MVR 
shares  (e.g.  Italy,  Germany  and  Spain)  to  the  Netherlands,  a  country  that  adopted  a 
permissible  and  flexible  approach  to  MVR  share  structures.213  Lastly,    16  respondents 
(64%) saw merit in stipulating in EU law that issuers across the EU may be able to list on 
any EU trading venues following the MVR share structure. 

211 Stakeholders supporting this view include investment banks, securities market associations, finance ministries’ representatives and 
private equity associations. 
212 This view was expressed by two stakeholders from the Netherlands. 
213  So  far  there  are  a  few  companies  which moved  to  the  Netherlands to  list  there  because  of  the  attractiveness  of  the  MVR  share 
structure. However, there is no available data to corroborate this. 

92 

 
 
                                                           
The majority of respondents (83%214) considered that, where allowed, the use of shares 
with  multiple  voting  rights  has  effectively  encouraged  more  firms  to  seek  listing  on 
public markets. When asked about the impact that MVR shares have on the attractiveness 
of  a  company  for  investors,  the  majority  of  the  respondents  to  this  question 
(predominantly  issuers  and  exchanges)  considered  that  the  impact  is  not  negative215. 
These respondents noted that MVR shares do not decrease investors’ appetite, provided 
that certain safeguards are in place while highlighting that transparency is key to making 
sure  investors  can  make  fully  informed  investment  decisions.  Some  of  the  respondents 
who  viewed  the  attractiveness  negatively  (including  two  NCAs  and  some  investors’ 
associations)  expressed  their  concern  about  the  disappearance  of  the  ‘one  share  –  one 
vote’  principle  and  one  respondent  noted,  in  particular,  that  MVR  share  schemes  may 
undermine  existing  accountability  mechanisms  in  corporate  governance  law,  such  as 
shareholders’  ability  to  elect  directors,  and  lead  to  management’s  entrenchment. 
However,  even  those  respondents  that  viewed  the  impact  slightly  negatively  or 
negatively,  noted  that  MVR  shares  are  beneficial  in  certain  situations  (particularly  for 
high-growth,  innovative,  founder-led  companies  looking  to  list)  and  noted  that  any 
changes put forward should strike an appropriate balance. This balance should cater for 
both  adequate  governance  protection,  such  as  limiting  the  decisions  that  can  be  taken 
with  additional voting  rights,  while also  allowing  founder-led  companies to  raise funds 
on public market and maintaining the founder’s long term vision for the company. They 
thus highlighted that any flexibility around MVR share structures should be approached 
in  a  way  that  safeguards  governance  standards  (e.g.  mandatory  sunset  clauses,  non-
transferability, automatic cancellation/conversion on exit etc.). 

2.  Technical workshop with industry stakeholders 

Two  virtual  technical  workshops  were  organised  at  the  beginning  of  April  2022  with 
industry  stakeholders  to  further  refine  the  policy  options  that  the  Commission  was 
considering.  

Meeting with Exchanges (05.04.2022) 

Prospectus Regulation 

The  participants’  views  on  the  page  limit  were  split.  Some  saw  benefits  in  a  300-page 
to  be  on  further  harmonisation 
the  focus 
limit  while  others  would  prefer 
(standardisation).  As  regards  scrutiny  and  approval,  exchanges’  representatives  were  in 
favour of keeping the current system as they believed it works well. Exchanges were not 
in  favour  of  being  put  in  charge  of  approval  and  scrutiny.  Some  considered  NCAs’ 
approval  as  the  seal  of  quality  necessary  for  investors.  There  was  also  support  for 
extending the use of the EU Recovery prospectus for transfers from SME growth markets 
to  regulated  markets  and  for  rendering  it  permanent  for  non-fungible  issuances. 
Exchanges  were  also  largely  in  favour  of  exempting  follow-on  issuances  of  fungible 
securities from the requirement to draw up a prospectus. 

Market Abuse Regulation 

214 i.e. 34 out of 41 respondents 
215  22%  (equivalent  to  9  respondents)  opted  for  positive  or  slightly  positive,  29%  (equivalent  to  12  respondents)  opted  for  neutral 
while 36% of respondents (equivalent to 15 respondents, mostly investors and NCAs) opted for negative or slightly negative. 

93 

 
 
 
                                                           
The exchanges’ representatives did not express a definitive view regarding the notion of 
inside information. They supported further clarification but did not agree on whether this 
would need to be defined at level 1 (i.e. via an amendment of the regulation) or level 3 
(i.e.  via  ESMA’s  guidance).  As  regards  sanctions,  some  highlighted  that  the  current 
regime  should  be  made  more  proportionate.  They  supported  the  recommendations  of 
TESG and CMU HLF to alleviate the sanctions  for breaches of Articles 17, 18, 19 and 
30.  

Listing Directive/ MVR share structures 

Most  exchanges  were  in  favour  of  repealing  the  Listing  Directive  as  long  as  certain 
elements (free float and minimum foreseeable market capitalisation) are incorporated in 
the  MiFID  II  regime.  Some  were  also  in  favour  of  lowering  the  minimum  free  float  to 
10%.  One  exchange  expressed  a  view  that  the  concept  of  “admission  to  the  official 
listing”  is  important  and  should  be  kept.  This  exchange  opposed  the  repeal  of  the 
Directive for that reason. 

As  to  the  MVR  share  structures,  exchanges  were  generally  in  favour,  supporting 
harmonisation at EU level.216  

Meeting with Issuers and Investors (08.04.2022) 

Prospectus Regulation 

Instead  of  an  introduction  of  a  page  limit  for  prospectuses,  respondents  were  rather  in 
favour of further streamlining its contents. The views were divided regarding the scrutiny 
and  approval  of  prospectuses.  Some  participants  highlighted  NCAs’  scrutiny  as 
important  to  ensure  investors’  trust,  while  others  argued  it  does  not  bring  any  added 
value,  being  a  mere  rubber-stamping  exercise.  As  regards  risk  factors,  some  issuers’ 
representatives  argued  that  there  is  merit  in  disclosing  only  those  risk  factors  that  are 
directly related to the company. They argued that, for example, the risk factor related to 
macroeconomic  factors  is  not  relevant  for  the  investor’s  assessment  of  the  company. 
There was general support for replacing the prospectus for issuers listing on SME growth 
market with a passportable EU admission document. 

Regarding secondary issuances, stakeholders were in favour of removing the need for a 
prospectus  for  follow-on  issuances  of  fungible  securities.  Some  suggested  that  the 
prospectus should be replaced by another document that is passportable but many called 
for further flexibility. Several stakeholders were also in favour of improving the regime 
for transferring from SME growth markets to regulated markets.  

Market Abuse Regulation 

Participants’ views on the introduction of a twofold definition of inside information were 
split.  Some  participants  outright  supported  it,  noting  its  potential  to  preserve  market 
integrity  while  enhancing  legal  clarity  with  respect  to  the  disclosure  obligation.  Other 
participants were not in favour of reviewing the notion of inside information and would 
rather support a clarification through ESMA guidelines.  

Several  stakeholders  agreed  to  extend  the  exemption  for  the  market  sounding  regime 
(currently applicable to bonds) to private placements of equity and some highlighted that 

216 83% (5 out of 6 exchanges) were in favour of the EU-level harmonisation. 

94 

 
 
                                                           
the regime should be optional (despite the latest ESMA’s report findings). On sanctions, 
many  stakeholders  found  them  disproportionate.  Some  called  for  sanctions  only  to  be 
administrative and not  criminal,  while others emphasised that they should not  be based 
on the turnover of companies.  

Listing Directive/ MVR share structures 

On the Listing Directive, the stakeholders that expressed a view saw merit in deleting the 
provision on free float.  

Regarding MVR share structures, an issuers’ representative highlighted that they would 
be in favour of more flexibility regarding the use of MVR share structures. An investors’ 
representative stated that they believed the adoption of MVR share structures by issuers 
is  perceived  negatively  by  investors.  However,  they  further  added  that,  if  the 
Commission  were  to  put  forward  a  regime  at  EU  level,  a  limitation  through  a  sunset 
provision would be key. 

95 

 
 
 
 
ANNEX 3: WHO IS AFFECTED AND HOW? 

1.  Practical implications of the initiative 

The  initiative  and  options  presented  in  this  IA  aim  to  address  cost  inefficiencies  and 
rigidities  in  the  requirements  and  conditions  for  public  listings.  The  preferred  options 
herein strike a balance between cost saving objectives and objectives related to upholding 
market integrity and investor protection. Proportionality for smaller listed companies is a 
further prime consideration.  

For founders’ and family-owned companies, the possibility to be admitted to trading with 
MVR  share  structures  in  any  Member  State  would  greatly  increase  the  appeal  to  list. 
Adjustments to the Prospectus Regulation would reduce the complexity, length and cost 
of prospectuses as well as lead to a more efficient, convergent and streamlined scrutiny 
and  approval  process.  Changes  to  MAR  would  make  requirements  regarding  the 
disclosure  (and  delay  of  disclosure)  of  inside  information  clearer  and  easier  to  comply 
with.  Furthermore,  smaller  issuers  would  also  benefit  from  the  application  of  a  more 
proportionate sanctions regime. Overall, the initiative is expected to bring about annual 
costs savings of approximately EUR 167 million for issuers, including SMEs. Direct cost 
savings result in particular from the streamlining of the Prospectus requirements and the 
clarification of the notion of inside information.  

It  is  expected  that  there  would  be  further  cost  reductions  benefitting  NCAs  as  the 
simplification  and  clarification  of  requirements  will  equally  increase  efficiencies  in  the 
related supervisory activities. Investors would also benefit from the envisaged regulatory 
changes,  specifically  from  the  reduction  in  the  complexity  and  length  of  prospectuses 
(making them easier to read and understand), as well as the clarifications to the notion of 
inside  information  (making  it  clearer  which  information  and  when  would  have  to  be 
disclosed by issuers and hence easier to act upon). However, there is insufficient insight 
on the exact costs savings that can be expected.  

There would, in principle, be no direct impacts on exchanges. However, in the long run, 
the increased attractiveness of listing and remaining listed due to the regulatory changes 
would increase the number of listed companies on their venues, therefore increasing their 
revenues. 

Finally,  the  proposed  measures  would  only  lead  to  minor  one-off  costs  for  issuers  and 
NCAs.  In  the  case  of  NCAs  the  minor  one-off  costs  would  be  linked  to  adapting  the 
scrutiny  and  approval  process  to  the  new  (alleviated  for  issuers)  regime.  In  the  case  of 
issuers,  the  one-off  costs  would  be  linked  to  adapting  internal  procedures  to  identify 
inside  information  and  deciding  when  to  delay  the  disclosure  of  said  information. 
Companies willing to list with MVR share structures, would incur minimum one-off cost 
to  ensure  that  a  listing  is  structured  in  accordance  with  the  new  rules  (and  more 
specifically, with the investor protection safeguards in place).  

96 

 
 
 
 
2.  Summary of benefits and costs 

The below table provides a summary of the expected benefits arising from the preferred 
aggregate option (i.e. all preferred options looked at together).  

I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Amount 

Comments 

Direct benefits 

Issuers would benefit from cost 
savings due to the reduction in the 
complexity and length of 
prospectuses as well as a more 
efficient, convergent and 
streamlined scrutiny and approval 
process by NCAs [Prospectus 
Regulation].  

EUR 67 million 
(cumulatively for equity and 
non-equity issuers) 

NCAs would benefit from lower 
cost of scrutiny of prospectuses, 
as in the case of secondary 
issuances of fungible securities, 
NCAs would no longer be 
required to approve the 
prospectus (issuers would only 
need to file with the NCA a 
statement of ongoing compliance 
and a short summary document, 
neither of which would require 
ex-ante scrutiny). [Prospectus 
Regulation] 

217 ESMA’s data for 2021.  
218 See Table 9 of Annex 4. 

N/A 

The  contents  of  the  prospectus  for  issuers  on  regulated 
market would be shortened and streamlined. In the case of 
SME  growth  markets,  the  prospectus  would  be  replaced 
with  a  simpler  EU  admission  documents.  Issuers  would 
also  be  exempted  from  the  obligation  to  draw  up  a 
prospectus  in  certain  cases,  where  a  lot  of  information 
about  the  company  and  securities  is  already  available  to 
public  (i.e.  issuers  with  a  track  record  on  regulated 
markets  or  SME  growth  markets).  Furthermore,  the 
prospectus  would  be  further  standardised  (i.e.  its  sections 
would be subject to a fixed order of disclosure), it  would 
be  published  in  an  electronic  format  only  (i.e.  no  paper 
copies on request) and it would be allowed to draw it up in 
English only (except for the summary).  

Issuers  would  also  benefit  from  a  more  efficient  and 
streamlined  scrutiny  process,  both  in  terms  reduced  legal 
fees  paid  to  counsels  to  respond  to  numerous  requests 
from  NCAs,  and  from  the  ability  to  better  plan  the 
expected scrutiny  duration (and the  general IPO process). 
These  savings,  however,  would  be  difficult  to  estimate. 
The estimate for the overall cost savings is therefore likely 
to underestimate the total cost savings stemming from the 
measure. 

The  quantification  of  benefits  is  based  on  annual  cost 
savings (for more details, see Chapter 6.2.2. of the Impact 
Assessment and Annex 4).  

It was not possible to estimate the cost savings for NCAs 
that  would  no  longer  be  required  to  scrutinise  secondary 
issuance  prospectuses  for  securities  fungible  with  the 
securities  already  admitted  to  trading,  as  ESMA/NCAs 
were  not  able  to  provide  an  estimate  of  their  cost 
associated with the scrutiny. Based on the annual issuance 
figures217, this cost saving would correspond to about 150 
less  prospectuses  requiring  scrutiny  and  approval  than 
today (e.g. in 2021 there were 138 simplified prospectuses 
for  secondary  issuances  of  equity  securities  and  16  EU 
Recovery  prospectuses  for  shares  that  would  be  in  scope 
of the exemption218)  

This figure assumes that all secondary issuances of equity 

97 

 
 
 
 
 
                                                           
would be fungible  with the primary issuance of securities 
for  an  already  listed  company  (i.e.  with  equity  in 
circulation).  This  is  a  conservative  estimate  that  does  not 
take into account cost savings from follow-on issuances of 
non-equity. 

fees,  currently  spent 

to  delayed  disclosure  only 

Targeted  amendments  to  the  rules  on  the  disclosure  of 
inside  information  would  reduce  burden  for  listed  issuers 
by:  (i)  limiting  the  amount  of  time  and  costs,  including 
external  advisers’ 
to  ensure 
compliance with the disclosure obligation; (ii) limiting the 
recourse 
to  exceptional 
circumstances. The list would provide a clear indication of 
events  that 
to  disclose, 
issuers  would  be  expected 
removing  the  lack  of  legal  clarity  and  associated  with  it 
cost for issuers in those instances. Moreover, clarifications 
on  the  conditions  to  delay  the  disclosure  of  inside 
information  would  help  make  ambiguities  of  the  notion 
less  relevant  in  practice,  and  reduce  the  costs  currently 
incurred by issuers in the interpretation and application of 
these conditions.  

Issuers would benefit from a 
clearer and narrower notion of 
inside information accompanied 
by a non-exhaustive indicative list 
of events and by clarifications to 
the conditions to delay disclosure 
of inside information. [Market 
Abuse Regulation] 

EUR 100 million 

The estimate is based on the assumed annual cost savings 
from  less  legal  advice/legal  assessment  necessary  in 
relation  to  the  notion  of  inside  information,  on  the  one 
hand,  and  reduced  cost  of  disclosure  (as  only  mature 
information  would  need to be disclosed under a  narrower 
notion). For more details, see Chapter 6.3.1. of the IA and 
Annex 4. 

Indirect benefits 

Companies/founders 
(prospective issuers) would be 
given the option to go public 
while retaining control of their 
business through the issuance of 
MVR shares across the EU and 
enjoy the benefits of public 
markets. 

EUR 737 million per year [or 
11 additional IPOs per year] 

Investors would benefit from 
enhanced comprehensibility, 
comparability and readability of 
the prospectus and from more 
targeted and more informative 

N/A 

A  minimum  harmonisation  of  MVR  share  structures 
would  be  beneficial  for  issuers  established  in  a  Member 
State that currently bans these structures, as it would allow 
them  to  retain  control  of  their  company  (and  continue 
shaping  the  business  in  accordance  with  their  respective 
original  ideas  and  aspirations)  while  raising  a  larger 
amount of funds and enjoying the benefits associated with 
listing. It would, in particular, reduce (if not fully remove) 
opportunity costs currently incurred by issuers that remain 
private to avoid losing control. It would also eliminate the 
additional  costs  incurred  by  issuers  that  choose  to  list  in 
another country in order to benefit from this flexibility. 

It was possible to estimate the opportunity cost incurred by 
companies  that  are  currently  not  listed  (and  hence  cannot 
enjoy  the  growth  associated  with  a  public  listing)  but 
could  have  been  listed  in  those  Member  States  that 
currently prohibit MVR share structures, if those structures 
were  allowed  there.  For  more  details,  see  Chapter  6.1.1 
and Annex 4. 

Investors  are  expected  to  also  benefit  from  a  lighter  and 
more streamlined prospectus document, which is easier to 
read  and  navigate  through.  Furthermore,  the  standardised 
format  for  prospectuses  on  regulated  markets  (i.e.  fixed 
order  of  disclosure  of  the  prospectus  sections)  would 

98 

 
 
disclosures under MAR 
[Prospectus Regulation and 
MAR] 

NCAs would benefit from the 
improvements to the scrutiny and 
approval process for standard 
(IPO) prospectuses, which would 
be rendered more efficient and 
streamlined. Furthermore, NCAs 
would benefit from simpler 
process of examining notifications 
on delays of inside information 
and possibly lower number of 
such notifications. [Prospectus 
Regulation and MAR] 

EUR 77 018 

Smaller issuers would face a 
more proportionate level of 
potential sanctions, thus reducing 
liability risks [MAR] 

Exchanges and market 
operators would benefit in the 
long run from increased levels of 
public issuances of equity and 
debt compared to the baseline 
scenario [all measures 
cumulatively] 

N/A 

N/A 

facilitate their comprehensibility and comparability across 
the  EU.  In  addition,  as  only  mature  inside  information 
would  be  disclosed  under  a  narrowed  notion,  investors 
would  be  able 
informative 
disclosures  (and  less  of  them),  which  would  further 
contribute to better decision making by these investors. 

to  benefit  from  more 

These indirect benefits for investors would not be possible 
to  quantify  as  there  is  insufficient  data  to  provide  an 
estimate with reasonable accuracy.  

By  streamlining  the  scrutiny  and  approval  process,  the 
NCAs would benefit from a faster, more efficient process. 
The  NCAs’  powers  in  scrutiny  would  be  better  framed 
whereby the more precise objective of the scrutiny and of 
the type of information collectable by issuers would allow 
to reduce the scrutiny period. 

The  timeline  for  NCAs  to  provide  notification  on  the 
decision  regarding  the  approval  of  an  EU  Recovery 
prospectus  is  reduced  from  10  to  7  days  as  laid  down  in 
Article  20(6a)  of  the  Prospectus  Regulation.  Similar 
reductions  on  the  scrutiny  and  approval  process  are 
therefore  expected  in  case  of  non-fungible  securities,  for 
which  the  EU  Recovery  prospectus  will  replace  the 
simplified prospectus for secondary issuances. 

The  indirect  benefits  for  NCAs  resulting  from  a  lower 
number  of  delay  notifications  were  estimated  at  EUR  77 
018 (See Annex 4 for further details). It was, however, not 
possible  to  estimate  other  indirect  benefits  for  NCAs 
(notably  those  stemming  from  an  improved  scrutiny 
process). 

A  more  proportionate  level  of  sanctions  for  breaches 
related  to  disclosure  would  avoid  a  disproportionate 
burden on  SMEs, thus reducing the disincentive  for them 
to  list  in  the  first  place  and  allowing  them  to  better 
diversify  their  sources  of  financing  (e.g.  funding  through 
private or public markets). 

These  indirect  benefits  for  smaller  issuers  would  not  be 
possible to quantify as there is insufficient data to provide 
an estimate with reasonable accuracy.  

increase 

in  companies 

It  is  expected  that  exchanges  would  gradually  experience 
an 
to 
trading/listing, as a result of the regulatory alleviations and 
higher attractiveness of public listing. Exchanges therefore 
stand to benefit from the initiative in the longer-term.  

seeking  admission 

These  indirect  benefits  for  exchanges  would  not  be 
possible to quantify as there is insufficient data to provide 
an estimate with reasonable accuracy.  

Administrative cost savings related to the ‘one-in one-out’ approach  

Streamlined prospectus 
documentation and more efficient 
and convergent NCAs’ approval 

EUR 67 million 
(cumulatively for equity and 
non-equity issuers) 

The quantification is based on annual cost savings for 
issuers (for more details, see Chapter 6.2.2. of the IA and 
Annex 4). It is expected that the largest share of these cost 

99 

 
 
 
 
procedure  

savings would be administrative cost savings.  

NCAs would no longer be 
required to approve the 
prospectus for secondary 
issuances of fungible securities 
[Prospectus Regulation] 

Clarification of the notion of 
inside information and of the 
conditions for delay disclosure 
[MAR]  

N/A 

See the table above.  

EUR 100 million 

A  clearer  notion  of  inside  information  will  reduce  the 
administrative  efforts  needed,  both  on  the  side  of  market 
participants  and  NCAs.  It  will  provide  on-going  benefits 
for  companies  already  listed.  The  quantification  is  based 
on  annual  cost  savings  for  issuers  (for  more  details,  see 
Annex  4).  It  is  expected  that  the  largest  share  of  these 
costs savings would be administrative cost savings. 

Given the largely outdated nature of the Listing Directive, 
and the fact that most of its provisions have already been 
replaced  by  other  EU  legislation,  it  is  expected  that  the 
repeal  of  the  Listing  Directive  would  generate  only 
marginal  cost-savings  for  issuers.  Furthermore,  the  few 
provisions  in  the  Listing  Directive  that  may  still  be 
relevant,  or relevant in at least some  Member  States (e.g. 
free  float,  foreseeable  market  capitalisation,  admission  to 
the official listing), would be incorporated in the MiFID II 
framework, thus continuing to apply to issuers. 

Repeal of the Listing Directive 
(see Annex 7) 

N/A 

The  table  below  provides  a  summary  of  the  expected  costs  arising  from  the  preferred 
aggregate  option  (i.e.  all  preferred  options  taken  together).  As  this  initiative  aims  to 
reduce regulatory costs (mainly for issuers, but also in part for investors and NCAs), it is 
expected that the preferred aggregate option would raise costs only in very few instances 
and  in  those  instances  the  costs  would  be  only  marginal.  However,  it  would  not  be 
possible to quantify these costs, as there is insufficient data to provide an estimate with 
reasonable accuracy.  

II. Overview of costs – Preferred option 

Citizens/Consumers  

Businesses 

Administrations (NCAs) 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Minimum 
harmonisation 
of MVR share 
structures 

Direct costs 

None 

None 

Minimum 
cost for 
companies to 
ensure that a 
listing is 
structured in 
accordance 
with the new 
rules (and 
more 
specifically, 
with the 
investor 

None  

None 

None 

100 

 
 
 
 
 
 
Replacement 
of the EU 
Growth 
prospectus 
with a EU 
admission 
documents on 
SME growth 
markets 

Streamlined 
scrutiny and 
approval 
procedure of 
prospectuses 
by NCAs 

Clarification 
of the notion 
of inside 
information 
and of the 
conditions for 
delay 
disclosure 

protection 
safeguards in 
place). 

Indirect costs  None 

None 

None 

None 

None 

None 

Direct costs 

None 

None 

None 

None 

Minor one-off 
costs for NCAs 
given required 
changes to 
internal scrutiny 
and approval 
procedures.  

None 
(recurrent 
costs will be 
lower than 
status quo as 
the overall 
approval 
procedure 
would be 
made more 
efficient and 
streamlined) 

Indirect costs  None 

None 

None 

None 

None 

None 

Direct costs 

None 

None 

None 

None 

Minor one-off 
costs on NCAs 
given required 
adjustments to 
internal scrutiny 
and approval 
procedures. 

None  
(recurrent 
costs will be 
lower than 
status quo as 
the overall 
approval 
procedure 
would be 
made more 
efficient and 
streamlined) 

Indirect costs  None 

None 

None 

None 

None 

None 

Direct costs 

None 

None 

Issuers would 
need to adjust 
internal 
procedures to 
identify inside 
information 
and to decide 
when to delay 
disclosure. 
This will give 
rise to 
marginal one-
off costs 

None 

None 

NCAs would 
benefit from 
less complex 
notifications 
on delays and 
possibly 
lower number 
of such 
notifications, 
due to the fact 
that there 
would be a 
narrower and 
clearer notion 
of inside 
information 
for disclosure 
purposes. 
If we assume 
a 20% 
reduction in 
costs related 
to the 
examination 

101 

 
 
 
 
of delay 
notifications, 
an estimated 
cost reduction 
for NCAs 
would amount 
to EUR 77 
018. (See 
Annex 4 for 
more details) 

Indirect costs  None 

None 

None 

None 

None 

None 

Costs related to the ‘one-in one-out’ approach  

Direct 
adjustment 
costs 

None 

None 

Minor 
adjustment 
costs for 
issuers to 
adapt to new 
definition of 
inside 
information  

None 

Minor 
adjustment costs 
for NCAs  

None 

Total 

Indirect 
adjustment 
costs 

Administrative 
costs (for 
offsetting)  

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

None 

III. Overview of relevant Sustainable Development Goals – Preferred Option(s) 

Relevant SDG 

Expected progress towards the Goal 

Comments 

SDG 8 - decent work and 
economic growth 

Contributes to the growth of SMEs by 
providing easier access to funding through 
public markets. Newly listed companies are a 
key motor of new investment and job creation. 
Easier access to public markets creates 
incentives for entrepreneurs to diversify in 
times of economic turmoil, leading to a more 
resilient economy.  

Contributes directly to Target 8.3 “Promote 
development-oriented policies that support 
productive activities, decent job creation, 
entrepreneurship, creativity and innovation, and 
encourage the formalization and growth of 
micro-, small- and medium-sized enterprises, 
including through access to financial services” 
and Target 8.10 “ Strengthen the capacity of 
domestic financial institutions to encourage and 
expand access to banking, insurance and 
financial services for all” as well as indirectly to 
Target 8.2 “Achieve higher levels of economic 
productivity through diversification, 
technological upgrading and innovation” 

102 

 
 
  
 
Easier access to public markets would increase 
access of smaller (industrial) companies to 
new funding opportunities. This would 
provide them with alternative sources of 
financing and ensure their ability to grow and 
innovate, including in the areas of key 
strategic importance for the EU. 

Contributes indirectly to Target 9.3 “Increase 
the access of small-scale industrial and other 
enterprises to financial services, including 
affordable credit, and their integration into value 
chains and markets”  

SDG 9 – industry, 
innovation, and 
infrastructure 

3.  SME Test 

Identification of affected businesses 

SMEs  are  within  the  scope  of  this  legislative  initiative  and  would  be  impacted  directly 
and indirectly.  It  is  relevant  for all SMEs that currently use market-based funding  (e.g. 
are  already listed)  and those that consider tapping public markets  for their financing  in 
the future. Although there are no official statistics on the number of SMEs that fall under 
the  definition  of  an  average  market  capitalisation  of  less  than  EUR  200  million  on  the 
basis of end-year quotes for the previous three calendar years, the data received from the 
industry  points  at  almost  1500  SMEs  already  being  listed  on  regulated  markets.  More 
than 1700 additional firms are listed on SME growth markets, and while not all of them 
are SMEs, their share is at least 50%, implying that at least 850 additional enterprises are 
impacted by this initiative. 3000 further firms are listed on multilateral trading facilities 
venues other than SME growth markets (which are a subcategory of multilateral trading 
facilities). While there are no data about how many of them are SMEs, there are reasons 
to  believe  that  the  share  of  SMEs  could  be  as  high  as  on  SME  growth  markets  (i.e.  at 
least  50%),  which  would  imply  about  1500  additional  entities.219  These  numbers  are, 
however, dwarfed by the number of more than 22 million SMEs in the EU that currently 
do not have their shares listed. Although many SMEs currently do not consider financing 
through  public  markets,  about  90  EU-27  SMEs  on  average  went  through  an  IPO  each 
year over 2015-2020, with almost 300 in 2021 alone. The 2020 EC Scoreboard identified 
about  700,000  SMEs  as  innovative  and  characterised  by  high  growth  potential.  These 
companies are in particular likely to be interested in accessing public markets that would 
ensure a flexible and, once listed, efficient way of raising funds for their growth.  

Despite  being  relevant  for  SMEs,  the  focus  of  this  initiative  is  broader  than  SMEs  or 
SME  growth  markets  (e.g.  it  also  concerns  requirements  on  regulated  markets).  The 
requirements  applicable  to  issuers  on  public  markets  ensure  that  investors  are  given 
sufficient,  timely  and  accurate  information,  both  at  the  time  of  listing  and  on  a 
continuous  basis  while  companies  are  listed,  so  that  they  can  make  well-informed 
investment decisions. For companies, especially SMEs, these requirements may imply in 
certain cases high administrative costs, thereby potentially reducing the relative benefits 
of  listing.  However,  these  requirements  also  carry  important  benefits  (and  potentially 
reduce  the  cost  of  capital  for  companies)  by  fostering  market  confidence  in  publicly 
listed companies (that are subject to high regulatory requirements) and by facilitating risk 
pricing by investors  of listed securities (through  accessing timely and  accurate investor 

219  The  average  capitalisation  of  firms on MTFs  is  smaller  than  that  on  SME  growth  markets  on  two  stock  exchanges  with a  large 
number of firms listed on MTFs. 

103 

 
 
 
 
                                                           
information). This initiative aims to facilitate the access to public market financing for all 
companies, while in particular establishing a more proportionate regime for SMEs. The 
initiative  would  take  into  account  the  compliance  burden  of  SMEs,  as  well  as  the 
(relatively) higher importance  for the overall market  integrity of regulatory  compliance 
by larger firms. The amendments to Prospectus Regulation and Market Abuse Regulation 
would cover all companies (including SMEs) admitted to trading on any trading venue, 
as well as companies (including SMEs) considering a listing. In addition, amendments to 
the  sanctions  provisions  under  MAR  would  be  done  with  a  view  to  providing  a  more 
proportionate  sanctions  system  specifically  for  SMEs  (and  exclusively  for  breaches  of 
disclosure-related  provisions).  The  new  Directive  on  MVR  share  structures  will  target 
only  companies  listed  on  SME  growth  markets  (where,  in  line  with  the  MiFID  legal 
requirement, at least 50% of all companies have to be SMEs.) 

Consultation of SME Stakeholders 

Over the recent  years,  companies’, and  especially  SMEs’,  access  to  public markets  has 
been  continuously  evaluated.  Issues  relating  to  regulatory  burden  on  companies  when 
accessing  public  markets  were  raised  in  the  context  of  the  CMU  HLF,  TESG  and  the 
2020 CMU Action Plan. In its discussion on listing rules, the HLF focused specifically 
on  SMEs.  The  mandate  of  the  TESG  was  to  review  the  functioning  of  SME  growth 
markets with respect to their initial purpose which was to create a regulatory environment 
that is proportionate to SMEs needs. Both expert groups had a number of representatives 
of SMEs as well as of SME growth markets, including EuropeanIssuers, SMEUnited and 
BME Growth.  
ESMA consulted stakeholders in the preparation of its report on the functioning of SME 
growth markets in 2020. To obtain further evidence on these issues, a Call for Evidence 
as  well  as  public  and  a  targeted  consultations  on  the  listing  act  were  launched  in 
November  2021.  National  business  associations  representing  the  interests  of  SMEs 
submitted their replies to the consultation. The Commission services also organised two 
technical  meetings/workshops  with  industry  stakeholders  in  April  2022,  to  which 
associations representing SME interests were invited and participated.  All  the feedback 
received  was  taken  into  account  when  considering  the  best  course  of  action  for  the 
legislative proposal.  

Assessment of the impact on SMEs 

This initiative aims to make listing more attractive as an alternative source of financing 
also for SMEs. While the scope of this initiative is broader than SMEs and SME growth 
markets, SMEs would benefit from lower costs of issuing financial instruments on public 
markets,  from  lower  compliance costs when being listed on public markets  and overall 
from the introduction of more proportionate rules specifically foreseen for SMEs. 
The  possibility  to  use  MVR  share  structures  would  enable  SMEs  established  in  a 
Member State that currently bans these structures to raise larger amount of funds on more 
attractive terms  for  founders. They would be  able to  enjoy  the benefits associated with 
listing without excessively diluting their ownership. 
More  concretely,  SMEs  would  benefit  from  lower  issuance  costs  stemming  from  the 
intended  alleviation  of  prospectus  requirements.  Companies  offering  securities  to  the 

104 

 
 
 
 
public and listing on SME growth markets would have to draw up a shorter and simpler 
EU  Growth  issuance  document,  which  would  be  subject  to  a  page  limit.  In  the  case  of 
secondary  issuances,  issuers  of  securities  fungible  with  securities  already  listed  on  an 
SME  growth  market  would  be  exempted  from  the  requirement  to  draw  up  a  dedicated 
admission document.  
A  narrower  notion  of  inside  information  for  disclosure  purposes  would  reduce  the 
ongoing costs of being listed, triggering less but more relevant disclosures. SMEs would 
also  benefit  from  a  more  proportionate  sanctions  regime  for  compliance  with  the 
disclosure obligations. Provided that the initiative achieves its objectives of contributing 
to a more conducive environment for SMEs’ listing and to an improved access to finance 
for  SMEs,  these  companies  will  be  able  to  grow  at  a  faster  pace,  with  positive 
implications for GDP and employment. 

Minimising negative impacts on SMEs 

SMEs face a disadvantage relative to large firms in using market funding. To mitigate for 
this  disadvantage,  the  EU  created  a  dedicate  regime  for  SME  growth  markets  with 
regulatory requirements proportionate specifically to SMEs. The preferred options in this 
impact  assessment  would  facilitate  the  use  of  market  funding  by  companies  and 
especially  SMEs.  They  would  reduce  SMEs’  costs  of  drawing  up  prospectuses,  their 
costs  of  complying  with  MAR  and  provide  enhanced  opportunities  in  some  Member 
States to raise equity through the adoption of MVR share structures. The changes to the 
rules on prospectuses and market abuse are already designed to account for the specific 
situation  of  SMEs  that  aim  to  tap  public  funding  markets  and  therefore  do  not  require 
further measures to  compensate for the overall disadvantage of SMEs in  doing so.  The 
advantages they bring to large firms, which have relative cost advantages over SMEs in 
drawing  up  prospectuses  and  complying  with  ongoing  MAR  requirements  due  to  their 
size and availability of resources, are not likely to curtail opportunities for SMEs to tap 
funding  on  public  markets.  The  possibility  to  issue  adopt  MVR  share  structures  would 
allow  entrepreneurs  to  keep  control  when  tapping  equity  markets,  which  is  particularly 
relevant for start-ups and family-run SMEs. The EU intervention in this area thus focuses 
specifically on SME growth markets. 

105 

 
 
 
 
ANNEX 4: ANALYTICAL METHODS 

This annex explains the economic analysis carried out for the IA. The first section reports on 
data  sources  and  their  limitations,  since  issues  related  to  data  coverage  and  quality 
constrained the analysis that could be undertaken in the various fields relevant to the IA. The 
second  section  demonstrates  to  what  extent  the  European  corporate  sector  makes  use  of 
market funding and in particular of funding through listed shares. The third to fifth sections 
focus on the determinants for the use of market funding that this initiative aims to address: 
the (indirect) issuance costs determined by the loss of corporate control as a potential obstacle 
for  companies  to  seek  listing  on  public  markets  in  section  3,  the  costs  of  producing  a 
prospectus in section 4, and the costs of being listed due to the need to comply with the MAR 
rules  in  section  5.  The  analysis  aims  to  identify  the  magnitude  of  costs  involved  and  to 
provide scenarios to what extent regulatory alleviations could reduce these costs and improve 
incentives for firms to make more use of market funding. 

1.  Data sources and data limitations 

This  IA  builds  on  various  data  sources.  The  2020  study  by  Oxera220,  which  provides 
numerous  statistics  and  a  comprehensive  analysis  of  primary  and  secondary  EU  equity 
markets,  was  a key input  for the analysis performed in  this impact  assessment.  In addition, 
statistics  from  public  and  commercial  databases,  and  data  provided  by  stakeholders  were 
used.  The  Commission  sent  targeted  requests  for  data  to  ESMA,  to  trading  venues  (via 
FESE),  to  issuers  (via  EuropeanIssuers),  and  to  SMEs  (via  SME  United).  These  targeted 
requests yielded information on the breakdown of prospectuses, the size of the various market 
segments,  and  observations  on  selected  cost  elements.  The  impact  assessment  further 
considered the recommendations and analysis by the CMU HLF, TESG, and by ESMA in its 
reports  on  prospectuses  approved221  and  market  abuse222,  and  ESMA  Peer  Review  of  the 
scrutiny  and  approval  procedures  of  prospectuses  by  authorities  of  21  July  2022223.  The 
public  consultation  held  from  October  2021  to  February  2022  and  workshops  with 
stakeholders in March and April 2022 provided further insights into stakeholders’ positions 
with  regard  to  certain  targeted  issues.  Some  stakeholders  substantiated  their  positions,  for 
example, in the public consultation with data, which was also used for the analysis. 

Despite  the  efforts  taken  to  collect  all  relevant  data  from  different  data  sources,  the  data 
collection procedure suffered from the three main limitations.  

  First,  official  EU  statistics  on  the  structure  of  capital  markets  and  listed  products  is 
incomplete. For example, for each Member State, the ECB publishes issuance data on bonds, 

220  Oxera,  ‘Primary  and  secondary  equity  markets  in  the  EU’,  Final  Report,  November  2020,  https://op.europa.eu/en/publication-detail/-
/publication/54e82687-27bb-11eb-9d7e-01aa75ed71a1/language-en/format-PDF/source-193781844. 
221  The  ESMA  report  on  EEA  prospectus  activity  and  sanctions  in  2020  is  the  latest  report  published  by  ESMA.  Due  to  the  recent 
implementation of the new storage mechanism, the yearly report containing statistics  on prospectuses approved and notified in the Union 
and a trend analysis, which ESMA is required to publish in accordance with Article 47 of the Prospectus Regulation is not available at the 
time of finalising this impact assessment. For the year 2021, on request by the Commission services, ESMA provided data on prospectus 
activity, mostly extracted from the storage mechanism.  
222 ESMA’s report on the Review of the Market Abuse Regulation of 24 September 2020, available at  https://www.esma.europa.eu/press-
news/esma-news/esma-publishes-outcomes-mar-review. 
223 ESMA Peer Review of the scrutiny and approval procedures of prospectuses by authorities of 21 July 2022 (ESMA42-111-70). Available 
at: esma42-111-7170_final_report_-_prospectus_peer_review.pdf (europa.eu). 

106 

 
 
                                                           
but  not  on  listed  shares.  ESMA  started  releasing  annual  statistical  reports  on  EU  securities 
markets in 2020 and structural market indicators only in February 2022.224 

  Secondly,  collection  of  data  from  secondary  sources  caused  issues  in  terms  of  data 
manipulation (consistency of data, aggregation of data and data cleaning). For instance, data 
on IPOs published by FESE is compiled from its member exchanges, but not all exchanges 
reported the number and value of follow-on issuances of shares. As another case in point, it is 
challenging  to  report  the  number  of  listed  firms  per  country  because  listing  venues  do  not 
report  issuers  by  nationality  and  multi-country  venues  do  not  provide  country-specific  data 
for each country they cover.225 Hence, aggregates can only be calculated from ISIN codes at 
instrument  level.  Finally,  some  data  points  are  subject  to  quality  issues,  double  entries  or 
have  missing  data.  When  data  comes  from  different  sources,  differences  in  definitions  and 
concepts  create  inconsistencies  and  (partial)  overlap  of  data,  for  example  double  listing  of 
firms  on  different  venues  turned  out  difficult  to  control  for.  The  matching  of  data  from 
different sources required intense manual checks to improve data quality.  

  Thirdly, data was not always available to investigate certain issues. For example, there is little 
information about the costs of regulatory compliance and the breakdown of issuance costs as 
firms might have little interest to reveal this information (or do not consistently record it – in 
particular, as far as indirect costs are concerned). Stakeholders often provided information on 
costs  of  issuance  by  stating  cost  ranges  rather  than  precise  cost  estimates,  but  even  then 
figures  varied  substantially.  As  a  result  of  the  above  limitations,  the  results  in  the  impact 
assessments have to be interpreted with caution.  

Table 1 presents  an overview of the market  structure on EU-27 exchanges  in  2021 sourced 
from  data  provided  by  FESE  for  this  IA.  It  shows  the  breakdown  of  equity  and  bond 
instruments,  the  value  of  outstanding  amounts,  the  magnitude  of  new  issuers  (IPOs)  and 
follow-on  issuances  across  regulated  markets,  SME  growth  markets  and  other  multilateral 
trading  facilities  (MTFs).  Some  exchanges  did  not  report  follow-on  equity  issuances  and 
although many exchanges reported data also for previous years, data gaps and breaks caused 
by mergers of exchanges prevented the calculation of time series. 

224See esma50-164-4665_smis.pdf (europa.eu)  
225 The WFE does not provide such data for Member States in which multi-country exchanges act. Euronext provided such a breakdown to 
the Commission, but not Nasdaq. 

107 

 
 
                                                           
Table 1 - Market structures on EU-27 exchanges, 2021 

Figure 1 complements  the information  on equity issuers and number of shares per Member 
State  taken  from  ESMA’s  structural  indicators  for  financial  markets.  It  shows  that  most 
equity  issuers  are  domiciled  in  Germany,  Sweden,  France,  Ireland  and  Luxembourg.  The 
number  of  equity  issuers  and  the  number  of  shares  admitted  to  trading  tend  to  correlate  in 
most, but not in all Member States, mostly due to there being issuers with more than one type 
of shares issued, but not admitted to trading. This difference between issuance and trading is 
informative  of  the  difficulty  in  interpreting  equity  data.  ESMA  also  reports  comparable 
number on bonds: 3 980 bond issuers versus 7 934 equity issuers in the EU-27 in 2020 with 
63 707 bonds admitted to trading versus 8128 shares. ESMA’s structural data report does not 
provide a breakdown of the share of bonds issued by public and private bodies. Whereas the 
public sector hardly issues any shares, it is a frequent issuer of bonds in almost all Member 
State. 

108 

 Regulated Markets thereof SMEs SME growth market MTF Total Equity Total number of listed companies  4 371 1 464 1 740 3 771 9 882 Total capitalisation of listed companies (EUR million) 13 555 343 38 289 163 718 86 587 074 100 306 135 Number of IPOs  269 62 336 36 641 Total value of IPO Proceeds -Investment Flows (EUR million) 44 004 7 911 7 774 265 52 043 Number of follow on equity issuances 496 311 331 38 865 Total value of follow on equity issuances (EUR million) 110 691 12 173 4 283 125 115 099 Dual listings 43  36 224 303 Bonds Outstanding number of issuers at years-end 3 796  162 3 648 7 606 Outstanding number of bond issuances at years-end 46 969  344 51 912 99 225 Outstanding total issue size of bonds issuances (EUR million, values at year-end) 14 437 502  46 094 4 501 817 18 985 414 Number of new bond issuers during the year  (i.e. number of companies that have issued their inaugural bond) 122  47 156 325 Number of new bond issuances during the year  11 835  113 22 804 34 752 Total issue size of new bond issuances during the year (EUR million) 2 677 943  8 432 60 189 296 62 875 672 Note: some exchanges were not able to report number on follow-on equity issuances. Source: FESE from exchanges.  
 
 
Figure 1. Number of equity issuers and shares admitted to trading across the EU Member States, 2020 

Source: ESMA. 

2.  The use of equity funding by corporations 

Many firms in the EU do not rely on market funding (see also sections 1.3 and 2.3 of this 
IA’s  main  body).  Only  a  small  proportion  of  EU  firms  is  listed  on  public  markets  and  the 
number  of  listed  firms  scaled  by  the  population  of  the  country  is  lower  in  the  EU  than  in 
some  of  other  developed  countries  (see  Figure  2).  There  are  about  14  listed  firms  per  1 
million inhabitants in the EU, compared to 27 in Switzerland, 30 in Norway and estimated 34 
in  the  United  Kingdom.226  While  the  ratio  of  listed  firms  to  inhabitants  in  the  EU  is 
comparable to that in the US, the US dwarves the EU in terms of market capitalisation. This 
suggests that stock markets have been better able to help firms grow more in the US than in 
the EU, proving the suboptimal scale/performance of EU public markets.  

226 The latest number of listed firms in the UK shown in World Bank Development Indicators dates from 2014. The number of inhabitants is 
used as benchmark because the number of total firms is not available for many countries.  

109 

 
 
 
 
                                                           
Figure 2. Number of listed companies per 1 million inhabitants, 2019 

Source:  World  Bank,  FED  St  Louis  (both  with  data  by  the  World  Federation  of  Exchanges)  and  FISMA 
calculations, using FESE, Euronext, NASDAQ and Eurostat data. 

The EU average hides substantial differences  across the Member States (see Figure 3). The 
number  of  listed  firms  per  inhabitant  is  considerably  below  the  EU  average  (and  the  US 
numbers) in Germany and Italy, while being substantially higher in Spain227 and the Nordic 
countries.  Numbers  for  LU,  MT,  BG  and  CY  are  inflated  by  equity  issuers  that  are  small 
financial  corporations.  This  exercise  required  calculations  with  data  from  different  sources 
since  the  data  based  on  the  World  Federation  of  Exchanges  (WFE)  reported  by  the  World 
Bank does not include data for those Member States that share a stock exchange. To obtain 
country  specific  data,  regional  data  was  obtained  from  Euronext  via  FESE  and  from  the 
NASDAQ website. The combination of data from the various sources required that data from 
different reporting years had to be used. This data underreports numbers because it does not 
cover some firms that go listed on foreign exchanges.228 

227 A relatively large number of IPOs in Spain over recent years were from the real estate sector, which suggests that an industry-specific 
factor may be accountable for the high number of listed firms in Spain. 
228 The WFE has a global IPO data base that however does not cover some well-known European firms that went public in the USA. 

110 

 
 
 
                                                           
Figure 3. Number of listed companies per 1 million inhabitants in the EU Member States 2019-2022 

Source: FISMA calculations with data from WFE, FESE, Euronext, NASDAQ, Eurostat. 

Many  more  EU  firms  could  be  tapping  stock  markets.  While  the  majority  of  the  enterprise 
population in the EU consists of micro and very small enterprises, there are overall less than 
8000 firms with listed shares.229 Oxera (2020) estimated that 6000 additional firms in the EU 
would  fulfil  the  criteria  to  go  public.230  Figure  4  shows  that  most  of  them  are  owned  by 
individuals or families.231 Bongini et al (2019) use a sophisticated empirical model to identify 
firm and country-specific determinants of firms’ market funding and determine the share of 
firms  from  the  population  of  firms  that  would  fall  under  these  conditions  (see  Figure  5).232 
Even  when  country-specific  determinants  are  controlled  for,  the  share  of  large  firms  that 
could  use  market  funding  is  substantial.  Firm-specific  determinants  are  size,  leverage  and 
turnover  growth.  Country-specific  determinants  relate  to  financial  market  developments 
(stock  market  development  and  banking  system  development)  and  legal  conditions  (rule  of 
law, time to resolve disputes, property rights index, etc.). 

229 ESMA (2021) reported 7934 issuers in the EU-27 in its “Structural indicators for financial markets (2021). The counting of listed firms 
for  the  chart  above  yielded  a  number  of  7203  issuers  of  listed  shares  from  EU  Member  States.  The  data  compilation  from  European 
exchanges points to 8500 equity issuers, which include dual listings and issuers from third countries. 
230 The conclusion is based on criteria related to employment, size, turnover, and assets. Firms in certain sectors like agriculture, health or 
education are not considered. This number is lower than shown in Oxera (2020) because UK firms were excluded. 
231 Although in some Member States unlisted firms are largely owned by foundations or financial companies. 
232 Bongini, P. et al., ‘SME access to market-based finance across Eurozone countries, Small Business Economics, Vol. 56, 2019, pp. 1667-
1697. 

111 

 
 
 
                                                           
Figure 4. Market potential 1 - Number of large unlisted firms in the EU Member States, broken down by 
type of ultimate owners 

Source: Oxera (2020) with Orbis data. 

Figure 5. Market potential 2 - Share of large firms that are market suitable according to the MSI index 

Source: Bongini et al (2019) with BvD Amadeus data. 

112 

 
 
 
 
 
 
3.  The value of keeping control of the firm: role of MVR share structures 

Annex  5  presents  the  role  of  MVR  shares  as  a  funding  instrument  that  allows  issuers  to 
safeguard  their  influence  on  the  management  of  the  firm.  This  section  complements  the 
analysis in  Annex 5 by  reviewing the empirical  support available to  quantify the impact  of 
the policy options in the main body. That said, the assessment is complicated by the fact that 
there  is  neither  detailed  statistics  showing  the  actual  use  of  MVR  share  structures  across 
Member States (Sweden being the exception) nor has this topic gained a lot of attention by 
empirical researchers. While the proportion of IPOs with MVR share structures has increased 
from 12% to 32% in the US between 2016 and 2021, it is not possible to show a comparable 
figure  for  the  EU-27.  Academic  research  on  MVR  share  structures  focuses  on  the 
implications  for  corporate  governance,  i.e.  incentives  for  managers  and  owners  visible  in 
share  valuations  and  in  particular  their  involvement  in  takeovers.233  While  the  experience 
from  the  US  suggests  that  in  particular  technology  firms  are  using  the  opportunity  to  issue 
MVR shares, there is not  yet  an in-depth study on what this tells about the determinants of 
MVR shares as funding and corporate control instrument. 
Research analysis by the EIB234 helps study the quantitative value of voting rights. For this 
study, firms were asked under which conditions they would choose bank lending versus share 
issuance  under  alternative  scenarios  of  ordinary  shares  and  shares  without  voting  rights.  In 
the  analysis,  firms  attributed  a  value  of  150  basis  points  to  the  possibility  to  maintain 
corporate control by issuing shares without voting rights. This result is based on regression 
analysis that uses the data from the survey and translates indications under which conditions 
firms would use bank lending or equity funding into capital costs.  

It is also possible to use regression analysis directly, which has the advantage that the result 
does not depend on some of the assumptions underlying the scenario analysis. The estimated 
coefficient can be interpreted as a probability that an equity issuance takes place when it is 
possible  to  issue  shares  without  voting  rights  attached  to  them.235  The  coefficient  of  the 
estimate  suggests  that  the  possibility  to  issue  shares  without  voting  rights  increases  the 
likelihood of share issuance by 21% relative to the issuance of ordinary shares.236 It needs to 
be noted that the possibility to reduce voting rights attached to new issuances is not, however, 
equal  to  preventing  any  loss  in  control  by  the  owner.  However,  it  is  a  powerful  means  to 
contain the loss of control.  

The absence of data on the share of firms that used MVR share structures when issuing shares 
prevents  an  in-depth  analysis.237  As  a  substitute  for  such  analysis,  Figure  6  compares  IPO 
numbers  in  the  Member  States  that  permit  MVR  share  structures  with  those  that  do  not 
permit their use. It shows that the value of listed shares and the number of IPOs is on average 
higher in those Member States that allow for MVR share structures compared to those that do 
not. Although these averages are strongly determined by the outliers, they are illustrative of 
lower  issuing  activity  when  MVR  share  structures  are  not  permitted.  Having  said  that,  it 

233  See  Annex  5  for  more  details.  See  also  Pajuste,  A.,  ‘Determinants  and  Consequences  of  the  Unification  of  Dual-Class  Shares‘,  ECB 
Working Paper No 465, 2005 for an analysis of why firms gave up MVR share structures two decades ago. 
234 See Brutscher and Hols (2019), ‘The European corporate equity puzzle’, Comparative Economic Studies, Vol. 62, pp. 69-104, October 
2019. 
235 This can be taken as an (imperfect) proxy of issuing based on a MVR share structure. 
236 See Tables 4 and 5 in Brutscher and Hols (2019). 
237 Also the detailed IPO data from FESE used for this exercise do not specify whether the equity issuance entailed ordinary shares or MVR 
shares. 

113 

 
 
                                                           
would  be  close  to  impossible  to  draw  any  direct  causal  links  between  the  existence  of  a 
possibility to issue MVR shares and a higher number of IPOs in a given Member State, given 
the complex nature of a listing decision, which takes into account a wide number of various 
parameters.  

Figure 6. Number of IPOs per Member State, sum 2015-2022 

* MVR share structures are possible in PT only since 2022. PT was therefore not included in the 
calculation of the average. 

FISMA calculations with FESE data. 

114 

 
 
 
 
Figure 7. Listed shares as NFC liabilities in % of GDP average 2015-2020 

FISMA calculations with Eurostat data. 

The opportunity  costs of  the ban on MVR  share  structures could  be defined as the missing 
growth opportunities for firms that decide to refrain from listing because their owners do not 
want  to  cede  corporate  control.  The  analysis  in  Didier  et  al.  (2016)  documents  that  listed 
firms tend to have stronger growth in assets, sales and employment.238 This is evident in the 
descriptive  statistics  and  also  in  the  detailed  analysis.  The  latter  shows  that  the  growth 
difference is particularly pronounced in the year of issuance and the subsequent two years.  

Table 2 - Firm characteristics in Didier et al, 2016, Averages 2013-2011 in USD calculated as median 
across countries of the median firm per country. 
Non-issuers 
99 823 
73 700 
327 
26 
27 185 
4.3% 
5.5% 
0.9% 

Total assets 
Sales 
Number of employees 
Firm age 
Number of firms 
Asset growth 
Sales growth 
Employment growth 
Issuing firms were defined as a firm with at least one capital raising issuance between 2003 and 2011. 

Equity issuers 
255 701 
114 015 
470 
19 
16 198 
10.5% 
9.5% 
5.0% 

Difference  
156.2% 
54.7% 
43.7% 
-26.9% 
-40.4% 
6.2%pts 
4.0%-pts 
4.1%-pts 

The  absence  of  a  suitable  data  base  and  of  empirical  estimates  does  not  allow  for  a  proper 
quantification of the impact of the introduction of MVR share structures on IPO numbers.  

238 See Didier, Tatjana; Levine, Ross, and Schmukler, Sergio, L. (2016) Capital market financing, firm growth, and firm size distribution, 
ESRB Working Paper No 4, March 2016. The research covers developed and emerging countries. 

115 

 
 
 
 
 
                                                           
It was, however, possible to produce a best-effort estimate, building on the available data and 
applying assumptions derived from economic literature on the subject.  

The following assumptions have been made:  

  There  would  be  21%  more  IPOs  in  Member  States  if  they  introduce  MVR  share  structures 

(consistent with the EIB study).  

  This increase would be applied to an average number of IPOs per year (56) and the average 
amount  raised  per  year  (EUR  972  million)  recorded  in  the  EU  Member  States  that  do  not 
permit MVR share structures over the period from 2015 to 2021.239  

  Assets would grow at a speed 6.2 percentage points higher in listed firms than in firms that 

did not issue equity (Table 3, Didier et al.)  

Applying  the  above  assumptions  would  generate  11  additional  IPOs  in  the  respective 
Member States, resulting in EUR 737 million of higher EU market valuation. 

4.  Issuance costs and costs for producing a prospectus 

A reason why firms do not make use of market funding is that the use of market instruments 
is associated with high upfront costs. This section presents analysis on the magnitude of these 
costs  and  elaborates  to  what  extent  changes  to  prospectus  requirements  could  reduce  these 
costs. 

4.1. Estimates of issuance costs required for an IPO 

In a recent EIF survey, 27% of private equity investors and 22% of venture capital investors 
reported  IPO  costs  an  obstacle  to  the  use  of  listed  shares  as  a  funding  instrument.240  A 
benchmark for the cost considerations behind a company’s reluctance to use public markets 
instead  of  bank  loans  was  obtained  in  a  seminal  experiment  by  EIB  researchers,  already 
quoted above.241 It found that, on average, firms would require an 8.8% lower capital cost to 
finance their investment projects via listed shares instead of taking a bank loan. The empirical 
analysis, based on a sample of almost 1 000 firms in the EU242, further found that 72% of this 
8.8% difference can be explained by three specific determinants, namely the more favourable 
tax  treatment  of  debt  versus  equity,  the  reluctance  to  cede  corporate  control  and  positive 
growth  expectations.  Hence  2.5%  (28%  of  the  8.8%  capital  costs)  is  attributable  to  other 
factors, including the transaction costs incurred during the listing process. The first factor is 
subject to a different Commission initiative that aims to reduce the tax bias against equity in 
Member  States  tax  systems  (See  Annex  11  for  more  details)  and  the  reluctance  to  cede 
corporate control was analysed above. Growth expectations depend on the business cycle and 
the firms’ business model. This section looks at the costs of the issuance process.  

IPO  costs  exceed  the  2.5%  threshold  by  a  wide  margin,  especially  for  smaller  issuances. 
Data on IPO costs is scarce. Those few that try to quantify them point to a range of 3-10% of 
the issuing amount,  depending on the size of the issuance (see Table 3).  In some countries, 
issuing costs are indicated in the prospectus, and for a sample checked for this exercise, they 

239 2019 and 2021 were deemed as rather atypical years, largely due to Covid-19 (e.g. 2019 reported a very low number of IPOs, while 2021 
reported a very high number of IPOs). 
240  Botsari,  A.  et  al.,  ‘Scale-up  Financing  and  IPOs:  Evidence  from  Three  Surveys’,  EIF  Research  and  Market  Analysis  Working  Paper 
2021/69, January 2021. 
241 See Brutscher and Hols (2019), ‘The European corporate equity puzzle’, Comparative Economic Studies, Vol. 62, pp. 69-104, October 
2019. 
242 The study is conducted on the back of the EIB investment and investment finance survey (EIBIS). 

116 

 
 
                                                           
also  vary  between  3  and  10%  of  the  amount  issued.243  The  analysis  in  Oxera  (2020)  data 
shows  that  issuance  costs  rise  with  the  issuance  amount  (see  Figure  8).  When  trying  to 
identify the determinants of issuance costs empirically by means of regression analysis with a 
sample of global issuances from a commercial data provider for this IA, the issuance amount 
turned  out  as  a  significant  determinant  of  issuance  costs.  The  issuance  amount,  however 
explained only a small share of the variation of costs across issuances as indicated by a very 
small R2. Country and industry dummies were not significant in many cases.244  

243 Almost all German IPOs in 2021 reported their issuing costs. 
244 Although it was possible to identify data on issuance costs for 3 000 issuances out of a sample of 50 000 equity issuances, less than 80 
were from the EU. The data was therefore not used for a more detailed analysis. 

117 

 
 
                                                           
Table 3 - Estimates of IPO costs245 

Figure 8. Fees per deal size 

245 FESE, ‘European IPO Report 2020’, IPO Task force, November 2020, https://www.fese.eu/app/uploads/2020/03/European-IPO-Report-
2020.pdf; PWC, ‘Considering an IPO to fuel your company’s future?’, PWC Deals, November 2017, www.pwc.com/us/iposervices; Oliver 
’Oliver  Wyman  Financial  Services,  2014, 
for  SME 
Wyman, 
https://www.oliverwyman.de/content/dam/oliver-wyman/global/en/files/insights/financial-
services/2014/July/FINAL3_BetterCapitalMarketMechanismsSMEs.pdf;  Wegemann, 
https://www.ipobox-online.de/erlose-und-kosten-bei-einem-ipo/5-2-kosten-eines-ipos. 

‘Towards  better  capital  markets 

IpoBOX,  2013, 

‘Kosten  eines 

financing 

solutions 

IPOs‘, 

J., 

118 

Source IPO costs relative to issuance size Comment FESE (2020) EUR 300 000 to 450 000 for a EUR 3 000 000 IPO, 150 000 to 250 000 for a 25 000 000 IPO, 375 000 to 600 000 for a 75 000 000 IPO, 600 000 to 1 500 000 for a 200 000 000 IPO Data assembled for an IPO task force for issuances in the EU PWC (2017) USD 7 300 000 for a USD 25 000 000-100 000 000 IPO, 14 600 000 for 100 000 000-250 000 000, 22 100 000 for 250 000 000-500 000 000, 26 500 000 for 500 000 000 to 1 000 000 000 Data assembled by consultants for issuances in the US Oliver Wyman (2014) USD 80 000 -100 000  Data assembled by consultants to list on an SME platform Wegmann (2013) 9-12% (EUR 2 700 000 to 3 600 000) for a EUR 30 000 000 IPO, 6-8% if larger 500 000 000 Data assembled for investor relations agencies A EU CEEC trading venue  Average about 5 % of proceeds for the last local IPO transaction Note: The underlying papers do not specify how the numbers where obtained and how the samples were constructed.  
 
                                                           
Source: Oxera (2020) with Dealogic data. 

Figure 9. Direct and indirect costs of an IPO 

Source: Oxera (2020). 

4.2. Costs of producing a prospectus 

The costs of producing a prospectus is only a small part of the overall issuance costs. Oxera 
argued  that  the  single  most  important  items  are  underpricing  and  underwriting  fees  (Figure 
9). That is, a price discount to ensure the issuance finds buyers and fees for the services and 
reputation  risk  that  the  underwriting  agent  respectively  carries.  According  to  the  Oxera 
(2020) study, the sum of prospectus costs and listing fees account for 0.3% of total IPO costs. 
Wegmann (2013) quantified the costs for lawyers to draft the prospectus for a German firm 
as  EUR  75  000  to  120  000,  in  addition  to  EUR  100  000  for  translation  and  printing,  in 

119 

 
 
 
 
 
addition  to  EUR  5  000  fees  charged  by  the  national  supervisor.  A  compilation  of  costs 
covered in Italian prospectuses for the move to regulated markets ranges from EUR 500 000 
to  EUR  2  000  000.  A  European  trading  venue  pointed  out  two  important  determinants  of 
prospectus  costs:  the strength  of the internal  team  preparing the  IPO  and the complexity of 
the  corporate  structure.  It  observed  that  prospectus  costs  range  from  EUR  10  000  for 
companies  with  a  strong  internal  team  and  a  simpler  corporate  structure  to  approximately 
EUR  500  000  for  very  complex  transactions  and  issuers.  Another  exchange  cautioned  that 
prospectus costs are dwarfed by other cost elements that have a similar function, namely to 
provide  legal  clarity  to  investors  and  inform  them  trustfully  about  the  offer.  Examples 
included  legal  fees  for  at  least  EUR  80  000  and  EUR 400  000  for  the  structuring  and 
preparation  of  the  legal  documentation.  When  an  international  placement  is  envisaged,  an 
international offer memorandum adds about EUR 200 000 according to a reply to the public 
consultation.  

The numbers reported in the literature are consistent with the outcome of the consultation that 
was  carried  out  for  this  impact  assessment.  Table 4  shows  the  range  of  prospectus  costs 
communicated to the Commission by respondents to the public consultations. The ranges by 
type of prospectus and financial instrument are sizeable.  

Table 4 - Stakeholders’ indications about prospectus costs (in EUR unless indicated otherwise) 

Type of prospectus and securities 

Stakeholder 

Field of 
activity or 
sector 

Standard  

Base  

EU Growth 

Simplified for 
secondary issuances  

EU 
Recovery  

Equity 

Non-
equity 

Non-
equity 

Equity  Non-

Equity 

equity 

Non-
equity 

Non-
Equity 

Warsaw Stock 
Exchange, PL 

Athens Stock 
Exchange, EL 

Operator of 
a trading 
venue 

Operator of 
a trading 
venue 

Deutsche Börse 
Group, DE 

Operator of 
a trading 
venue 

279 000* 

4% - 6%  2% - 4% 

SMEs: 

SMEs:  

50 000- 
80 000 

40 000- 70 
000 

Other: 

Other:  

140 000- 
300 000 

50 000- 
100 000 

2% 

40 000-
60 000 

30 000-
50 000 

40 000-  
60 000 

30 000- 
50 000 

20 000- 
40 000 

BNP Paribas, 
FR 

Investment 
bank 

400 000 
to 600 
000 direct 
cost 

10 000 to 
50 000 

300 000 
to 500 
000 

N/A 

N/A 

N/A 

N/A 

N/A 

Deutsches 
Aktieninstitut, 
DE 

Swedish 
Securities 

Association 

100 000** 

Association  100 000-  25 000- 30  25 000-  100 000- N/A 

100 000- 

N/A 

N/A 

120 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Markets 
Association 
(SSMA), SE 

International 
Capital 
Market 
Association 
(ICMA), CH 

300 000 

000 

30 000 

150 000 

200 000 

Association 

10 000 - 
800 000 

10 000- 
800 000 

Kapitalmarkt 
KMU+, DE 

Association 

Business 
Hospital, RO 

Financial 
research 
provider 

Min  

Min  

Min  

Min  

Min  

Min  

Min  

200 000  

100 000 

120 000 

80 000 

150 000 

80 000 

80 000 

2 000 

1 000 

1 500 

3 000 

2 000 

1 000 

1 000 

2 000 

Atrys Health, 
ES 

Other 
(Healthcare) 

1 000 000 

50 000 

1 000 000 

* Average cost of prospectus including consulting / offering costs, ** of which EUR 50 000 for the dealer’s 
counsel and EUR 30 000 for the issuers counsel and EUR 20 000 internal costs 

Table 5  shows  the  range  of  prospectus  costs  estimated  by  a  large  trading  venue  in  the  EU. 
The  ranges  expand  further  if  information  from  replies  by  other  stakeholders  to  the 
consultation  is  added  (see  Table4).  Independent  from  the  source,  the  data  shows  that  the 
introduction of the EU Growth prospectus allowed a considerable decline in costs, which may 
explain why the share of smaller IPOs has increased. The EU Recovery prospectus allows to 
cut costs for secondary issuances further.  

Table 5 - Costs of producing a prospectus in EUR across types of securities and prospectuses 

Prospectus type 

Equity securities 

Non-equity securities 

Standard prospectus 

EU Growth prospectus  

Simplified prospectus for 
secondary issuances 

EU Recovery prospectus 
(available for shares only) 

SMEs 

other 

SMEs 

other 

140 000- 

300 000 

50 000-  

80 000 

40 000- 

60 000 

40 000- 

70 000 

30 000- 

50 000 

50 000- 

100 000 

40 000- 

60 000 

20 000- 

40 000 

30 000- 

50 000 

N/A 

Source: Deutsche Boerse, reply to public consultation. Figures also validated by Euronext in a bilateral email 
exchange. 

Table 6 - Average costs of producing a prospectus in EUR across types of securities and prospectuses 

Prospectus type 

Equity securities 

Non-equity securities 

SMEs 

other 

SMEs 

other 

121 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Standard prospectus 

65 000 

220 000 

55 000 

75 000 

EU growth prospectus  

50 000 

40 000 

Simplified prospectus for secondary 
issuances 

EU Recovery prospectus (available for 
shares only) 

50 000 

30 000 

40 000 

N/A 

Source: this table is based on calculations made using the figures reported in Table 5. 

Table 7 - Average percentage savings per prospectus type 

Prospectus type 

Percentage cost savings 

EU Growth prospectus vs. Standard prospectus (SMEs) (equity and 
non-equity securities combined) 

EU Recovery prospectus (shares only) vs. EU Growth prospectus 
for equity securities 

EU Recovery prospectus (shares only) vs. Simplified prospectus 
for secondary issuances of equity securities 

25% 

40% 

40% 

Source: this table is based on calculations made on figures provided in Table 6.  

Although  the  costs  for  producing  the  prospectus  are  only  a  small  share  of  IPO  costs,  their 
indirect cost seem to be more substantial. Prospectuses define the information a firm is liable 
for. They allow the disclosure of information to the public, which reduces liability risks for 
the management. This disclosure, however, costs management time and gives rise to costs of 
legal advice. There is, however, little information about such costs of prospectus. Wegmann 
(2013) argued that the cost  for a legal  opinion even for smaller issuances would amount to 
EUR 100 000, with due diligence consultants charging up to EUR 50 000 – EUR 100 000. He 
also  estimates  that  an  IPO  consumes  50%  of  CEO  and  36%  of  CFO  time  over  6  months. 
Oxera (2020) estimated that fees for legal, advisory and consultancy services amount to 1.4% 
of  the  IPO  proceeds.  This  might  be  considered  an  upper  ceiling  for  indirect  costs  of  the 
prospectus. Oxera (2020) also estimated that IPO communication costs are twice as high as 
prospectus costs (see Figure 9).  

Lower  prospectus  costs  can  incentivise  some  firms  to  go  public.  The  patchy  data  about 
prospectus  costs  and  the  relatively  low  number  of  observations  of  IPOs,  however,  prevent 
any numerical estimate about how lower prospectus costs would translate into more IPOs or 
higher issuance volumes. Absent the possibility of a quantification,246 the introduction of the 
SME growth markets and associated alleviations to prospectus rule can be taken as a natural 
experiment  to  substantiate  estimates  of  cost  savings.  For  example,  the  success  of  the  SME 
growth market in boosting issuances in Sweden may be taken as an indication of the issuers’ 
preference for lower-cost prospectuses.  

246 Quantification is difficult for the following reasons. Country-variation is much smaller than the heterogeneity of issuers and issuances, 
implying that having more (larger) issuers with complex structures and larger issuances in one Member State has an impact on that country’s 
aggregates that would make it difficult to disentangle the effects for any cross-country comparisons.  

122 

 
 
 
 
 
 
                                                           
Table 8 - Prospectuses approved for IPOs and secondary issuances on SME growth markets in 2021247 

Type of offer or admission to trading  

Approved prospectuses in 2021 (EEA) 

Initial  admission  to  trading  on  an  SME  growth  market  with 
offer to the public 

Secondary issuance on an SME growth market 
Source: ESMA’s data for 2021. 

135 

72 

The  proportion  of  IPOs  by  SMEs  increased  significantly  after  the  introduction  of  SME 
growth markets under MiFID II (a special category of MTFs designated specifically (but not 
only) for SMEs). The introduction of the measure coincided with a global weakening of IPO 
activity and both the absolute number of IPOs as well as their share in global IPO numbers 
declined,  so  it  is  difficult  to  disentangle  the  impact  of  the  introduction  of  SME  growth 
markets. When looking at annual issuance numbers, the proportion of IPOs of EU-27 SMEs, 
i.e.  firms  with  an  initial  market  capitalisation  of  below  EUR  200  million,  rose  from  about 
70%  in  2017  to  80%  in  2018  and  2019.  In  2021,  the  number  of  IPOs  by  EU  firms  and  by 
SMEs in particular outpaced the global IPO trend (see Figure 10). 

While most issuance activity of SMEs took place in Sweden, the numbers also rose in many 
other  EU  Member  States.  Member  States  that  did  not  witness  an  increase  in  IPOs  were 
limited  to  Austria,  Belgium,  Greece,  Croatia,  Lithuania,  Romania,  Slovenia  and  Slovakia. 
With a further decline in issuance costs, more firms could be attracted.  

247 Methodological note: prospectuses approved in 2021 as well as the ISINs related to these 2021 approved prospectuses, independently of 
when  the  ISIN  was  reported.  Type  of  offer  or  admission to  trading  is a  field  associated to  the  ISIN  field,  which is  only  reported  for  the 
documents with securities information: Standalone, Base Prospectus with Final Terms, Securities Note and Final Terms. 

123 

 
 
                                                           
Figure 10. IPOs of EU firms (number of large firms and SMEs on the left-hand scale, share in 
global IPOs in % on the right hand scale) 

Source: FISMA calculations using FESE and WFE data. SMEs defined as IPOs with a market capitalisation of 
below EUR 200 million on the first trading day. 

Figure 11. Number of IPOs of SMEs 

Source: FISMA calculations based on FESE data. SME IPOs are defined as IPOs with a market capitalisation of 
below EUR 200 million on the first trading day. 

124 

 
 
 
 
 
4.3. Cost  savings  from  the  use  of  different  types  of  prospectuses  or  documents  as  well  as 

from exemptions 

This  section shows the results of a simulation  of potential cost  savings if those issuers that 
had to draw up a prospectus would have the opportunity to use a different type of prospectus 
than  they  actually  did.  This  simulation  analysis  is  done  for  different  type  of  instruments 
(equity  and  non-equity),  issuance  types  (primary  and  follow-on)  and  market  segments 
(regulated markets, SME growth markets) in line with the proposed options in the main body 
of  this  IA.  Simulations  use  the  data  on  possible  average  cost  savings  reported  in  Table 7, 
indicative estimates of market experts set out in Table 6 and the number of prospectuses for 
different types of securities and issuances approved by NCAs in 2021.  

Despite its basic methodology and reliance on subjective assumptions made by experts (who 
may  suffer  from  cognitive  bias),  this  simulation  analysis  seems  to  be  the  best  available 
method to derive at least the orders of magnitude for possible cost savings.248  

Figure 12. Overview of scenarios for issuing on different markets, issuance types and prospectuses 

Simulation 
analysis

Primary 
issuances

Secondary 
issuances

on Regulated 
markets

on SME growth 
markets

with EU 
Recovery 
prospectus

exempted from 
prospectus

of Equity

of Non-equity

with SME GM 
admission 
document

with EU 
admission 
document

Table 13

of fungible 
securities

of non-fungible 
securities

Table 9

Table 10

Table 11

Table 12

Table 14

Table 15

4.4. Primary issuances: offers of securities to the public or admission to trading on regulated 

markets 

According  to  ESMA’s  data,  the  number  of  standard  prospectuses  for  offers  of  securities  to 
the public or for admission to trading on a regulated market approved in 2021 was 382 for the 
category of equity securities and 1 862 for the category of non-equity securities respectively 
(calculated by deducting the number of EU Growth prospectuses, simplified prospectuses for 
secondary  issuances  and  EU  Recovery  prospectuses  from  the  total  number  prospectuses 
approved), as shown in Table 9. 

248 For those reasons, this simulation analysis could only be taken as an indication of a possible impact but not as a precise calculation hereof 
and should be treated as such. 

125 

 
 
 
 
                                                           
Table 9 - Standard prospectuses approved in 2021 by securities type249. 

Equity securities 

Non-equity securities 

A.  Total number of prospectuses 

B.  Total number of EU Growth prospectuses 

C.  Total  number  of  simplified  prospectuses 

for secondary issuances 

D.  Total 

number 

of 

EU  Recovery 

prospectuses 

E.  Total number of standard prospectuses A - 

(B + C + D) 

Source: ESMA’s data for 2021 

Option 2250 

717 

181 

138 

16 

382 

1 975 

47 

66 

N/A 

1 862 

Issuers  offering  securities  to  the  public  and/or  seeking  admission  to  trading  on  a  regulated 
market  would  benefit  from  significant  savings  if  the  standard  prospectus  would  be 
streamlined and aligned to at least the level of disclosure of the EU Growth prospectus (e.g. 
further benefits would accrue due to the deletion or additional streamlining of few additional 
items considered burdensome by issuers and unnecessary in their current form). Applying the 
estimation of 25% for cost savings from the use of an EU Growth prospectus versus the use 
of  a  standard  prospectus  (Table 7),  the  estimated  average  cost  savings  (per  year)  could 
amount  to  about  EUR  21  million  for  equity  securities  and  EUR  35  million  for  non-equity 
securities (about EUR 56 million in total), as indicated in Table 10. 

Table 10 - Primary issuances on regulated markets (Option 2) 

Equity securities 

Non-equity securities 

A.  Standard prospectuses approved in 2021251 

382 

1 862 

B.  Estimated 

average 

cost 

standard 

EUR  220 000 

EUR  75 000 

prospectus252 

C.  Estimated  average  cost  savings  of  an  EU 

25% 

25% 

Growth prospectus (in %)253 

D.  Estimated  average  cost 
standard prospectus (B * C) 

savings  per 

EUR  55 000 

EUR  18 750 

E.  Estimated cost savings (A * D) 

EUR  21 010 000 

EUR  34 912 500 

249 Methodological note: approved prospectuses in 2021 grouped by prospectus type and by securities type (equity vs. non-equity) using the 
reported annexes. This might cause a limited double counting of prospectuses (i.e. for the same prospectus, there might be a document with 
annexes belonging to the equity category and another belonging to the non-equity category). 
250 Option 1 would not lead to any cost savings related to the more streamlined contents of the prospectus. 
251 ESMA’s data for 2021. 
252 See Table 6. 
253 See Table 7. 

126 

 
 
 
 
 
 
 
                                                           
4.5. Primary issuances: offers of securities to the public and listing on SME growth markets  

Option 1 

Under option 1, in the case of a full exemption for the offer of securities to the public coupled 
with  a  listing  on  an  SME  growth  market,  which  entails  that  issuers  would  draw  up  the 
admission document required by the SME growth market (and which content would be based 
on the rulebook of the latter), issuers would be expected to achieve higher cost savings than 
under  option  2  (see  below),  despite  losing  the  benefit  and  flexibility  of  a  passportable  EU 
admission document. 

According to Table 6, average costs for an EU Growth prospectus are approximately EUR 50 
000.  According  to  Nasdaq  Baltics,  SME  growth  market  admission  documents  may  range 
from 20 to 60 pages, and the total cost for the listing based on an admission document varies 
around EUR 50 000 to  EUR 100 000 (average  EUR 75 000). The cost  of an average SME 
growth  market  admission  document  is  estimated  to  be  EUR  15  000  -  EUR  30  000,  which 
would  correspond  to  the  range  of  20-40%  of  the  average  total  cost  of  listing  based  on  an 
admission document approved by an exchange (i.e. EUR 75 000). The estimated cost saving 
on SME growth market would thus be based on the average of this range,  i.e. EUR 22 500. 
Considering that 135 prospectuses were approved in 2021 for a public offer and initial listing 
on  an  SME  growth  market,  the  estimated  total  net  cost  saving  for  companies  listing  on  an 
SME growth market would amount to about EUR 3.7 million, as shown in Table 11. 

Table 11 - Primary issuances on SME growth markets with an SME growth market admission document 
(Option 1) 

A.  Prospectuses approved in 2021 for a public offer and initial listing on an SME 

135 

growth market254 

B.  Estimated average cost of an EU Growth equity prospectus255  

EUR  50 000 

C.  Estimated total gross cost savings from prospectus exemption (A* B) 

EUR  6 750 000 

D.  Estimated average cost of an admission document 

EUR  22 500 

E.  Additional total costs of an admission document (A*D) 

EUR  3 037 500 

F.  Incremental cost savings by drawing up the admission document (C – E) 

EUR  3 712 500 

Option 2 

In the case of offers of securities to the public and of listings on an SME growth market, the 
replacement of the EU Growth prospectus with a more streamlined EU admission document, 
based  on  the  level  of  disclosure  of  the  EU  Recovery  prospectus  and  of  the  SME  growth 

254 See Table 8. 
255 See Table 6.  

127 

 
 
 
                                                           
market admission documents, would allow issuers to significantly reduce costs.256 Assuming 
cost of the EU admission document257 are equal to the cost of an EU Recovery prospectus (on 
which model the former would be built), and using the estimated cost savings of 40% for the 
use  of  an  EU  Recovery  prospectus  compared  to  the  use  of  an  EU  Growth  prospectus  (as 
indicated in  Table 7), issuers that submitted a prospectus  for a public offer and listing on a 
SME growth market in 2021258 could have realised cost savings of about EUR 2.7 million, as 
shown in Table 12. 

Table 12 - Primary issuances on SME growth markets with an EU admission document (Option 2) 

EU admission document 

A.  Prospectuses  approved  in  2021  for  a  public  offer  and  initial 

135 

listing on an SME growth market259 

B.  Estimated average cost of an EU Growth prospectus for equity 

EUR  50 000 

securities260 

C.  Estimated  average  savings  of  an  EU  admission  document  vs. 

40% 

an EU Growth prospectus (in %)261 

D.  Estimated average cost savings per prospectus 

E.  Estimated total cost savings (A * D) 

EUR  20 000 

EUR  2 700 000 

4.6. Secondary issuances 

Option 1 

In  the  case  of  secondary  issuances,  listed  issuers  who  have  a  track  record  on  either  a 
regulated  market  or  an  SME  growth  market  would  achieve  cost  savings  if  the  simplified 
prospectus  for  secondary  issuances  would  be  replaced  by  a  very  short  and  streamlined 
prospectus similar to the EU Recovery Prospectus for both equity and non-equity securities 
(the  EU  Recovery  prospectus  format  would  also  be  used  by  companies  wishing  to  transfer 
from an SME growth market to a regulated market). Combining the 40% cost savings from 
using the EU Recovery prospectus relative to the use of a simplified prospectus for secondary 
issuances of equity securities indicated in Table 13 with 138 secondary equity issuances and 
66 secondary non-equity issuances in 2021 would yield aggregate cost savings of about EUR 
3.8 million. 

Table 13 - Secondary issuances of equity and non-equity securities with an EU Recovery prospectus 

256 The EU Recovery prospectus is currently the most streamlined prospectus type, with a 30 page-size limit (and 2 pages for the summary), 
while SME growth market admission documents may range from 20 to 220 pages according to the feedback from some stakeholders (20-60 
pages on Nasdaq Baltics, up to 100 pages on Nasdaq Nordics, 180-220 pages on Euronext Growth Milan). 
257 EU admission document should not be confused with existing admission documents of exchanges. 
258 See Table 8. 
259 See Table 8. 
260 See Table 6. 
261 See Table 7. 

128 

 
 
 
 
 
                                                           
A.   Simplified  prospectuses  for  secondary 

issuances  of  equity 

138 

securities approved in 2021 

B.  Estimated average cost of a simplified prospectuses  for secondary 

EUR 50 000 

issuances of equity securities262  

C.  Simplified  prospectuses  for  secondary  issuances  of  non-equity 

66 

securities approved in 2021263 

D.  Estimated average cost of a simplified prospectuses  for secondary 

EUR 40 000 

issuances of non-equity securities264 

E.  Estimated total prospectus costs for secondary issuances  

EUR 9 540 000 

(A * B + C * D) 

F.  Estimated average savings of an EU Recovery prospectus265  

40% 

G.  Estimated cost savings for secondary issuances (E * F) 

EUR 3 816 000 

Option 2 

In  case  of  a  full  exemption  from  the  obligation  to  draw  up  a  simplified  prospectus  for 
secondary issuances of securities fungible with securities already admitted to trading, issuers 
would  generate  even  more  significant  cost  savings.  These  companies  would  be  required  to 
publish  only  a  statement  of  continuous  compliance  with  the  reporting  and  disclosure 
obligations  and  a  short  summary  document  with  a  few  key  information  (e.g.  on  the  use  of 
proceeds).  For  the  purpose  of  this  analysis,  only  secondary  issuances  of  equity  securities 
issued  by  means  of  a  simplified  prospectus  for  secondary  issuances  or  an  EU  Recovery 
prospectus  in  2021  are  considered  to  be  fungible  with  equity  securities  already  admitted  to 
trading266.  The  yearly  cost  savings  stemming  from  this  exemption  could  therefore  be 
estimated  at  about  EUR  7.4  million,  as  indicated  in  Table 14  (from  which  the  cost  of 
producing  the  compliance  statement  and  the  summary  document  should  be  deducted, 
although they are likely to be minimal). 

Table 14 - Secondary issuances of fungible securities exempted from the prospectus requirement 

A.  Prospectuses approved in 2021267 

138 

16 

Secondary issuance 
prospectus (equity) 

EU Recovery prospectuses 
(shares) 

262 See Table 6. 
263 See Table 9. 
264 See Table 6. 
265  See  Table  7.  It  is  assumed  that the 40%  savings  of  the  current  EU  Recovery  prospectus  for  shares  versus  a  simplified  prospectus  for 
secondary issuances of equity securities also applies for non-equity securities (there is currently no EU Recovery prospectus for non-equity 
securities). 
266 Although it is possible that companies issued shares/other equity which was not fungible with the shares already in circulation (e.g. type 
A and type B shares), this was likely minimal. On the opposite side, it is likely possible that companies issue non-equity securities that are 
fungible  with  non-equity  securities  already  admitted  to  trading.  It  is,  therefore,  unlikely  to  impact  the  estimate  for  cost  savings  in  any 
sizeable manner.  
267 ESMA’s data for 2021. 

129 

 
 
 
 
                                                           
B.  Estimated average cost268 

EUR  50 000 

EUR  30 000 

C.  Estimated 

total 

cost 

savings 

from 

exemption (A * B) 

(Gross  of  cost  of  summary  document  and 
statement  of  continuous  compliance  with 
reporting and disclosure obligation) 

EUR  6 900 000 

EUR  480 000 

For the purpose of this analysis, non-fungible securities relate to the situation where issuers, 
whose equity securities are already admitted to trading on a regulated market or listed on an 
SME growth market, issue non-equity securities. Therefore, only non-equity securities issued 
by means of a simplified prospectus for secondary issuances in 2021 are taken into account in 
the analysis. If issuers could draw up a lighter prospectus (largely mirroring the EU Recovery 
prospectus)  for  such  non-fungible  issuances  instead  of  the  currently  required  simplified 
prospectus  for  secondary  issuances269,  they  could  realise  cost  savings  of  about  EUR  1 
million, as shown in Table 15. 

Table 15 - Secondary issuances of non-fungible securities with an EU Recovery prospectus 

A.  Simplified prospectuses for secondary issuances for non-equity securities 

66 

approved in 2021270 

B.  Estimated average cost of a simplified prospectus for secondary issuances 

EUR  40 000 

for non-equity securities271 

C.  Estimated average savings of an EU Recovery prospectus in (%)272 

40% 

D.  Estimated average cost savings per prospectus (B * C) 

EUR  16 000 

E.  Estimated cost savings (A * D) 

EUR  1 056 000 

5.  The costs of being listed 

In  addition  to  the  upfront  issuance  costs,  corporations  may  be  discouraged  to  use  market 
funding by the on-going costs of obligations that follow from being listed on public markets. 
Oxera (2020) reported that the time and costs associated with compliance and administration 
and requirements to disclose sensitive information were among the reasons cited by market 
participants  of  why  firms  delisted  from  public  markets.  This  section  reports  the  available 
evidence on the magnitude and breakdown of ongoing costs to  comply  with regulations,  in 
particular  to  comply  with  market  abuse  rules.  These  numbers  serve  as  input  to  scenario 

268 See Table 6. 
269 As the EU Recovery Prospectus is currently only available for shares, detailed templates (schedules) for non-equity securities would have 
to be laid down in the legislative act. 
270 ESMA’s data for 2021. 
271 See Table 6. 
272 See Table 7. 

130 

 
 
 
 
 
 
 
                                                           
analysis on the magnitude of cost savings that the policy options discussed in the main body 
of the IA could trigger. 

5.1. Estimates of the magnitude of the costs of staying listed 

An  IPO  leads  to  follow-on  costs  for  the  issuer  because  of  transparency  obligations  to  the 
shareholders  and  the  general  public.  Listing  obligations  are  may-fold,  ranging  from 
requirements on accounting, auditing, investor relationships to corporate governance. While 
the  Oxera  (2020)  study  identified  the  importance  of  the  costs  of  remaining  listed,  there  is 
actually  little  information  about  the  magnitude  and  breakdown  of  such  costs.  Nevertheless, 
Wegemann  (2013)273  provides  an  illustrative  breakdown  of  the  ongoing  costs  of  remaining 
listed using an example of a mid-sized enterprise, for which he estimated total ongoing costs 
would  amount  to  almost  EUR  400  000  per  annum  (Table  ).  Costs  for  auditing,  the 
shareholder assembly and broader investor relationship accounted for the lion’s share of the 
overall costs. Costs of information and publication disclosures – beyond business reports and 
accounting - accounted for EUR 20 000 per annum.  

Table 16 - Costs of remaining listed for a mid-sized enterprise 

Exchange fee 

Designated sponsor 

Listing partner 

Quarterly and annual reports 

Audit 

Roadshows + meetings with analysts 

Costs for the shareholder assembly 

Costs for investor relations 

EUR 

7 500 

35 000 

15 000 

40 000 

100 000 

50 000 

60 000 

60 000 

Information and publication obligations  

20 000 

Sum 

387 500 

Source: Wegmann (2013). 

Apart from this study, there is little quantitative information about the ongoing costs and in 
particularly  about  the  costs  of  complying  for  companies  with  obligations  stemming  from 
MAR.  

There  is  however  another  compliance  cost  study  that  focuses  exclusively  on  the  financial 
sector. The study analyses data received from a few financial institution on compliance with 
MAR.274 It reports that compliance with MAR leads to ongoing costs between EUR 2 million 
and  EUR  26  million  for  these  financial  institutions,  largely  consisting  of  costs  for  data 
processing  and  validation,  IT  operation  and  maintenance.  However,  since  financial 
institutions  are  specialised  actors  and  frequent  issuers  of  securities,  it  is  not  clear  whether 
their experiences can be applied to non-financial corporations. 

273 Wegemann, J., ‘Kosten eines IPOs‘, IpoBOX, 2013, retrieved 7 April 2022. 
274 ICF/CEPS (2019), Study on the costs of compliance for the financial sector, final report for the European Commission, see Table 210. 

131 

 
 
 
                                                           
Workshops and bilateral meetings with the industry and industry associations were organised 
to collect further information on the general cost of compliance with MAR as well as that of 
compliance with  the specific MAR  obligations (such as  the obligation to  disclose all inside 
information as soon as possible). It turned out that such information was not collected by the 
industry.  Issuers  were  also  deemed  to  be  too  heterogeneous  to  produce  telling  statistics  on 
this  matter.  The  information  used  below  was  reported  by  an  EU  trading  venue  that  could 
source such information from 13 issuers. Among them was one large firm, 5 mid-sized firms 
and 6 SMEs. Given the limited size, there was no possibility to check whether there is a bias 
in  the  sample.  Furthermore,  the  sample  can  neither  be  considered  representative  for  the 
Member State, in which the corporations are located, nor for the EU-27. Still it allows for a 
broad, order-of-magnitude, estimate. 

Table 17 - Breakdown of ongoing costs from being listed on a public venue – indications from the 
industry, average in EUR 

Annual exchange fees 

Other fees (central depository, supervisory institution, etc.) 

Higher costs of statutory audit 

Higher costs of accounting team related to higher accounting standards 

Higher costs of legal team related to analyses of additional regulation 

Higher costs related to corporate governance 

Costs of investor relations/information disclosure 

TOTAL 

Memo: average issuance volume (EUR) 

SME 

non-SME 

5 900 

10 900 

15 300 

16 200 

16 100 

59 500 

15 600 

139 400 

12 500 

34 800 

58 100 

73 900 

21 000 

150 000 

62 200 

412 500 

42 800 000 

944 500 000 

7 

6 

Source: Indications from individual issuers collected from a European trading venue. 

5.2. The potential for cost savings – orders of magnitudes and assumptions 

5.2.1. 

Cost savings for issuers 

The Commission asked for estimates of compliance cost with MAR in its public consultation 
and  workshops  with  stakeholders.  The  outcome  was  not  as  clear  as  expected  since 
respondents  aggregated  them  together  with  other  cost  components  and  did  not  report  them 
separately. The estimates produced in this section assume that the costs of compliance with 
MAR  lead  to  higher  costs  for  the  legal  team  and,  partly,  to  higher  costs  of  investor 
relationships (see Table 17).  

In  the  absence  of  further  information  about  the  determinants  of  these  compliance  costs  for 
issuers, it is only possible to provide a broad, order-of-magnitude, estimate of the impact of 
changes to MAR by using a number of assumption for several parameter based on plausibility 
considerations.  Given  the  broad  range  of  numbers  obtained  by  the  study  estimating 
compliance costs in the financial sector, a similar survey is unlikely to deliver suitable results 
for the even more heterogeneous issuers in the non-financial sector. That said, the following 
paragraph presents a scenario analysis to obtain a notion of possible cost savings.  

132 

 
 
 
  
 
The main type of cost incurred by the issuer complying with MAR is the cost of its legal team 
and/or  the  cost  of  (external)  legal  advice.  The  indications  from  issuers  about  the  additional 
costs for the legal team when being listed can thus serve as a benchmark for estimating the 
costs of compliance (Table 17). 

To get orders of magnitude, it is, first, assumed that 80% of the higher cost for the legal team 
reported by issuers are due to  compliance with  MAR and, second, that  80% of those MAR 
compliance costs are due to the legal uncertainty associated with applying the interpretation 
of inside information. The first assumption of 80% of MAR compliance costs over the total 
compliance costs is due to the fact that compliance with MAR was reported by stakeholders 
(in bilateral discussions and workshops) as the main ongoing concern requiring attention of 
the legal internal department or external legal advisors. All other ongoing compliance costs 
are  covered  by  other  cost  items  (in  the  table)  under  accounting,  auditing  and  investor 
information.  The  second  assumption  of  80%  devoted  to  the  legal  interpretation  of  inside 
information  once  again  is  deduced  from  talks  with  stakeholders  who  reported  that  dealing 
with the legal uncertainty around the interpretation of the notion of inside information is the 
dominant  ongoing  challenge  for  their  respective  legal  consultant.  Therefore,  while 
stakeholders were not able to report the exact numbers, they confirmed that MAR compliance 
and the legal  uncertainty surrounding the notion  of inside information  constitute significant 
cost  elements  for  them.275  It  is  then  assumed  that  option  1  (dual  definition  of  inside 
information  accompanied  by  a  non-exhaustive  list  of  events)  would  allow  to  save  a 
considerable  part,  but  not  all,  of  the  costs  for  the  legal  team  post-IPO  associated  with  the 
definition of inside information (75%). The exhaustive list of events under option 2, in turn, 
would remove all legal uncertainty associated with the notion of inside information, reducing 
those legal costs by 100%.276  

Applied  to  the  average  costs  of  the  legal  team  and  considering  that  there  are  about  3  100 
SMEs listed on regulated markets or SME growth markets and around 6 400 other firms on 
regulated markets or MTFs277, option 1 could lead to (estimated) economy-wide compliance 
cost reductions of about  EUR 89 million, broken down into EUR 25 million for SMEs and 
EUR  65  million  for  non-SMEs.  The  adoption  of  a  comprehensive  list  of  events  (option  2) 
could  lead  to  a  further  cut  in  related  compliance  costs  (i.e.  100%  instead  of  75%  cost 
reduction  for  the  portion  of  the  costs  associated  with  the  legal  team  dealing  with  the 
interpretation  of  insider  interpretation),  resulting  in  aggregated  (estimated)  cost  savings  of 
EUR 119 million, of which EUR 33 million for SMEs and EUR 86 million for non-SMEs.  
It  is  then  assumed  that  25%278  of  the  costs  attributed  to  investor  relations  and  information 
publication costs in Table 17 could be attributed to the disclosure of information to investors 
and  that  the  benefits  of  improved  rules  on  the  possibility  to  delay  disclosure  of  inside 
information could represent 10%279 of that part of the costs for investor relations/information 

275 Having said that, both assumptions remain to be ballpark numbers that should be treated as such and should not be used as statistically 
accurate estimates. 
276  Estimated  costs  savings  of:  0.8*0.8*0.75*(underlying  benchmark  legal  team  cost  level)  under  option  1,  and  0.8*0.8*1*(underlying 
benchmark legal team cost level) under option 2.  
277 See Table 1of this Annex. 
278 In Wegmann (2013), the information disclosure costs amount to a quarter of the sum of  investor relations and information publication 
costs, see Table 16. 
279 Both numbers are purely ballpark numbers, based on previous exchanges with stakeholders and our understanding. 

133 

 
 
                                                           
publication costs, given the reduced need for delay notifications in the case of more mature 
information280.  

The estimates for cost savings from the clarification of the delay conditions rely on the cost 
data  on  investor  relations  and  information  publication  provided  by  Wegmann  (2013) 
(Table 18).  Applying  25%  (as  set  out  above)  the  benchmark  cost  level  and  using  a 
conservative assumption that the clarification on condition for delay would save 10% of these 
costs, produces the aggregate (estimated) cost savings of about EUR 12 million, out of which 
1.2 million for SMEs and 10 million for larger firms.  

Table 18 - Scenario analysis of the cost savings from review of the definition of inside information and of 
the conditions for delaying its disclosure 

Number of listed firms281 

3 168 

6 411 

9 579 

Higher costs for legal team from being listed282 

16 100 

21 000 

SME 

non-SMEs 

total 

Higher costs for investor relations from being 
listed283 

Assumed ratio for MAR-related work of legal team 

Assumed share of the legal team’s work related to 
the definition of inside information 

Assumed share of information costs in costs for 
investor relations and information publication 

15 600 

62 200 

80% 

80% 

80% 

80% 

25% 

25% 

Assumed share of cost saving from clarity on inside definition 

Option 1 in % 

Option 2 in % 

75% 

100% 

75% 

100% 

1 

2 

3 

4 

5 

6 

7 

8 

9 

Option 1 and Option 2 

10% 

10% 

Assumed share of cost saving from clarity on delays 

Aggregate cost savings from clarity on inside definition 

10 

11 

Option 1 (10 = 1*2*4*5*7) 

24 554 000 

64 595 000 

89 149 000 

Option 2 (11 = 1*2*4*5*8) 

32 738 000 

86 127 000 

118 865 000 

12 

Option 1 and Option 2 (12 = 3*6*9) 

1 232 000 

9 964 000 

11 196 000 

Aggregate cost saving from clarity on disclosure 

280  Estimated  cost  savings:  0.25*0.10*(underlying  benchmark  investor  relationship  cost  level  +information  publication  cost  level)  (both 
under options 1 and 2, as both are assumed to lead in an equal manner to less delay notifications). 
281 See Table 1. 
282 See Table 17. 
283 See Table 17. 

134 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
5.2.2. 

Cost savings for public authorities  

National  competent  authorities  (NCAs)  incur  costs  when  they  have  to  examine  the 
information  sent  by  an  issuer  that  disclosure  of  the  information  was  delayed  and  a  written 
explanation of how the relevant conditions were met. It was possible to gather data on these 
costs from 4 Members States: PL, MT, IT, ES.284 As the data gathered from those Members 
States are captured in a different way, it was necessarily to make them the comparable. The 
following transformations were undertaken: 

 

 

 

 

In case of Malta, NCA assessed costs of delay when they needed to ask follow-on questions 
as EUR 175 and when they did not need to ask follow-on question - as EUR 90. Assuming 
that at least in one out of three cases they would need to ask follow-on questions, the average 
cost would be EUR 118.  
Spain’s NCA indicated the costs of examining the notification on delay at  EUR 45-55. For 
the  purpose  of  this  impact  assessment,  the  average  quote  of  EUR  50  will  be  taken  into 
consideration.  
In Poland, the average number of delays per year for the period of 3-years was 150. The total 
costs  for  2021  incurred  by  Polish  NCA,  when  examining  notifications  on  delays,  were 
estimated at EUR 20 000. It gives an average of EUR 133 per delay.  
In case of Italy, the average number of delay for 3-years period was 286. The total costs for 
2021 incurred by the Italian NCA, when examining notifications on delays, were estimated at 
EUR 25 000. The average cost of delay would be EUR 87 EUR.  

 

  Assuming that these four Member States are a representative sample of Member States, the 
average  costs  per  delay  in  the  EU  would  be  EUR  97.  This  is  a  prudent  estimation,  as  the 
sample of NCAs taken into consideration for this calculation does not include countries with 
the highest labor costs.  
The total number of delays in EU for 3-years period reached 11 909 (see Annex 6 for more 
details),  which  gives  an  average  of  3  970  delay  notifications  per  year.  This  means  that  on 
average,  the  cost  of  examining  delays  by  NCAs  per  year  in  the  EU  would  equal  EUR  385 
090.  
If  we  assume  a  20%285  reduction  in  costs  related  to  the  examination  of  delay  notifications 
following improvements introduced to the delay regime under option 1,286 an estimated cost 
reduction for NCAs would amount to EUR 77 018. 

284 Those Member States indicated the cost valuation of the procedure. 
285 It is assumed that NCAs would enjoy more cost savings than issuers in relation to delay notifications (20% vs 10%). This is due to the 
fact that issuers would still be expected to do the necessary evaluation of a larger amount of information that may not all result in a delay 
notification submitted to the NCAs (we are thus broadly assuming that every second piece of information considered by an issuer would 
result in a formal delay notification to NCA).  
286 Option 2 foresees no amendments to conditions for delay. 

135 

 
 
 
 
                                                           
ANNEX 5: ANALYSIS OF THE PRE-IPO PHASE: MVR SHARE 

STRUCTURES  

1.  What are MVR share structures 

MVR share structures (also called Dual Class share structures) are a straightforward form of 
control enhancement mechanism that generally builds on dividing shares in two classes based 
on voting rights. One of the classes has a lower or subordinate voting value (commonly one 
vote). The other class typically carries a larger number of votes (e.g. ten); it will be hereafter 
referred to as MVR shares.287 The purpose of MVR share structures is generally to permit a 
shareholder  (or  a  group  of  shareholders)  to  hold  a  controlling  stake  in  a  company  without 
having  to  make  the  proportionate  economical  investment  required  for  the  size  of  the  stake, 
should all shares have the same voting power.  

Loyalty  shares  –  another  form  of  control  enhancement  mechanism  -  are  shares  that  give 
enhanced  voting  power  to  shareholders  that  have  held  them  for  a  specified  time  period. 
Typically loyalty-shareholders get two votes per share, instead of one vote, if they have held 
their  shares  for  two  years  or  more288.  Any  shareholder  can  obtain  the  added  voting  rights 
provided  they  maintain  the  share  for  the  specified  time  period.  When  loyalty  shares  are 
traded, the buyer does not acquire the additional voting rights - rather they are extinguished. 
Although  the  introduction  of  loyalty  shares  aims  at  bringing  long-term  benefits  for  the 
company by incentivising long-term shareholders, empirical evidence has demonstrated that 
this  is  not  always  the  case.  Studies  have  demonstrated  that  in  practice  they  are  used  to 
enhance control by controlling shareholders and do not increase the holding period of shares 
(see paragraph 2 for more detail). 

MVR  share  structures  are  only  one  among  the  existing  control  enhancing  mechanisms,  i.e. 
mechanisms generating a discrepancy in the relation between financial ownership and voting 
power  with  the  result  that  a  shareholder  can  increase  its  control  without  holding  a 
proportional stake of equity. The study on the proportionality between ownership and control 
in EU Member States289, requested by the Commission and published in 2007, showed that 
the  available  mechanisms  to  enhance/lock  in  control  by  leveraging  voting  power  may  also 
include, among others, non-voting shares290, non-voting preference shares291, and voting right 
ceilings292.  Nevertheless,  being  more  rigid  in  their  set-up,  these  alternative  share  structures 
naturally  constrain  the  amount  of  equity  that  can  be  raised  at  the  IPO  stage  and  through 

287 In some Member States, MVR shares are shares with one voting right, while shares inferior to MVR shares may hold less than one voting 
right (e.g. 1/10 of a voting right). 
288  Loyalty  shares are  also  called  “tenure-share  voting stock”  or  “time-phased  voting  stock”.  In  some  cases,  additional  (fractional)  voting 
rights are added progressively, the longer the shareholder holds on to a share. 
289  Report  on  the  Proportionality  Principle  in  the  European  Union,  External  Study  Commissioned  by  the  European  Commission,  2007, 
final_report_en (2).pdf.  
290 Shares with no voting rights and which carry no special cash-flow rights (such as a preferential dividend) to compensate for the absence 
of voting rights. 
291 Non-voting shares issued with special cash-flow right to compensate for the absence of voting rights. For example, shares that have no 
voting rights but have a preferential (higher or guaranteed) dividend. 
292 A restriction prohibiting shareholders from voting above a certain threshold irrespective of the number of voting shares they hold. Voting 
right ceilings can be expressed as a percentage of all outstanding voting rights (for example, when no shareholder may vote for more than 
three  percent  of  the  company’s  registered  share capital)  or  as  a  percentage  of  all  votes  cast at  a  general  meeting  (very  common  in  many 
Member States).293 Becht, Marco and Kamisarenka, Yuliya and Pajuste, Anete, Loyalty Shares with Tenure Voting – Does the Default Rule 
Matter?  Evidence  from  the  Loi  Florange  Experiment  (April  1,  2018).  European  Corporate  Governance  Institute  (ECGI)  -  Law  Working 
Paper No. 398/2018, Available at SSRN: https://ssrn.com/abstract=3166494 or http://dx.doi.org/10.2139/ssrn.3166494 

136 

 
 
                                                           
follow-on  issuances,  since  further  share  issuances  would  inevitably  dilute  the  founder’s 
interest due to a fixed (lower) voting ratio. By contrast, MVR shares allow founders to retain 
majority-voting control while selling a larger portion of their investment in the company.  

MVR  share  structures  can  be  especially  beneficial  for  high-growth  companies  active  in  the 
tech-sector whose founders may desire to retain control of the company post-IPO to pursue 
their idiosyncratic vision for the company without becoming too exposed to the whims of the 
public markets. Regulatory competition to attract IPOs has led many jurisdictions outside the 
EU  that  had  previously  banned  or  restricted  these  structures  to  revise  their  regulatory 
approaches  to  MVR  share  structures.  Asian  financial  centres,  including  Hong  Kong  and 
Singapore,  and  more  recently  Shanghai  and  Shenzhen,  which  traditionally  prohibited  MVR 
share structures, currently allow them, when certain requirements are met. In the same vein, 
the UK recently amended their listing rules to allow companies with these structures to list on 
the premium segment of the London Stock Exchange (see section 3.2. for more detail). 

2.  Loyalty shares vs MVR share structures 

Both  loyalty  and  MVR  share  structures  imply  a  departure  from  the  “one  share,  one  vote” 
principle, as they confer proportionally more votes to the shareholder who holds one of these 
shares than ordinary shares. However, there are notable differences between the two both in 
terms of the reasoning behind their implementation and their effectiveness.  

MVR share structures are introduced as a mechanism to preserve the rights of the founder or 
controlling shareholder through different classes of shares, one of which has a fixed, higher 
voting power. These structures are meant to increase the allure of public markets for founder 
driven company and to isolate their decision-making from market pressures. One of the main 
reasons  that  deters  founders  from  listing  their  company  is  the  risk  that  short-term  market 
volatility could lead to investors seeking to change the founder’s vision for the company as 
well as leaving them vulnerable to hostile takeovers. MVR share structures provide a way for 
founders  to  continue  to  pursue  their  vision  on  how  the  company  should  grow  while  still 
allowing  investors  to  invest  in  the  company  and  therefore  profit  economically  from  its 
growth.  Founders’  vision  and  ability  to  pursue  that  vision  becomes  part  of  a  company’s 
selling point and investors factor this into the share price  when deciding whether to  invest. 
MVR  share  structures  are  prevalent  throughout  the  globe,  with  presence  in  diverse  capital 
markets,  such  as  the  US,  Nordics,  South  Africa  and  Hong  Kong  (see  section  3  for  more 
detail).  

Unlike  MVR  share  structures,  loyalty  shares  are  enhanced  control  mechanisms  designed  to 
foster  long-term  shareholding  among  investors,  without  constituting  a  separate  class  of 
shares.  Any  shareholder  can  obtain  additional  voting  rights  if  they  hold  the  stock  for  the 
designated  time.  Furthermore,  as  the  enhanced  voting  rights  are  not  attached  to  the  shares 
themselves, but rather to the shareholders that own the shares, loyalty shares become ordinary 
shares when the shares change owner. Loyalty shares are expected to lead to a more stable, 
long-term-oriented ownership base that would benefit companies’ development, protecting it 
from  the  influence  of  short-term  investors.  These  structures  exist,  for  example,  in  Italy, 
Belgium and France.  

Empirical  evidence, however, points to  the fact  that  these shares have mostly been used by 
incumbent shareholders to lock-in control, sometimes in a less transparent manner than MVR 
shares. Studies in France found that there is no significant difference in the average holding 

137 

 
 
periods  of  investors  between  firms  with  and  without  loyalty  voting  shares293.  This  is 
corroborated  by  anecdotal  evidence  from  Italy  that  neither  institutional  investors  nor  retail 
investors  make  use  of  loyalty  voting  rights  to  a  significant  extent,  and  that  it  is  almost 
exclusively  the  controlling  shareholder  who  benefits  from  it294.  In  the  same  vein,  other 
research  found  that  loyalty  shares  are  used  less  widely  and  less  intensely  in  firms  with 
dispersed ownership than they are used in firms with a controlling shareholder295.  

3.  Current situation in the EU Member States and in other jurisdictions outside of the EU 

3.1. Situation in the EU Member States 

There is  currently fragmentation in  the EU in regards to  MVR  share structures with  twelve 
Member  States  allowing  MVR  share  structures,  2  Member  States  allowing  both  MVR  and 
loyalty shares, three Member States allowing loyalty shares while banning MVR shares, and 
twelve prohibiting both. Table 1 provides for an overview of the Member states’ legislations 
regarding MVR share structures. 

Some  Member  States,  such  as  Sweden  or  Denmark,  have  allowed  MVR  share  structures 
nearly  since  the  inception  of  their  capital  markets  in  the  19th  century.  In  Sweden,  the 
percentage  of  listed  companies  with  MVR  share  structures  has  always  remained  above 
40%296  and  in  Finland  and  Denmark  they  represent  the  majority  of  public  market 
capitalization297. In contrast, other Member States such as Germany and Austria, do not allow 
companies to issue MVR shares. 

Regardless  of  Member  States’  positions  on  MVR  share  structures,  it  seems  that  Member 
States  allow  for  different  deviations  from  the  “one-share  one-vote”  principle.  The  study  on 
the proportionality between ownership and control in EU Member States (published in 2007) 
already concluded that no EU jurisdiction  within the analysed sample opted for an all “one 
share one vote” principle. On the contrary, and quite remarkably, even those Member States 
that  had,  to  some  extent,  formally  adopted  the  “one  share  one  vote”  principle  authorised 
various control-enhancing mechanisms, such as voting right ceilings or non-voting preference 
shares298.  These  conclusions  were  recently  confirmed  in  a  study  on  minority  shareholders 
protection,  requested  by  the  Commission  and  published  in  2018299.  This  study  contains  a 
section on the application of the “one share, one vote” principle in Member States, where it is 
concluded  that  the  national  legal  frameworks  of  the  EU  Member  States  do  not  see  this 
principle as  a fundamental one300. It is also pointed out that deviations from the “one share 
one vote” principle are a rather recent tendency. 

293  Becht,  Marco  and  Kamisarenka,  Yuliya  and  Pajuste,  Anete,  Loyalty  Shares  with  Tenure  Voting  –  Does  the  Default  Rule  Matter? 
Evidence from the Loi Florange Experiment (April 1, 2018). European Corporate Governance Institute (ECGI)  - Law Working Paper No. 
398/2018, Available at SSRN: https://ssrn.com/abstract=3166494 or http://dx.doi.org/10.2139/ssrn.3166494 
294 Joint statement on the introduction of multiple voting rights at Italian listed Companies  
https://www.eumedion.nl/en/public/knowledgenetwork/letters/2015-02---statement-on-italian-multiple-voting-rights.pdf  
295 Among the French dispersed ownership firms using loyalty shares, only 9.5 percent of the overall shares received the additional vote, 
while those companies with controlling shareholders had the loyalty-share vote boosting about four times as many (i.e. 36%) shareholder 
votes (see Mark J. Roe and Federico Cenzi Venezze, Will Loyalty Shares Do Much for Corporate Short-Termism, The Business Lawyer; 
Vol. 76, Spring 2021, p. 487). 
296 Skog. R, Lidman, E (2022) London allowing dual class Premium listings: A Swedish commentary 
297 Kim, J., Matos, P. and Xu, T. (2018), Multi-Class Shares Around the World: The Role of Institutional Investors 
298  Report  on  the  Proportionality  Principle  in  the  European  Union,  External  Study  Commissioned  by  the  European  Commission,  2007, 
final_report_en (2).pdf, p. 14. 
299 Study on Minority Shareholders Protection, Final report, 2018, DS0418428ENN.en (2).pdf.  
300 Ibid, p. 192. 

138 

 
 
                                                           
It  is  also  worth  noting that  several  EU Member  States have recently changed their national 
legislation to allow MVR share structures and/or loyalty shares: 

(i)  In  France,  the  2014  Loi  Florange  made  loyalty  shares  the  default  voting  structure  for 

French public companies; 

(ii)  in 2015, Italy, as part of a package of reforms designed to make listing more attractive 
for  private  companies  (and,  more  generally,  to  further  enhance  contractual  freedom  in 
corporate law), allowed non-listed companies to issue MVR shares, while also ensuring 
that issuers can retain them once listed. Listed companies can adopt loyalty shares; 

(iii) in  2018,  Belgium  departed  from  the  traditional  prohibition  on  issuing  securities  with 
MVR shares. Unlisted companies are now able to issue MVR shares without a limit on 
the  number  of  votes  that  can  be  attached  to  a  share.  Listed  companies  may  introduce 
loyalty shares, the introduction of which requires a two-thirds majority vote; 

(iv) in  2021,  Spain  introduced  loyalty  shares  when  transposing  the  Shareholders  Rights 

Directive301;  

(v)  Portugal  introduced  MVR  share  structures  in  January  2022  with  the  objective  of 
fostering IPOs and attracting companies to their public market. Companies going public 
or already listed have now the choice to issue MVR shares with a maximum voting ratio 
of 5:1. 

Table 1 - Current situation in all EU Member States regarding multiple voting right shares 

MVR shares 

Loyalty 
Share 

Non-voting right share 

Allowed when 
listing or when 
listed 

Maximum voting ratio  Allowed  Allowed 

Type 

no 

no 

no 

no 

no 

yes 

yes 

no 

N/A 

N/A 

N/A 

N/A 

N/A 

no 

no 

N/A 

no 

yes 

no 

no 

yes 

yes 

yes 

yes 

no 

yes 

no 

no 

no 

yes 

no 

yes 

up to 1/3 of the 
share capital 

Preference 
shares 

Preference 
shares 
Preference and 
ordinary shares 
up to ½ of total 
shares 

Preference and 
ordinary shares  

Preference and 
ordinary shares  

Member 
State 

Austria 

Belgium 

Bulgaria 

Cyprus 

Croatia 

Czech  
Republic 

Denmark 

Estonia 

301 Directive 2007/36/EC, as amended by Directive (EU) 2017/828.  

139 

 
 
 
  
  
                                                           
Finland 

France 

Germany 

Greece 

Hungary 

Ireland 

Italy 

Latvia 

Lithuania 

Luxembourg 

Malta 

Netherlands 

Poland 

yes 

no 

no 

no 

yes 

yes 

yes 

no 

no 

no 

yes 

yes 

yes 

no 

N/A  

N/A 

N/A 

10:1 

- 
3:1 (MVR shares can 
only be issued by 
private companies and 
retained after the IPO)  

N/A 

N/A 

N/A 

- 

2:1 (MVR shares can 
only be issued by 
private companies and 
retained after the IPO) 

no 

yes 

no 

no 

no 

no 

yes 

yes 

yes 

yes 

yes 

yes 

yes 

yes 

up to ½ of total 
shares 

Preference 
shares 
Preference 
shares 

no 

no 

no 

no 

yes 

yes 

yes 

yes 

yes  

no 

no 

yes 

Portugal 

yes 

 5:1  

no 

yes 

Romania 

yes 

Only listed companies 
can issue these shares 

no 

yes 

Slovakia 

Slovenia 

Spain 

Sweden 

no 

no 

no 

yes 

Source: European Commission 

3.2. Situation outside the EU 

- 

no 

yes 

N/A  

no 

yes 

N/A  

10:1 

yes 

no 

yes 

no 

Only preference 
shares without a 
vote 
Only preference 
shares without a 
vote 

Only preference 
shares without a 
vote 

Only preference 
shares without a 
vote up to ½ of 
total shares 
up to ½ of total 
shares 

Outside the EU there are several jurisdictions that have a long history of using MVR share 
structures,  such  as  the  US,  Canada  or  Norway.  However,  regulatory  competition  to  attract 

140 

 
 
  
  
  
  
  
  
  
  
 
  
  
  
IPOs  has  recently  led  many  other  jurisdictions  that  previously  banned  or  restricted  these 
structures to revise their regulatory approaches. The UK recently amended their listing rules 
so as to allow companies with these structures to list on the premium segment of the London 
Stock Exchange. In Asian financial centres, including Hong Kong and Singapore, and more 
recently  Shanghai  and  Shenzhen,  there  has  also  been  a  reversal  of  the  legislation  on  MVR 
shares.  In  all  of  these  jurisdictions,  the  use  of  MVR  share  structures  had  been  traditionally 
prohibited,  and  it  is  currently  allowed  if  certain  requirements  are  met.  This  approach  was 
adopted  in  an  attempt  to  compete  with  other  leading  financial  centres  for  the  attraction  of 
IPOs, after seeing how companies like Alibaba—the then biggest IPO in history—decided to 
go public in New York because they were unable to go public with a MVR share structure in 
Hong Kong302. In Singapore, losing out on the IPO of the English football club Manchester 
United  in  2012  to  the  US  sparked  a  debate  on  MVR  share  structures.  After  a  public 
consultation and internal debate, MVR share structures were approved in 2016.  

Table 2 - Current situation in countries outside the EU regarding multiple voting right shares 

Country 

Australia 

Canada 

Allowed 

No 

Yes 

China (Mainland) 

Yes303 

Hong Kong 

India 

Israel 

Japan 

Norway 

Singapore 

South Korea 

Switzerland 

United Kingdom 

United States 

Source: European Commission 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

No 

Yes 

Yes 

Yes 

Multiple voting right shares 

Type 

N/A 

MVR shares (no limit) 

MVR shares (10:1) 

MVR shares (10:1) 

Differential voting right shares 

N/A 

MVR shares 

MVR shares (10:1) 

MVR shares (10:1) 

N/A 

MVR shares (10:1) 

MVR shares (20:1) 

MVR shares (no limit) 

302  See  HKEX  Concept  Paper,  “New  Board”  (2017),  1,  13,  available  at  https://www.hkex.com.hk/-/media/HKEX-Market/News/Market-
Consultations/Concept-Paper-on-New-Board/cp2017061.pdf. “Hong Kong has faced heavy competition from the US for the listings of some 
of the most sought after Mainland companies from the information technology sector. One major attraction of the US market for many such 
companies is that WVR structures are permitted there, whereas the Hong Kong market does not allow them. Although only 33 out  of 116 
(28%) Mainland companies with primary listings in the US have WVR structures, their combined market capitalisation of US$561 billion 
represents  84%  of  the  market  value  of  all  US-listed  Mainland  companies.  Their  market  capitalisation  is  equivalent  to  15%  of  the  entire 
market capitalisation of the Hong Kong market. Moreover, 18 out of 33 (55%) US-listed Mainland Chinese companies with WVR structures, 
accounting for 84% of market capitalisation, are from precisely the information technology industry”. 
303 MVR shares are allowed for companies listed on the Science Technology Innovation Board of SSE or on the ChiNext Market of SZSE. 

141 

 
 
                                                           
3.2.1. 

The recent changes to the UK listing rules 

The  existence  of  MVR  share  structures  in  the  UK  dates  back  to  the  beginning  of  the  20th 
century.  Although  popular  during  their  inception,  during  the  1950’s  pushback  from 
institutional investors led to these structures being negatively perceived and banned from the 
premium  segment  of  the  London  Stock  Exchange,  although  it  remained  possible  for 
companies with MVR shares to list shares in the standard listing segment. This ban had been 
in place until 2021, when the UK Financial Conduct Authority changed the rules in order to 
allow for companies with MVR share structures to be listed on the premium segment. 

The  reversal  of  the  UK  position  was  ignited  by  the  UK  Listing  review  published  in  early 
2021304. The UK Listing Review published a set of recommendations “to boost the UK as a 
destination for Initial Public Offerings (IPOs) and to optimise the capital raising process for 
companies seeking to list on the main UK markets”, including one on allowing MVR share 
structures  on  the  premium  segment  of  the  London  Stock  Exchange.  This  proposal  had  the 
objective of incentivising listings by high-tech companies whose founders often fear dilution 
of control. However, in order to maintain high corporate governance standards for companies 
listed in the premium segment, companies listing with MVR share structures would have to 
include a 5-year sunset provision and be subject to certain additional conditions, such as the 
requirement  that  MVR  share  shareholders  be  directors,  limitations  on  the  transfer  of  MVR 
shares (transfer based sunset clause) and a maximum voting ratio of 20:1. 

The  UK  listing  review  was  followed  up  by  a  consultation  where  the  Financial  Conduct 
Authority  inquired  stakeholders  on  several  subjects  including  MVR  share  structures  (called 
Dual  Class  Shares  in  the  survey)305.  58  stakeholders  responded  to  the  consultation.  A  large 
majority of respondents (30) were in favour of the introduction of the MVR share structures 
into  the  premium  listing  segment  with  the  specified  conditions  with  only  a  minority  of 
respondents  objecting  (8  respondents).  Respondents  also  mainly  agreed  that  there  was  a 
proper  balance  between  allowing  MVR  share  structures  into  premium  listing  while 
maintaining London’s high levels of corporate governance and stewardship. 

The  results  of  the  public  consultation  were  published  in  December  2021  together  with  the 
amendments  to  the  UK  listing  rules  to  allow  MVR  share  structures  on  the  premium 
segment306. One of the latest companies to list in the LSE using MVR share structures  was 
the  FinTech  payments  company  Wise  (formerly  TransferWise)  in  July  2021  which  was 
founded by two Estonians. 

3.2.2. 

Recent developments in Asia (Singapore and Hong Kong) 

Although MVR share structures have been traditionally available in a number of developed 
markets nearly since the inception of their capital markets, they have not been widespread in 
the Asia Pacific region until recently.  

304 The document is available at 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/966133/UK_Listing_Review_3_March.pd
f 
305  PS21/22:  Primary  Market  Effectiveness  Review,  Consultation  Paper,  available  at  CP21/21:  Primary  Markets  Effectiveness  Review 
(fca.org.uk).  
306  Primary  Market  Effectiveness  Review:  Feedback  and  final  changes  to  the  Listing  Rules,  Policy  Statement,  PS21/22  December  2021, 
available at PS21/22: Primary Market Effectiveness Review: Feedback and final changes to the Listing Rules (fca.org.uk).  

142 

 
 
                                                           
In  Hong  Kong,  after  missing  out  on  Alibaba’s  IPO  in  favour  of  NYSE  in  2014  due  to  not 
allowing the possibility of listing with a MVR share structure, HKEX changed its listing rules 
in 2018 to allow companies to list with these shares. Xiaomi Corporation, one of the world’s 
largest smartphone makers, was listed in early July 2018, making it the first MVR share IPO 
on HKEX. 

Similarly,  in  Singapore,  the  Singapore  Exchange  (‘SGX’)  concluded  their  second  round  of 
consultations  on  MVR  share  structures  in  April  2018  and  announced  in  June  2018  that 
companies with MVR share structures would be eligible for listings on the SGX. Similar to 
Hong Kong, the debate on allowing MVR share structures started in Singapore after missing 
out  on the  IPO of the English Football Club  Manchester  United in  2012 that, like Alibaba, 
listed in the US.  

SGX  began  its  push  for  the  adoption  of  MVR  share  structures  to  capture  opportunities 
presented by the “new economy” companies in 2016, when its Listings Advisory Committee 
provided  ground  rules  for  listings  using  MVR  share  structures.  Those  rules  were  largely  in 
line with the subsequent (2018) amendments to Singapore’s company law. Then, the Future 
Economy  Council307  made  the  following  recommendation,  “for  listed  companies,  the 
Government  should  permit  dual  class  share  (DCS)  structures  while  instituting  appropriate 
safeguards to promote market transparency and mitigate governance risks. DCS listings are 
increasingly being considered, for example, in industries such as information technology and 
life  sciences.  DCS  should  be  permitted  for  companies  seeking  a  listing  on  the  Singapore 
Exchange  (SGX)  while  instituting  appropriate  safeguards  to  promote  market  transparency 
and mitigate governance risks”308. 

The moves by Hong Kong and Singapore, two of the key financial centres in Asia, created a 
ripple  effect  amongst  other  players  in  the  region.  In  the  subsequent  years  both  India  and 
China amended their listing rules in order to accommodate these types of structures. 

4.  EU Legislation on voting rights  

EU  legislation  does  not  contain  to  date  any  general  principle/rules  on  voting  rights  and/or 
proportionality  between  ownership  and  control.  Efforts  have  been  made  in  the  past  by  the 
Commission to instil the “one vote one share” principle at EU level, first, in 1972, with the 
draft  proposal  for  the  fifth  company  law  directive  and  later,  in  2007,  with  the  work  on  a 
Commission  Recommendation  on  the  proportionality  principle.  In  both  instances,  however, 
the Commission’s efforts did not come to fruition, due to a lack of political support as well as 
of conclusive supportive evidence. The 2007 study on the Proportionality Principle in the EU 
clarified  that,  on  the  basis  of  the  available  academic  research,  there  was  no  conclusive 
evidence of a causal link between deviations from the proportionality principle and either the 
economic  performance  of  listed  companies  or  their  governance.  The  study  also  found  that 
there  was some evidence that investors perceive these mechanisms negatively  and  consider 
more transparency would be helpful in making investment decisions. 

307 The Future Economy Council is an economic body that drives the growth and transformation of Singapore’s economy for the future. It is 
chaired by the Deputy Prime Minister & Coordinating Minister for Economic Policies and comprises members from government, industry, 
trade associations and chambers, unions, and educational and training institutions. 
308 Committee on the Future Economy. 2017. “Report of the Committee on the Future Economy: Pioneers of the Next Generation” Ministry 
of Communications and Information [SG]. 

143 

 
 
                                                           
In  the  last  decade  the  focus  gradually  shifted  from  the  opportunity  of  mandating  the  “one 
share,  one  vote”  principle  to  considering  whether  certain  deviations  from  that  principle 
should be introduced into EU law. This gradual shift followed suit with the recent tendency in 
some  Member  States  to  allow  MVR  share  structures  and/or  loyalty  shares.  In  2011,  the 
Reflection  Group  on  the  Future  of  EU  Company  Law  proposed  that  the  Commission 
recommends  to  the  Member  States  to  allow  loyalty  shares309.  The  introduction  of  loyalty 
shares  was  also  suggested  by  the  European  Parliament,  during  the  negotiations  on  the 
Shareholder Rights Directive, but did not receive sufficient political support at the time. More 
recently,  the  CMU  HLF  as  well  as  the  TESG  recommended  that  companies  are  allowed  to 
implement (and list with) MVR share structures with a view to ensuring that founders do not 
have to relinquish control when going public.  
A  few  provisions  referring  to  MVR  shares  are  contained  in  the  Takeover  Bid  Directive310. 
This Directive lays down rules to coordinate Member States’ regulation of takeover bids (i.e. 
a  public  offer  to  acquire  all  or  part  of  the  securities  of  a  company  listed  on  a  regulated 
market). As deviations from the “one share one vote” principle may limit the contestability of 
corporate  control,  the  Directive  aims  to  ensure  full  disclosure  on  whether  a  company  has 
issued  shares  that  deviate  from  the  “one  share  one  vote”  principle  and  provides  that 
disproportionate  voting  rights  can  be  neutralized  by  the  so-called  breakthrough  rule.  The 
latter  aims  to  make  certain  restrictions  inoperable  during  the  takeover  period  and  allows  a 
successful bidder to easily remove the incumbent board of the target company and modify its 
articles of association. 

Article  10(1)(a)  of  the  Takeover  Bids  Directive  requires  Member  States  to  ensure  that 
companies  admitted  to  trading  on  a  regulated  market  publish  detailed  information  on  “the 
structure  of  their  capital  […]  with  an  indication  of  the  different  classes  of  shares  and,  for 
each  class  of  shares,  the  rights  and  obligations  attaching  to  it  and  the  percentage  of  total 
shares  capital  that  it  represents”.  Information  must  also  be  published  as  to  “the  holders  of 
any  securities  with  special  control  rights”  (e.g.  golden  shares)  and  to  “any  restrictions  on 
voting  rights,  such  as  limitations  of  the  voting  rights  of  holders  of  a  given  percentage  or 
number  of  votes,  deadlines  for  exercising  voting  rights,  or  systems  whereby,  with  the 
company’s  cooperation,  the  financial  rights  attaching  to  securities  are  separated  from  the 
holding of securities” (Article 10(1)(d) and (f)). 

With  respect  to  MVR  shares,  in  particular,  Article  11(3)  last  sentence  requires  that  these 
shares  carry  only  one  vote  at  the  general  meeting  of  shareholders  which  decides  on  any 
defensive measures in accordance with Article 9311 (breakthrough rule). Art. 11(5) moreover 
provides that “equitable compensation shall be provided for any loss suffered by the holders 
of those rights” under the terms set by the Member States.  

Member  States  may,  however,  opt-out  of  the  breakthrough  rule  under  Article  12(1),  which 
allows  them  to  “reserve  the  right  not  to  require  companies  …  which  have  their  registered 
offices within their territories to apply Article 9(2) and (3) [on shareholder approval of post-

309 See Report of the High Level Group of Company Law Experts on Issues Related to Takeover Bids in the European Union by Jaap W. 
Winter, Jan Schans Christensen, José M. Garrido Garcia, Klaus J. Hopt, Jonathan Rickford, Guido Rossi, Joelle Simon :: SSRN 
310 Directive 2004/25/EC of 21 April 2004 on takeover bids.  
311 Under Article 11(4), the same principle applies whenever, following a bid, the offeror holds 75% or more of the capital carrying voting 
rights, with reference to “the first general meeting of shareholders following closure of the bid, called by the offeror in order to amend the 
articles of association or to remove or appoint board members”. 

144 

 
 
                                                           
bid defences] and/or Article 11”. Yet, where Member States make use of this option, “they 
shall nevertheless grant companies which have their registered offices within their territories 
the  option,  which  shall  be  reversible,  of  applying  Article  9(2)  and  (3)  and/or  Article  11” 
(Article 12(2)). Listed companies, therefore, shall be granted an opt-in right with respect to 
the  breakthrough  rule  by  those  Member  States  that  decided  to  opt-out.  To  date,  only  three 
Member States have chosen to fully adopt the breakthrough rule. 

5.  Advantages and disadvantages of MVR share structures 

There has been a long standing debate among academics, policy-makers, stock exchanges and 
other  stakeholders  regarding  MVR  share  structures  and  on  whether  they  are  beneficial  for 
companies and the overall capital markets ecosystem and if companies should be allowed to 
go public with a MVR share structure. This section presents advantages and disadvantages of 
MVR share structures as reported by stakeholders in public consultations and workshops and 
as set out in studies and research papers. 

5.1. Advantages of MVR share structures 

The  availability  of  MVR  share  structures  may  incentivise  more  founders  to  list.  MVR 
share structures provide founders with the opportunity to tap public equity capital markets for 
funding, and enjoy all the benefits associated to listing (e.g. reported higher growth compared 
to  unlisted  peers312),  while  retaining  a  larger  control  over  their  company.  Hi-tech,  high 
growth  issuers  as  well  as  family-owned  and  smaller  companies  are  more  likely  to  consider 
listing on a public market as a viable funding source if reassured that they would not have to 
cede  control  over  their  business  once  they  list.  This  is  backed  by  the  results  of  the  public 
consultation,  where  76%  of  the  respondents  agreed  that,  where  allowed,  the  use  of  MVR 
shares has effectively encouraged more firms to seek a listing on public market.  

Empirical evidence shows that the popularity of MVR share structures in the US has grown 
noticeably in the last years, reaching 33% of all IPOs in 2021. Although it cannot be assumed 
that the 98 companies that listed in the US in 2021 with MVR shares would not have listed if 
these share structures  were not  allowed, it can be inferred that the possibility of adopting a 
MVR share structure was a very important part of the decision to list. 

Figure 1. Percentage of MVR share structure IPOs in the US. 

312 Didier, Tatjana; Levine, Ross, and Schmukler, Sergio, L. (2016) Capital market financing, firm growth, and firm size distribution, ESRB 
Working Paper No 4, March 2016. 

145 

 
 
 
                                                           
35%

30%

25%

20%

15%

10%

5%

0%

1
9
9
1

2
9
9
1

3
9
9
1

4
9
9
1

5
9
9
1

6
9
9
1

7
9
9
1

8
9
9
1

9
9
9
1

0
0
0
2

1
0
0
2

2
0
0
2

3
0
0
2

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

0
2
0
2

1
2
0
2

% of Multiple Vote Share IPOs in the US

Source: Jay Ritter – IPO statistics  

Thus, the introduction of MVR share structures can, on the one hand, attract companies that 
would have otherwise listed abroad and, on the other hand, attract companies that would have 
remained  private  if  listing  with  these  shares  were  not  allowed.  Annex  4  contains  further 
analysis on the link between MVR shares and issuers’ propensity to go public.  

Companies  with  MVR  share  structures  can  potentially  have  higher  valuations  at  the 
IPO stage. According to literature, companies with MVR share structures tend to have higher 
valuations at the IPO stage generating more wealth for founders and other initial investors.313 
Recently listed firms tend to trade at a premium and operate at least as efficiently as recently 
listed  single-class  firms.  This  is  supported  by  a  study  that  established  that  companies  with 
MVR share structures exhibit higher valuations around the time of the IPO, but find that as 
these  companies  mature,  their  valuation  relative  to  single  class  share  companies  recedes314. 
Some studies have shown that as companies with MVR share structures mature their agency 
costs increase, their valuation, margins, labour productivity, and pace of innovation decrease, 
and  they  may  become  more  reluctant  to  cut  investment  and  employment  in  bad  times, 
increasing  risk315.  Other  studies  have  also  demonstrated  that  companies  with  MVR  share 
structures  generate  greater  premiums  during  takeovers  than  single  class  share  firms  which 
benefits all shareholders equally316. 

Companies  with  MVR  share  structures  tend  to  be  more  insulated  against  short-term 
market pressures.  Studies  have found evidence  supporting the hypothesis that MVR  share 
structures can help managers focus on the implementation of long-term projects and reduce 
short-term  market  pressures317.  This  is  further  supported  by  the  fact  that  short-term  market 

313  Kim,  Hyunseob  and  Michaely,  Roni,  Sticking  around  Too  Long?  Dynamics  of  the  Benefits  of  Dual-Class  Voting  (January  2,  2019). 
European Corporate Governance Institute (ECGI) - Finance Working Paper No. 590/2019, Swiss Finance Institute Research Paper No. 19-
09, Available at SSRN: https://ssrn.com/abstract=3145209 or http://dx.doi.org/10.2139/ssrn.3145209. 
314 (Cremers et al., 2018; Kim and Michaely, 2019). 
315  Cremers  M,  Lauterbach  B,  Pajuste  A  (2018)  The  life-cycle  of  dual  class  firm  valuation.  European  Corporate  Governance  Institute 
(ECGI)—Finance Working Paper No 550. Accessible at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3062895. 
316  Baugess,  Slovin,  Sushka  (2012),  Large  shareholder  diversification,  corporate  risk  taking,  and  the  benefits  of  changing  to  differential 
voting rights. 
317  Allaire  Y  (2016)  enough  with  the  shibboleth  on  dual  class  of  shares.  Le  MÉDAC.  2016-05_yvan_allaire_vote_multiple_anglais.pdf 
(medac.qc.ca). 

146 

 
 
 
 
                                                           
pressures  increase  in  companies  with  MVR  share  structures  after  a  share  unification  takes 
place318.  Companies  with  MVR  share  structures  are  also  more  protected  against  hostile 
takeovers in times of market turbulence319. Therefore, high-growth firms and firms with long-
term  projects  that  require  significant  upfront  costs  (such  as  R&D  expenditures)  may  find  it 
optimal  to  adopt  MVR  share  structures,  so  that  managers  can  focus  on  creating  long-term 
value for shareholders, which, in turn, can be desirable to promote innovation, research, and 
sustainable growth.  

MVR share structures are more transparent than other control-enhancing mechanisms. 
Companies  going  public  with  MVR  share  structures  provide  a  fair,  transparent  and  easy  to 
understand image of the company when contrasted with other control enhancing mechanisms, 
such  as  cross-ownership  structures,  shareholder  agreements  or  stock  pyramids320.  As 
mentioned earlier, the Takeover Bid Directive already requires Member States to ensure than 
companies admitted to trading on regulated markets publish detailed information on the right 
and  obligation  attached  to  each  class  of  shares.  When  a  company  goes  public  using  MVR 
share structures, investors, can simply decide if they trust the founder enough to invest in the 
company.  If  they  do  not  trust  the  founder,  they  will  simply  choose  not  to  invest  in  the 
company or invest at a discount. As long as the MVR share structure is properly disclosed, 
the investor can easily distinguish who will be the controlling party, unlike in other structures 
where it can be lost among a maze of holding companies. 

MVR  share  structures  can  also  be,  in  some  cases,  more  transparent  than  loyalty  shares. 
Loyalty  shares  do  not  constitute  a  separate  class  of  shares,  meaning  all  shareholders 
theoretically  have  an  equal  chance  to  acquire  loyalty  voting  rights.  Therefore,  in  certain 
countries, loyalty voting rights can simply be introduced by an amendment to the articles of 
association.  One  study  found  that  in  one  country,  14  firms  switched  from  “one  share,  one 
vote” to loyalty voting right following legislative changes that made these share structures the 
default  share  structure  for  listed  companies.  In  seven  cases,  there  was  not  even  a  vote  that 
proposed to retain the “one share, one vote” structure, as the controlling shareholder had the 
necessary  one-third  blocking  minority  to  block  an  amendment  to  disapply  loyalty  voting 
rights.321  This  could  lead  to  loyalty  shares  strengthening  the  power  of  existing  controlling 
shareholders (including the state in some companies) and making it more difficult for these 
companies to be acquired. 

5.2. Disadvantages of MVR share structures 

MVR  share  structures  may  provide  founders  with  lifetime/perpetual  control  and 
thereby lead to controlling shareholder entrenchment.322 MVR share structures may allow 
managers  and  controllers  to  be  entrenched  and  insulated  from  the  market  for  corporate 

318 Jordan, Bradford D. and Kim, Soohyung and Liu, Mark H., Growth Opportunities, Short-Term Market Pressure, and Dual-Class Share 
Structure (November 11, 2013). Available at SSRN: https://ssrn.com/abstract=2474645 or http://dx.doi.org/10.2139/ssrn.2474645. 
319  Joel  Seligman,  ‘Equal  Protection  in  Shareholder  Voting  Rights:  The  One  Common  Share,  One  Vote  Controversy’  (1986)  54  George 
Washington Law Review 687, 687. 
320 Gurrea-Martínez A (2018) Should securities regulators allow companies going public with dual-class shares? Oxford Business Law Blog. 
Accessible  at:  https://www.law.ox.ac.uk/business-law-blog/blog/2018/01/should-securities-regulators-allow-companies-going-public-dual-
class. 
321  Becht,  Marco  and  Kamisarenka,  Yuliya  and  Pajuste,  Anete,  Loyalty  Shares  with  Tenure  Voting  -  Does  the  Default  Rule  Matter? 
Evidence from the Loi  Florange Experiment (April 1, 2018). European Corporate Governance Institute (ECGI)  - Law Working Paper No. 
398/2018, Available at SSRN: https://ssrn.com/abstract=3166494 or http://dx.doi.org/10.2139/ssrn.3166494. 
322 See for instance https://alexedmans.com/wp-content/uploads/2015/03/Dual-Class-Shares.pdf. 

147 

 
 
                                                           
control.  Therefore,  both  controlling  shareholders  and  managers  may  be  more  relaxed  when 
running  the  company  since  potential  acquirers  may  be  prevented  from  taking  over  the 
company and implementing a potentially superior business plan thus damaging the value of 
the company.323 Furthermore, unless sunset clauses are introduced, founders could hold MVR 
shares  perpetually,  long  after  the  structure  brings  positive  benefits  to  the  company.  Studies 
demonstrate  that  controllers  have  perverse  incentives  to  retain  MVR  share  structures  even 
when  those  structures  become  substantially  inefficient.  Thus,  as  time  passes  from  the  IPO, 
there  is  a  growing  risk  that  MVR  share  structures  will  become  value  decreasing  and  that 
public  investors  will  find  themselves  subject  to  an  inefficient  structure  with  significant 
governance risks and costs.324 

In some cases, MVR share structures may give company insiders the power to outvote 
minority  shareholders  on  important  issues,  such  as  sustainability.  There  is  recent 
evidence about the diluting effect of MVR share structures resulting in blocking sustainability 
resolutions by the controlling shareholder/management. A 2021 US analysis showed that 19 
sustainability  resolutions  could  potentially  have  gathered  shareholders’  support  (Amazon, 
Facebook,  Berkshire  Hathaway,  etc.),  had  they  not  been  opposed  to  by  corporate  insiders 
with outsized voting rights.325  

The  founder/controlling  shareholder  does  not  have  economic  interests  proportional  to 
his  control  over the company, which  may lead to agency costs and expropriation risk. 
Since the founders own a percentage of the company’s share capital disproportionate to their 
economic  interest,  they  will  only  bear  a  small  percentage  of  the  company’s  potential 
economic  downturn.  This  may  generate  agency  costs  which  increase  with  the  size  of  the 
wedge  between  control  rights  and  cash-flow  rights,  as  shown  by  both  theoretical  and 
empirical  studies. These studies found that, as the size of the wedge widens, CEOs receive 
higher  levels  of  compensation,  managers  are  more  likely  to  make  shareholder-value 
destroying  acquisitions,  and  capital  expenditures  contribute  less  to  increase  shareholder 
value326.  As  demonstrated,  in  the  long  run  this  may  decrease  company  value  and  damage 
investor interests.  

MVR share structures may damage company value. It is alleged that the aforementioned 
risks  of  controlling  shareholders’  entrenchment,  increased  agency  costs  and  expropriation 
risk,  can  ultimately  (and  over  time)  lead  to  the  destruction  of  company  value.  Some  argue 
that,  since  the  interests  of  holders  of  MVR  shares  are  not  economically  aligned  with  the 
interests  of  the  company,  holder  of  MVR  shares  have  no  incentives  to  maximise  the 
company’s value or potential. This would mean that a company with MVR share structures 
should have a lower valuation than if it did not have this structure or lower than its peers that 
do not have these structures. In a study of 675 European public companies from 11 countries, 
Barontini  and  Caprio  analysed  the  relation  between  firm  value  and  the  wedge  between  the 
voting and the cash-flow rights of the largest shareholder. The results push the notion on the 

323  Bebchuk,  Kraakman,  &  Triantis,  Stock  Pyramids,  Cross-Ownership  and  Dual  Class  Equity:  The  Mechanisms  and  Agency  Costs  of 
Separating Control From Cash-Flow Rights, in Morck (ed.), Concentrated Corporate Ownership 2000, pp. 445–460. 
324  Bebchuk,  Lucian  A.  and  Kastiel,  Kobi,  The  Untenable  Case  for  Perpetual  Dual-Class  Stock  (April  18,  2017).  Virginia  Law  Review, 
Volume 103, pp. 585-631, June 2017, Harvard Law School John M. Olin Center Discussion Paper No. 905, Harvard Law School Program 
on Corporate Governance Discussion Paper 2017-6 
325  Examples  include  resolutions  in  Facebook/Meta.  Further  examples  are  available,  e.g.  at  https://rankingdigitalrights.org/mini-report/its-
time-to-bring-down-the-barriers-blocking-shareholders-on-human-rights/. 
326 Masulis R, Wang C, Xie F (2009) Agency problems at dual-class companies. J Financ 64(4):1697–1727. 

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existence  of  negative  association  between  corporate  valuation  and  the  control-enhancing 
devices that boost the voting power of the largest shareholder.327 Furthermore, some studies 
have  noted  the  positive  effects  that  occur  after  a  share  unifications  in  terms  of  long-term 
market valuation.328 

Companies with MVR share structures may be less attractive for investors. Companies 
that  listed  with  MVR  share  structures  may  be  less  attractive  for  investors  due  to  several 
reasons which mainly stem from the fact that they do not have a voting power proportional to 
their economic stake in the company. The views were split among the investors’ community 
in  the  public  consultation  on  the  question  of  MVR  shares,  with  22%  of  investor 
representatives voicing support and 36% expressing criticism.329 Studies have demonstrated 
that institutional investors exhibit strong aversion towards multi-class firms, investing less in 
these firms, and discount their valuation, as stated in the previous paragraph. The presence of 
institutional  investors  correlates  with  a  higher  likelihood  of  share-class  unification.330 
However, regarding this last point, it is only active investors who push for share unification 
with passive investors usually not influencing these decisions331. 

6.  Merits of introducing MVR shares in the EU 

MVR  share structures  have  gained a newfound importance and relevance in  today’s capital 
markets due to the surge of founder driven high-tech companies. This has reignited the debate 
regarding  their  potential  benefits  and  costs  and  if  they  help  create  more  attractive  public 
capital  markets.  Their  popularity  among  founder-driven  high  tech  companies  has  led  to 
capital markets reassessing their benefits and in many cases reversing their previous positions 
on  these  type  of  structures.  Most  respondents332  to  the  public  consultation,  as  well  as 
stakeholders’  representatives  that  participated  in  the  technical  meetings333  held  by  the 
Commission,  agreed  that  MVR  share  structures  incentivise  issuers  to  list  and  make  public 
markets more attractive (see Annex 2 for more details). However, some stakeholders, mainly 
investors, argued that despite these benefits these structures are overall negative for investors 
and  capital  markets.  Their  main  argument  against  MVR  share  structures  is  focused  on  the 
idea that these structures destroy company value. 

327  Barontini R,  Caprio  L  (2005),  The  effect  of  family  control  on  firm  value  and performance.  European  Corporate  Governance  Institute 
(ECGI)—Finance Working Paper No 88. 
328 Lauterbach, Pajuste, (2015), The long-term valuation effects of voluntary dual class share unifications. 
329 When asked about the impact that MVR shares have on the attractiveness of a company for investors, 36% of respondents (equivalent to 
15 respondents) opted for negative or slightly negative, 22% (equivalent to 9 respondents) opted for positive or slightly positive, while 29% 
(equivalent to 12 respondents) opted for neutral. Some of the respondents who viewed the attractiveness negatively (including two NCAs 
and  some  investors’  associations)  expressed  their  concern  about  the  disappearance  of  the  one  share  –  one  vote  principle  and  noted,  in 
particular, that MVR share schemes may undermine existing accountability mechanisms in corporate governance law, such as shareholders’ 
ability to elect directors, and lead to management’s entrenchment. 
330 Kim, Matos, Xu, (2018), Multi-Class Shares Around the World: The Role of Institutional Investors. 
331  Loyalty  shares  (outside  the  scope  of  this initiative)  may  also  give  rise  in  certain cases to  issues  pertaining  to the  treatment  of  foreign 
investors, where national shareholders (insiders, family owners, the State in State-controlled companies) can get preferential treatment to the 
detriment  of  shareholders  from  other  Member  States.  For  example,  existing  national  shareholders  can  be  allowed  to  reduce  their 
shareholding  without  relinquishing  control,  discouraging  investment  from  other  Member  States.  An  example  is  the  so-called  French  loi 
Florange (adopted in 2014) introducing loyalty shares that automatically granted investors who had held stock in a listed French company 
for at least two years double the voting rights of other investors. 
332 53 out of 71 respondents. Among those in favour were issuer associations, stock exchanges, investment banks, academia, law firms and 
some investor associations. Among those against were mainly investor associations and some stock exchanges. 
333 Among exchanges 83% (5 out of 6) were in favour and among issuers and investors 83% (5 out of 6) were in favour. 

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It  may  be  argued  that  since  the  holders  of  MVR  shares  do  not  have  their  interest  and  the 
interests  of  the  company  aligned  economically  they  are  not  incentivised  to  maximize  the 
company’s value or potential. This would then theoretically mean that a company with MVR 
share structures should have a lower valuation than if it did not have this structure or lower 
than its peers that do not have these structures. However, there is no definitive view on this 
question. There are several studies that conclude that MVR share structures have a positive or 
neutral impact on companies’ valuation334,335. Furthermore, a research project carried out by 
ECGI on behalf of the Commission also demonstrated that there is no conclusive evidence on 
the effects of MVR share structures on company value in either direction. It stated that based 
on the empirical evidence, it cannot be said whether the presence of differentiated ownership 
(MVR)  in  companies  destroys  the  market  value  outside  of  equity  of  these  companies.336 
Some studies suggest that the benefits in terms of valuation for companies tend to peter out 
after time similar to the other perceived benefits of MVR share structures. These studies point 
to the use of sunset clauses to remedy this. Therefore, it cannot be definitively concluded that 
MVR share structures always have a negative impact on a company’s valuation. 

As  regards  the  argument  that  MVR  share  structures  damage  company  value,  it  should  be 
noted that without the availability of MVR share structures, some companies included in the 
empirical studies would never have gone public in the first place.337 Therefore, even if some 
studies showed that firms with MVR share structures underperform their peers (which is not 
necessarily  the  case  as  shown  by  other  studies),  the  fact  that  MVR  share  structures  allow 
more  companies  to  go  public  and  hence  contribute  to  the  overall  size  and  scale  of  public 
markets militate against an outright ban of MVR share structures.  

Regarding  investor  concerns  on  the  risks  of  expropriation  costs  and  the  long-term 
entrenchment  of  founders,  there  are  effective  remedies,  such  as  sunset  clauses.  These  can 
further be complemented by other safeguards to maximise the protection for investors. When 
MVR share structures were introduced in Singapore, the Singapore Exchange expressly asked 
stakeholders if they agreed to include safeguards against expropriation risk such as having the 
majority  of  the  Audit  Committee,  Nominating  Committee  and  Remuneration  Committee, 
including the respective chairmen, independent. In the UK, a 5 year time based and a transfer 
based  sunset  clause  are  required  to  list  on  the  premium  segment  along  with  other 
requirements.  Canada  introduced  a  so  called  “coattail  provision”  which  ensures  that  all 
shareholders  receive  the  same  price  for  their  shares,  should  the  controlling  shareholders 
decide to sell out. However, it must be noted that sunset clauses and conditions should not be 
excessively restrictive as they may make the MVR share structures ultimately undesirable for 
issuers.338  In  China,  there  has  been  little  use  of  MVR  share  structures  since  the  rules  were 
introduced in 2019 and this has been attributed to the overly restrictive investor safeguards.339 
If these safeguards are made so restrictive that no issuer will want to use them, MVR shares 

334 Anh, Fisch, Patatoukas & Davidoff Solomon, Synthetic Governance, ECGI Finance Working Paper no. 693/2020. 
335 von der Crone, Hans Caspar and  Plaksen, Evgeny, The Value of Dual-Class Shares in Switzerland (March 2010). Available at SSRN: 
https://ssrn.com/abstract=1542780. 
336 Proportionality between ownership and control in EU listed companies: External study commissioned by the European Commission pg. 
13, carried out by ISS, Sherman & Sterling and the ECGI. 
337 Gurrea-Martínez A, (2021) Theory, Evidence, and Policy on Dual-Class Shares: A Country-Specific Response to a Global Debate. 
338 Min Yan (2021) The myth of dual class shares: lessons from Asia’s financial centres, Journal of Corporate Law Studies, 21:2, 397-432, 
DOI: 10.1080/14735970.2020.1870843. 
339 Min Yan (2020) Differentiated voting rights arrangement under dual-class share structures in China: expectation, reality, and future, Asia 
Pacific Law Review, 28:2, 337-359, DOI: 10.1080/10192557.2020.1855794. 

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lose  any  appeal  for  investors.  Therefore,  it  is  key  to  ensure  a  proper  balance  between  the 
issuers’ and investors’ interests. 

Taking  into  account  the  new  market  context,  which  has  increased  the  popularity  of  these 
structures,  the  potential  benefits  these  structures  bring  (in  terms  of  more  listings)  and  the 
recent  trends  in  other  capital  markets,  it  would  appear  justified  to  allow  these  structures 
throughout all Member States, either for all companies or with a scope targeted to a specific 
subset of companies, such as issuers listing on SME growth market.  

Currently,  it  appears  that  without  EU  intervention,  some  Member  States  would  not  reverse 
their  ban  on  these  structures  in  the  short-term.  It  could  be  due  to  multiple  reasons,  starting 
from  historical  reasons,  stakeholder  pressures,  past  experience  and  the  fact  that  changing 
company  law,  which  was  developed  over  centuries  in  many  countries,  is  often  complex. 
Nevertheless,  any  delays  in  allowing  these  structures  in  the  EU  could  lead  to  considerable 
negative effects over time with companies increasingly going abroad to list or foregoing on 
listing completely  (until  the rules change). As  a  result the EU stand to  lose in  terms of the 
potential size and scale of its public markets.  

Therefore,  the  introduction  of  MVR  share  structures  would  not  only  be  beneficial  for  EU 
issuers,  it  would  be  beneficial  for  the  overall  competitiveness  of  EU  financial  markets.  In 
order  to  address  institutional  investor  concerns  regarding  shareholder  entrenchment  and 
expropriation risk, the use of safeguards and conditions, such as sunset clauses, would be key. 

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ANNEX 6: ANALYSIS OF THE IPO PHASE340: PROSPECTUS REGULATION 
1.  Objectives and key changes introduced by the Prospectus Regulation 

The  Prospectus  Regulation341  entered  into  force  on  21  July  2017  and  was  fully  into 
application on 21 July 2019. It was supplemented by (i) Commission Delegated Regulation 
(EU) 2019/980342, which lays down rules on the format, content, scrutiny and approval of the 
prospectus; (ii) Commission Delegated Regulation (EU) 2019/979343, which establishes rules 
on  key  financial  information  in  the  prospectus  summary,  publication  and  classification  of 
prospectuses, advertisements for securities, supplements and the notification portal; and (iii) 
Commission Delegated Regulation (EU) 2021/528344, which lays down rules on the minimum 
information for the exemption document to be published in case of a takeover by means of an 
exchange offer, a merger or a division. 
As  stated  in  recital  7345,  the  aim  of  the  Prospectus  Regulation,  is  to  ensure  investor 
protection  and  market  efficiency,  while  enhancing  the  internal  market  for  capital.  A 
prospectus is a document that must contain the necessary information which is material for an 
investor  to  make  an  informed  investment  decision.  In  that  regard,  a  prospectus  mainly 
describes a company’s main line of business, its finances and shareholding structure as well 
as the securities being offered to the public or admitted to trading on a regulated market.  
The Prospectus  Regulation  harmonised the provisions set  out  in  the Prospectus  Directive346 
and introduced several changes or innovations, in particular: 

  No  prospectus  required  for  offers  of  securities  to  the  public  below  EUR  1  million, 
(EUR  100  000  under  the  Prospectus  Directive)  considered  “breathing  space  for 
crowdfunding”.  Furthermore,  Member  States  have  discretion  to  exempt  from  the 
prospectus  requirement  offers  that  do  not  require  notification  and  with  a  consideration 
between  EUR  1  million  and  an  amount  which  cannot  exceed  EUR  8  million  (EUR  5 

340 The Prospectus Regulation also includes alleviated regimes for secondary issuances of securities by issuers whose securities are already 
admitted to trading on a regulated market or an SME growth market. Such alleviations stem from the fact that issuers who are already listed 
on  those  venues  for  a  required  minimum  period  of  time  are  well  known  to  the  market  and  subject  to  periodic  and  ongoing  disclosures 
requirements (such as under MAR or TD). However, there are no disclosure requirements under the Prospectus Regulation stemming from 
the fact of being listed (i.e. follow on issuances are a choice of the issuer). 
341  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). 
342  Commission  Delegated  Regulation  (EU)  2019/980  of  14  March  2019  supplementing  Regulation  (EU)  2017/1129  of  the  European 
Parliament and of the Council as regards the format, content, scrutiny and approval of the prospectus to be published when securities are 
offered  to  the  public  or  admitted to  trading  on a  regulated  market,  and  repealing  Commission  Regulation  (EC)  No  809/2004  (OJ  L  166, 
21.6.2019, p. 26). 
343  Commission  Delegated  Regulation  (EU)  2019/979  of  14  March  2019  supplementing  Regulation  (EU)  2017/1129  of  the  European 
Parliament and of the Council with regard to regulatory technical standards on key financial information in the summary of a prospectus, the 
publication  and  classification  of  prospectuses,  advertisements  for  securities,  supplements to  a  prospectus,  and  the  notification  portal,  and 
repealing  Commission  Delegated  Regulation  (EU)  No  382/2014  and  Commission  Delegated  Regulation  (EU)  2016/301  (OJ  L  166, 
21.6.2019, p. 1). 
344  Commission  Delegated  Regulation  (EU)  2021/528  of  16 December  2020  supplementing  Regulation  (EU)  2017/1129  of  the  European 
Parliament and of the Council as regards the minimum information content of the document to be published for a prospectus exemption in 
connection with a takeover by means of an exchange offer, a merger or a division (OJ L 106, 26.3.2021, p. 32). 
345 “The aim of this Regulation is to ensure investor protection and market efficiency, while enhancing the internal market for capital. The 
provision  of  information  which,  according  to  the  nature  of  the  issuer  and  of  the  securities,  is  necessary  to  enable  investors  to  make  an 
informed  investment  decision  ensures,  together  with  rules  on  the  conduct  of  business,  the  protection  of  investors.  Moreover,  such 
information  provides  an  effective  means  of  increasing  confidence  in  securities  and  thus  of  contributing  to  the  proper  functioning  and 
development of securities markets. The appropriate way to make that information available is to publish a prospectus”. 
346  Directive  2003/71/EC  of  the  European  Parliament  and  of  the  Council  of  4  November  2003  on  the  prospectus  to  be  published  when 
securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, p. 64). 

152 

 
 
                                                           
million  under  the  Prospectus  Directive).  A  voluntary  EU  prospectus  opt-in  available  at 
the choice of issuers. 

  Full prospectus exemption for employee share schemes (only partial exemption under 

the Prospectus Directive, disadvantaging EU employees of non-EU employers). 

  Exemption  of  issuers  from  the  admission  prospectus  in  case  of  secondary  issuance  of 
securities fungible with securities already admitted to trading, subject to a 20% cap (the 
cap was 10% under the Prospectus Directive and the exemption was limited to shares). A 
similar  exemption  applies  to  shares  resulting  from  the  conversion  or  exchange  of 
securities (no cap under the Prospectus Directive for the latter). 

  Risk factors to be classified by category of risks, with the most material mentioned first 
(risk factors sections used to be excessively long and used as liability shield by issuers 
under the Prospectus Directive). 

  Shorter (7 pages) and retail investor-friendly prospectus summaries. Issuers subject to 
the  PRIIPs  Regulation347  can  recycle  their  key  information  document  (KID)  into  the 
summary. 

  Removal  of  incentives  to  issue  in  large  denominations  (beyond  EUR  100  000)  where 
regulated  markets  set  up  a  ring-fenced  professional  segment  for  non-equity  securities, 
(EUR  100  000  denomination  was  the  only  criterion  under  the  Prospectus  Directive  to 
distinguish between retail and wholesale non-equity securities). 

 

Increased  use  of  the  incorporation  by  reference  of  information  in  the  prospectus,  to 
avoid redundancies and duplication of disclosures. 

  More efficient and flexible rules on prospectuses and base prospectuses, such as to allow 
tripartite  base  prospectuses  (i.e.  consisting  of  separate  documents)  for  all  non-equity 
securities. 

  A  simplified  prospectus  for  secondary  issuances  of  securities  available  for  issuers 
listed continuously and for at least the last 18 months on a regulated market or an SME 
growth market (replacing the previous prospectus for rights issues). 

  A  new  EU  Growth  prospectus  for  SMEs,  mid-caps  listed  on  an  SME  growth  market 
and small unlisted offers (up to EUR 20 million  for unlisted issuers with  less than 500 
employees). The regime is however not available for regulated markets. 

  A  universal  registration  document  (URD)  for  frequent  issuers  of  securities,  to  be 
approved for the first  two  years and filed every  year after with  the NCA (i.e. available 
‘on the shelf’). The approval time of a prospectus incorporating a URD reduced from 10 
to 5 days (‘fast-track approval’). 

  More  convergent  rules  on  scrutiny  and  approval  of  the  prospectus  by  NCAs  (in 
particular  completeness,  comprehensibility  and  consistency  of  the  prospectus  put  on 
equal ground). 

347 Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for 
packaged retail and insurance-based investment products (OJ L 352, 9.12.2014, p. 1). 

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  A  new  ESMA’s  EU-wide  database  with  free  online  access  to  the  public  and  search 

function to all EU prospectuses and relating documents. 

  Possibility for third country issuers to offer securities to the public or seek admission to 
trading of securities in the EU by either drawing up an EU prospectus or, in presence of a 
Commission  equivalence  decision,  a  prospectus  in  accordance  with  the  law  of  a  third 
country. 

  Alignment of the administrative sanction regime for prospectuses with the standards of 

MiFID II, transparency and market abuse regimes. 

2.  Subsequent amendments to the Prospectus Regulation 

Since  its  entry  into  application,  the  Prospectus  Regulation  has  been  amended  in  three 
circumstances.  
At the end of 2019, the SME Listing Act348 initiative introduced targeted amendments to the 
Prospectus  Regulation,  in  particular  the  possibility  to  use  the  simplified  prospectus  for 
secondary  issuances  for  convertible  and  exchangeable  securities  and  to  transfer  the  listing 
from an SME growth market to a regulated market (aka ‘transfer prospectus’), provided that 
the issuer has been listed on the SME growth market continuously and for at least the last two 
years and has fully complied with reporting and disclosure obligations. 
In 2020, the Crowdfunding Regulation349 amended the Prospectus Regulation by introducing 
a  new  exemption  for  an  offer  of  securities  to  the  public  from  a  crowdfunding  service 
provider, under a specific threshold. 
In  2021,  the  Capital  Markets  Recovery  Package  (CMRP)350  amended  the  Prospectus 
Regulation introducing: (i) the EU Recovery prospectus regime, a short-form prospectus of 
30 page-maximum size for secondary issuances of shares; (ii) an increase of the threshold for 
the  exemption  to  publish  a  prospectus  for  the  offer  or  admission  to  trading  of  non-equity 
securities  issued  on  a  continuous  and  repeated  manner  by  credit  institutions;  and  (iii) 
clarifications on the rules about supplements (including an extension of the time for financial 
intermediaries  to  contact  investors  when  a  summary  is  published  and  an  extension  of 
withdrawal rights for investors). All such amendments are temporary and due to expire on 31 
December 2022. 

An  attempt  by  the  Commission  to  further  amend  the  Prospectus  Regulation  to  attribute 
certain  competences  to  scrutinize  prospectuses  to  ESMA,  which  was  made  in  2017  in  the 
context of the proposal for the ESAs Review Regulation351, did not find political support and 

348Regulation (EU) 2019/2115 of the European Parliament and of the Council of 27 November 2019 amending Directive 2014/65/EU and 
Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets (OJ L 320, 11.12.2019, p. 
1). 
349  Regulation  (EU)  2020/1503  of  the  European  Parliament  and  of  the  Council  of  7  October  2020  on  European  crowdfunding  service 
providers for business, and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 (OJ L 347, 20.10.2020, p. 1). 
350 Regulation (EU) 2021/337 of the European Parliament and of the Council of 16 February 2021 amending Regulation (EU) 2017/1129 as 
regards the EU Recovery prospectus and targeted adjustments for financial intermediaries and Directive 2004/109/EC as regards the use of 
the single electronic reporting format for annual financial reports, to support the recovery from the COVID-19 crisis (OJ L 68, 26.2.2021, p. 
1). 
351  Regulation  (EU)  2019/2175  of  the  European  Parliament  and  of  the  Council  of  18  December  2019  amending  Regulation  (EU) 
No 1093/2010 establishing a European Supervisory Authority (European Banking Authority), Regulation (EU) No 1094/2010 establishing a 
European Supervisory Authority (European Insurance and Occupational Pensions Authority), Regulation (EU) No 1095/2010 establishing a 
European  Supervisory  Authority  (European  Securities  and  Markets  Authority),  Regulation  (EU)  No 600/2014  on  markets  in  financial 
instruments, Regulation (EU) 2016/1011 on indices used as benchmarks in financial instruments and financial contracts or to measure the 

154 

 
 
                                                           
 
was  not  adopted.  That  proposal  aimed  to  confer  to  ESMA  the  supervision  (including  the 
scrutiny and approval) of certain categories of prospectuses, including those more relevant in 
a  cross-border  context  (prospectuses  for  wholesale  non-equity  securities,  prospectuses  for 
asset-backed  securities,  prospectuses  drawn  up  by  third  country  issuers  and  prospectuses 
drawn up by specialist issuers). 

3.  The evolution of prospectus approval in the EEA 

The evolution of prospectus approval during the last 15 years shows a rather declining trend, 
although  in  recent  years  there  has  not  been  a  steep  decline  like  the  one  experienced  from 
2007 to 2010 (the years of the financial crisis).  

As indicated in Annex 4, there were periods when the business cycle was mature creating an 
incentive  for  firms  to  tap  market  funding.  In  terms  of  prospectus  approval,  the  peak  of 
activity  of  2007,  followed  by  a  steep  decline  during  the  following  three  years,  was 
concentrated  in  3  Member  States:  Ireland  (2789  prospectuses  approved  in  2007  and  509  in 
2010), Luxembourg (1823 prospectuses approved in 2007 and 640 in 2010) and Italy (1161 
prospectuses approved in 2007 and 584 in 2010). 

Figure 1. Total annual prospectus approval in the EEA (exc. UK) from 2006 to 2021. 

Source: ESMA data for 2021352, ESMA’s EEA prospectus activity report for 2019 and 2020.  

performance of investment funds, and Regulation (EU) 2015/847 on information accompanying transfers of funds (OJ L 334, 27.12.2019, p. 
1). 
352  Methodological  note:  all  approved  prospectuses  in  2021  submitted  to  ESMA  counted  as  the  number  of  unique  identifiers  for  the 
following  document  types:  Base  Prospectuses  with  and  without  Final  Terms,  Standalone  Prospectuses  and  Securities  Notes,  to  avoid 
counting prospectuses that are not from 2021. 

155 

 
 
 
                                                                                                                                                                                     
The  entry  into  application  of  the  Prospectus  Regulation  in  July  2019  has  not  reverted  the 
declining trend in terms of prospectus approval. The slight bounce back in 2021 is considered 
to be correlated to the increase in IPO activity in the EU in the same year (as referred to in 
Annex 4), as reflected in the increase in equity prospectuses versus non-equity prospectuses 
in the course of that year shown in Figure 2. 

Figure 2. Equity and non-equity prospectuses (%) approved in the EEA (exc. UK) from 2017 to 2021. 

Source: ESMA data for 2021353, ESMA’s EEA prospectus activity report for 2017, 2018, 2019 and 2020.  

As  regards  the  approval  of  prospectuses  by  country,  Figure  3  shows  the  concentration  of 
prospectus activity in some Member States. In particular, Ireland, Luxembourg and Sweden 
approved in 2021 respectively 18%, 17% and 16% of prospectuses in the EEA. 

353 Methodological note: approved prospectuses in 2021 grouped by prospectus type and by securities type (equity vs. non-equity) using the 
reported annexes. This might cause a limited double counting of prospectuses (i.e. for the same prospectus, there might be a document with 
annexes belonging to the equity category and another belonging to the non-equity category). 

156 

 
 
 
 
 
 
 
 
                                                           
Figure 3. Annual prospectus approval in the EEA (exc. UK) by Member State in 2021.  

Source: ESMA data for 2021354, ESMA’s EEA prospectus activity report for 2019 and 2020.  

However, the prospectus activity varies substantially depending on the security type, as some 
Member States tend to approve the majority of prospectuses for non-equity securities while 
others tend to approve mostly prospectuses for equity securities. As shown in Figures 4 and 
5, based on 2020 figures, the equity prospectus activity tends to be concentrated in Sweden 
(30%), France (21%) and Norway (8%), while non-equity prospectuses are mainly approved 
in  Luxembourg  (24%),  Ireland  (22%)  and  Germany  (14%).  The  trend  was  very  similar  in 
2019, although the UK was included in the numbers.  

Figure 4. Equity prospectuses approved in 2019 (inc. UK) and in 2020 (exc. UK) as of share of all equity 
prospectuses approved within the EEA.  

 2019 

                  2020 

354  Methodological  note:  all  approved  prospectuses  in  2021  submitted  to  ESMA  counted  as  the  number  of  unique  identifiers  for  the 
following  document  types:  Base  Prospectuses  with  and  without  Final  Terms,  Standalone  Prospectuses  and  Securities  Notes,  to  avoid 
counting prospectuses that are not from 2021. 

157 

 
 
 
 
 
 
 
 
 
   
                                                           
Source: ESMA reports on EEA prospectus activity in 2019 and in 2020. 

Figure 5. Non-equity prospectuses approved in 2019 (inc. UK) and 2020 (exc. UK) as of share of all non-
equity prospectuses approved within the EEA. 

                           2019 

                                2020 

Source: ESMA reports on EEA prospectus activity in 2019 and in 2020. 

Furthermore,  Figure  6  shows  that  the  approval  of  base  prospectuses  is  concentrated  in 
Member  States  that  approve  most  non-equity  prospectuses  (Ireland,  Luxembourg,  and 
Germany). 

Figure 6. Number of base prospectuses and standalone prospectuses approved in the EEA in 2021 in the 
respective Member States 

158 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source: ESMA’s data355 for 2021. 

Finally, Figure 7 shows the 5 year-trend relating to the approval of base prospectuses versus 
standard  prospectuses.  A  greater  percentage  of  base  prospectuses  was  approved  in  2020 
during the peak of the Covid-19 crisis, possibly linked to the decrease in IPOs in that year.  

Figure 7. Number of base prospectuses and standalone prospectuses approved in the EEA (exc. UK) from 
2017 to 2021  

355  Methodological  note:  all  approved  prospectuses  in  2021  submitted  to  ESMA  counted  as  the  number  of  unique  identifiers  for  the 
following  document  types:  Base  Prospectuses  with  and  without  Final  Terms,  Standalone  Prospectuses  and  Securities  Notes,  to  avoid 
counting prospectuses that are not from 2021. 

159 

 
 
 
 
                                                           
Source: ESMA’s data for 2021356, ESMA report on EEA prospectus activity in 2017, 2018, 2019 and 2020. 

4.  Evaluation of the key measures of the Prospectus Regulation  

This  evaluation  focuses  on  some  key  elements  of  the  Prospectus  Regulation,  in  particular 
taking into account Article 48 of the latter, which requires to assess whether the  prospectus 
summary,  the  simplified  disclosure  regime  for  secondary  issuances,  the  EU  Recovery 
prospectus,  the  EU  Growth  prospectus  and  the  URD  remain  appropriate  in  light  of  their 
pursued objectives. Given that the report to be produced by ESMA in accordance with Article 
47 of the Prospectus Regulation was not available at the time of writing this evaluation, the 
latter is based on data provided bilaterally by ESMA to the Commission services for the year 
2021357,  on  ESMA’s  reports  on  EEA  approved  prospectuses  previously  published  for  the 
years  2019358  and  2020359.  Furthermore,  this  evaluation  takes  into  account  the  reports 
published  by  the  CMU  HLF360  and  the  TESG361,  the  Oxera  study362  on  the  primary  and 
secondary equity markets in the EU, the feedback gathered from stakeholders who responded 
to the targeted consultation on the Listing Act and ESMA’s peer review of the scrutiny and 
approval procedures of prospectuses by authorities of 21 July 2022 report. 

356  Methodological  note:  all  approved  prospectuses  in  2021  submitted  to  ESMA  counted  as  the  number  of  unique  identifiers  for  the 
following  document  types:  Base  Prospectuses  with  and  without  Final  Terms,  Standalone  Prospectuses  and  Securities  Notes,  to  avoid 
counting prospectuses that are not from 2021. 
357 At the time of writing the impact assessment, ESMA continues working to improve the quality and consistency of the data. 
358 EEA prospectus activity in 2019. See: esma32-384-4852_prospectus_activity_report_2019.pdf. 
359 EEA prospectus activity and sanctions in 2020. See: esma32-382-1153_prospectus_activity_and_sanctions_report_2020.pdf 
360 See: https://ec.europa.eu/info/files/200610-cmu-high-level-forum-final-report_en. 
361 See: https://ec.europa.eu/info/sites/default/files/business_economy_euro/growth_and_investment/documents/210525-report-tesg-cmu-
smes_en.pdf?msclkid=dce6c304b4f111ecb78dc84c756a1e20. 
362 See: https://www.oxera.com/wp-content/uploads/2020/11/Oxera-study-Primary-and-Secondary-Markets-in-the-EU-Final-Report-EN-
1.pdf. 

160 

 
 
 
 
                                                           
4.1. The standard prospectus for equity and non-equity securities 

The  Prospectus  Regulation,  when  generically  referring  to  ‘the  prospectus’,  considers  all 
different  forms  of  prospectuses  available  in  view  of  the  specificities  of  different  types  of 
securities, issuers, offers and admissions363. 

However,  for  the  purpose  of  this  analysis,  standard  prospectus  refers  to  all  types  of 
prospectuses (for both equity and non-equity securities, including when drawn up in the form 
of  a  base  prospectus)  other  than  the  EU  Growth  prospectus,  the  simplified  prospectus  for 
secondary issuances or the EU Recovery prospectus. 

Furthermore,  for  the  purpose  of  this  analysis,  primary  issuances  refer  to  the  issuance  of 
securities  to  be  offered  to  the  public  or  to  be  admitted  to  trading  on  a  regulated  market  by 
companies whose securities are not  yet admitted to trading. Primary issuances include IPOs 
of shares by companies  going public. The standard prospectus for primary issuances is the 
most comprehensive prospectus type. It can be drawn up as a single document or may consist 
of  separate  documents  (i.e.  in  a  ‘tripartite  form’,  with  its  constituting  documents  –  the 
registration  document  or  universal  registration  document,  the  securities  note  and,  where 
applicable,  the  summary  –  approved  separately).  However,  the  standard  prospectus  can  be 
drawn  up  in  any  case,  including  when  the  Prospectus  Regulation  allows  to  use  alleviated 
prospectuses.  As  a  general  principle,  as  also  stated  in  Commission  Delegated  Regulation 
(EU) 2019/980364, the issuer, offeror or person asking for admission to trading on a regulated 
market is allowed to provide in the prospectus the most comprehensive information available. 
With  the  exception  of  the  recently  introduced  EU  Recovery  prospectus,  which  regime  and 
disclosure Annexes were both laid down in the Prospectus Regulation365, the rules on format 
and content for all other prospectus types (including all disclosure Annexes) were laid down 
in the above mentioned Delegated Regulation, which built on a technical advice from ESMA. 

For  the  specific  case  of  for  non-equity  securities,  including  those  issued in  a  continuous  or 
repeated  manner  or  as  part  of  an  offering  programme,  issuers  are  allowed  to  draw  up  a 
prospectus in the form of a base prospectus366. The base prospectus contains information on 
the  issuer  and  some  general  information  on  the  securities,  while  the  final  terms  to  a  base 
prospectus  contain  information  relating  to  the  securities  note  which  is  specific  to  the 
individual  issue  (such  as  the  ISIN,  the  issue  price,  the  date  of  maturity,  any  coupon,  the 
exercise  date,  the  exercise  price,  the  redemption  price).  Where  the  final  terms  are  not 
included  in  the  base  prospectus  they  are  not  approved  by  the  NCA,  but  only  filed  with  it, 
together  with  the  specific  summary  of  the  issue  which  is  annexed  to  them.  Such  flexibility 
renders  the  base  prospectus  a  very  popular  document  across  the  community  of  non-equity 
issuers.  In  Member  States  with  active  non-equity  markets  (e.g.  Germany,  Luxembourg, 
Ireland), thousands of final terms are filed with NCAs every year.  

To  ensure  the  proper  functioning  of  the  wholesale  market  for  non-equity  securities  and 
increase  market  liquidity,  the  Prospectus  Regulation  sets  out  a  distinct  alleviated  treatment 
for non-equity securities admitted to trading on a regulated market and designed for qualified 
investors only. Such alleviated treatment  consists on less onerous information requirements 

363 Recital 24 of the Prospectus Regulation. 
364 Recital 2 of Commission Delegated Regulation (EU) 2019/980. 
365 Articles 7(12a), 14a, 20(6a), 21(5a) and Annex Va to the Prospectus Regulation. 
366 Article 8 of the Prospectus Regulation. 

161 

 
 
                                                           
than for non-equity securities offered to retail investors, no requirement to include a summary 
in  the  prospectus,  and  more  flexible  language  requirements.  The  alleviated  prospectus  for 
wholesale  non-equity  securities  is  eligible  for  (i)  the  admission  to  trading  of  non-equity 
securities  on  a  regulated  market,  or  a  specific  segment  thereof,  to  which  only  qualified 
investors  can  have  access  for  the  purpose  of  trading  in  those  securities,  or  (ii)  non-equity 
securities  with  a  denomination  per  unit  of  at  least  EUR  100  000,  which  reflects  the  higher 
investment capacity of investors concerned by the prospectus.  

A)  Effectiveness 

investor  protection  and 

The  Commission’s  targeted  consultation  on  the  Listing  Act367  included  an  overarching 
question  on  whether  the  standard  prospectus  for  an  offer  of  securities  to  the  public  or  an 
admission  to  trading  of  securities  on  a  regulated  market  in  its  current  form  strikes  an 
appropriate  balance  between  effective 
the  proportionate 
administrative  burden  for  issuers  (i.e.  whether  it  meets  the  overarching  objectives  of  the 
Prospectus Regulation). Amongst the stakeholders who provided an answer, the majority (35 
stakeholders  accounting  for  59.3%)  responded  negatively.  Such  group  includes  13  business 
associations368,  15  companies/business  organizations369,  2  academia,  2  NGOs  and  2  NCAs. 
The  minority  that  responded  positively  (22  stakeholders  accounting  for  37.3%)  includes  8 
public  authorities  (including  ESMA),  6  business  associations370,  6  companies/business 
organizations371,  1  NGO,  1  academic.  Furthermore,  section  3  to  this  Annex  shows  that  the 
entry into application of the Prospectus Regulation in 2019 does not seem to have impacted 
the long-term trend of the prospectus  approval  in the EEA, albeit  that trend is  impacted by 
several  factors  (e.g.  issues  related  with  taxation,  civil  law,  the  general  macroeconomic  and 
geopolitical trend). Likewise, the split between equity and non-equity prospectuses approved 
has  remained  relatively  stable  through  the  years  and  the  concentration  of  the  approval  of 
prospectuses  by  securities  type  in  some  Member  States  has  not  changed  significantly  even 
after the UK left the EU (figures 4 and 5 of section 3 to this Annex).  

The  targeted  consultation  also  included  a  dedicated  section  on  the  standard  prospectus  for 
non-equity  securities,  including  the  base  prospectus,  as  well  as  on  the  dual  regime  retail 
versus wholesale non-equity securities. 

Stakeholders’ feedback on the standard prospectus for non-equity securities tends to be more 
positive than for the standard prospectus in general. In particular, almost half of respondents 
(20  stakeholders372  accounting  for  47.6%)  considers  that  the  prospectus,  including  the  base 
prospectus,  for  non-equity  securities  has  been  successful  in  facilitating  fundraising  through 
capital  markets  and  that  the  differentiation  between  whole-sale  and  retail  is  very  important 

367 See Annex 2. 
368 Mainly of issuers and banks, but also one association of investors and of law firms.  
369 Including 9 operators of a trading venue, 1 financial research provider and 2 law firms. 
370 Of issuers, banks and trading venues and 1 association of institutional investors. 
371 Including 3 operators of a trading venue, 2 investment banks, 1 law firm. 
372 Including 12 business associations (of banks, trading venues, issuers), 4 companies/business organisations (4 operator of a trading venue 
and 1 investment bank), 1 NCA, 1 academic. 

162 

 
 
 
                                                           
and  appropriately  tailored  to  the  needs  of  those  two  investor  classes  (8  stakeholders373, 
accounting for 19% expressed a negative opinion in that regard). 

In that group, some stakeholders suggest limited improvements to the whole-sale prospectus 
regime (e.g. remove unnecessary disclosure requirements where the information is available 
in  financial  reports,  focus the materiality test of the prospectus  for non-equity securities on 
creditworthiness  of  the  issuer,  allow  the  incorporation  by  reference  of  future  regulated 
information, make a better use of the registration documents and URD).  

Furthermore,  to  the  question  on  the  alignment  of  the  prospectus  for  retail  non-equity 
securities  with  the  lighter  disclosure  regime  of  the  prospectus  for  wholesale  non-equity 
securities, 47.5% of the  respondents  (19 stakeholders374) responded positively and 25%  (10 
stakeholders375) responded negatively (the rest expressed no opinion). 

In the smaller  group  with  a less positive view, some business  organizations mentioned that 
the non-equity securities prospectus remains too complicated for retail clients and the current 
uncertainty  around  the  exact  scope  of  the  PRIIPs  Regulation  has  deterred  many  issuers  to 
extend their non-equity offerings to retail clients. As a result most non-equity securities are 
offered  only  to  the  wholesale  market.  Other  stakeholders  invoke  the  high  level  of 
denomination (EUR  100 000) that prevent  many retail  investors to  access the fixed income 
investment. 

Table 1 shows that in 2021, the total prospectuses for wholesale debt securities account for 
61% of the total (mostly debt with denomination equal to EUR 100 000, while debt traded on 
qualified  investors-only  segments  are  still  marginal),  while  prospectuses  for  retail  debt 
securities account for 38% of the total. 

Table 1 - Prospectuses for debt securities approved in 2021 differentiated by denomination 

Retail debt securities 

Wholesale debt securities 

Prospectuses for debt with 
denomination < EUR 100.000 

Prospectuses for debt with 
denomination < EUR 100.000 
available only to qualified 
investors 

Prospectuses for debt with 
denomination = EUR 100.000 

499 (38%) 

56 (4%) 

745 (57%) 

Source: ESMA’s data for 2021376. 

B)  Efficiency  

Tables 4 and 5 of Annex 4, which outlines examples of costs of a standard prospectus based 
on stakeholders’ feedback from the targeted consultation, show that the price ranges for the 

373 Including 2 business associations (banks and law firms), 5 companies/business organisations (including 3 operators of a trading venue, 1 
investment bank and a financial research provider), 1 NCA. 
374 Including 9 business associations (of banks, issuers, investors, law firms) and 6 companies/business organisations (including 3 operators 
of a trading venue, 1 investment bank and a financial research provider) and 2 NCAs. 
375 Including 5 business associations (of trading venues, banks and issuers), 2 operators of a trading venue, 1 investment banks and 2 NCAs. 
376 Methodological note: all approved prospectuses in 2021 grouped by prospectus type and by securities type (equity-non equity), as well as 
the number of ISINs reported in these approved prospectuses 

163 

 
 
 
 
                                                           
standard prospectus are substantially higher than price ranges for alleviated prospectus types. 
In that regard, the TESG’s final report published in May 2021, also highlighted that the large 
size and complexity of prospectus documentation is detrimental for the both the sell-side and 
buy side. The TESG report described prospectuses for primary issuances as costly and time 
consuming  for  issuers  to  produce,  and  pointed  out  that  the  disproportionate  length  might 
discourage investors to read them and even to invest. Furthermore, the size and complexity of 
prospectuses  might  delay  the  scrutiny  and  approval  process  by  NCAs.  The  TESG  report, 
referring to the high median length of prospectuses in the EU and the significant divergence 
across jurisdictions highlighted in  the Oxera report377 recommended limiting the number of 
pages of an IPO prospectus to 300 pages, with the possibility to request a size extension to 
the NCA if justified by a complex financial history.  
The  association  of  Italian  joint  stock  companies378  analysed  the  average  length  of  the  IPO 
prospectus  for  the  10  most  recent  IPOs  in  the  main  EU  markets  as  of  March  2019379,  as 
shown in Table 2. It established that the median length of an IPO prospectus in the EU was 
400 pages, with significant divergence among Member States, ranging from 250 pages in the 
Netherlands to  over 800 pages in  Italy. There is  little proportionality between the length  of 
the  IPO prospectus  and the size of the issuer: the mean number of pages  for issuers with  a 
market  capitalisation  between  EUR  150  million  and  EUR  1  billion  is  even  higher  than  for 
issuers  with  a  market  capitalisation  above  EUR  1  billion  (577  versus  514  pages, 
respectively).  

Table 2 - Average length (number of pages) of prospectus documents, March 2019380 

ESMA’s data for 2021 on the length of different types of prospectuses, reported on Table 3, 
differ  quite  significantly  from  those  reported  in  the  Oxera  study,  most  likely  due  to 
differences in the respective samples (ESMA’s sample covering a larger group of companies 
and types of prospectuses). However, the difference between the average and median length 
of  a  standalone  prospectus,  which  are  respectively  147  and  109  pages,  is  an  indication  of 

377 See Oxera report, Table 4.1 on p. 68. 
378 Assonime. 
379 See Oxera study, page 68. 
380 See Oxera study, page 68. 

164 

 
 
 
                                                           
discrepancies  between  the  shortest  and  the  longest  prospectuses  or,  more  generally,  of  a 
wider divergence and lack of uniformity of prospectuses across the EU.  

Table 3 - Page length of prospectuses in 2021 for different types of prospectuses 

Source: ESMA’s data for 2021381. 

The  divergent  scenario  about  the  length  of  prospectuses  across  EU  Member  States  is  also 
highlighted  in  Figure  8,  which  shows  that  certain  jurisdictions  tend  to  have  more  or  less 
voluminous prospectuses (or related documents) compared to others. For example, Sweden is 
featuring in  the  low range in  terms  of page size for both  standalone and base prospectuses, 
while on the opposite side Luxembourg and Germany are featuring in the high range for base 
prospectuses,  and  Ireland  and  Poland  are  featuring  in  the  high  range  for  standalone 
prospectuses.  

Figure 8. Average document by prospectus type and NCA in different EU Member States382 

Source: ESMA peer review report 

381 Methodological note: data on the length of prospectus by document type (single language prospectuses only). Documents with approval 
or filing date between 01/01/2021 and 31/12/2021. 
382 Each dot shows the average number of pages for documents of a specific type issued in a specific member state. Dots of the same colour 
represent  the  same  member  state.  Due  to  space  constraints,  dots  are  labelled  only  for  “outliers”  at  the  right-hand  side  of  the  chart  and 
member states with a large number of prospectus approvals. 

165 

 
 
 
 
                                                           
In the targeted consultation, within the group of stakeholders that responded negatively to the 
aforementioned  overarching  question  on  the  standard  prospectus,  the  majority  (18 
stakeholders383  accounting  for  52.9%)  considers  that  the  standard  prospectus  should  be 
significantly  alleviated.  While  some  respondents  (7  stakeholders384,  accounting  for  20.6%) 
would replace the standard prospectus with a more efficient prospectus type, pointing out to 
the  EU  Growth  prospectus  or  the  EU  Recovery  prospectus  as  a  model,  and  some  others  (8 
stakeholders385  accounting  for  23.5%)  proposed  different  solutions  (e.g.  set  a  page  limit, 
make the prospectus a standardized and fully harmonized document).  

On  the  content  of  the  standard  prospectus,  Table  4  outlines  stakeholders’  views,  gathered 
from  the  targeted  consultation,  on  the  most/least  burdensome  sections  of  the  prospectus. 
Three  stakeholders  also  provided  feedback  on  possible  sections  that  could  be  alleviated  or 
removed386. Furthermore, some stakeholders that participated to  the dedicated meeting with 
issuers and investors (see Annex 2) provided some comments on specific prospectus sections 
or  times  that  are  considered  burdensome,  redundant  or  that  could  be  incorporated  by 
reference.387 

Table 4 - Stakeholders’ feedback on standard prospectus sections. 

PROSPECTUS SECTIONS 

Risk factors 

Profit forecasts or estimates 

Operating and financial review 

Not Burdensome + 
Rather Not -
Burdensome 

4% 
(1 respondent) 

10% 
(2 respondents) 

4% 
(1 respondent) 

Neutral 

Rather Burdensome + 
Very Burdensome 

8% 
(3 respondents) 

10% 
(2 respondents) 

40% 
(10 respondents) 

88% 
(22 respondents) 

80% 
(16 respondents) 

56% 
(14 respondents) 

383  Including  11  business  associations  (of  investors,  issuers,  banks  law  firms),  4  companies/business  organisations  (1  trade  association,  1 
financial research provider, 1 operator of trading venues and 1 law firm), 1 NGO, 1 NCA, 1 academic. 
384 Including 3 operators of a trading venue, 2 issuers, 1 law firm, and 1 academic. 
385 Including 6 operators of a trading venue, 1 association of banks and 1 NCA. 
386 Regulatory environment; important events in the development of the issuer's business; capital resources; administrative, management and 
supervisory  bodies  and  senior  management;  related  party  transactions;  statement  of  capitalization  and  indebtedness;  legal  information 
regarding a description  of  the  rights attached  to the  securities,  including  any  limitations  of  those  rights and  procedure  for  the  exercise  of 
those  rights;  history  of  share  capital;  interim  financial  statement  (if  on  the  date  of  the  approval  of  the  prospectus  the  document  contains 
audited  historical  financial  information  covering  the  period  of  the  interim);  complex  financial  history;  investments;  remuneration  and 
benefits. 
387 The requirements for presentation and categorisation of risk factors make the prospectus unnecessarily complicated, the required ranking 
of risk factors imposes an undue burden and, more importantly, liability risk to the issuer and its managers.  In addition, many things are 
unpredictable, for example the Covid-19 pandemic. The information on administrative, executive and supervisory bodies as well as senior 
management appears unnecessarily detailed and can be difficult and time-consuming to compile (board membership during the last 5 years 
is not relevant). The information on the statement of capitalisation and indebtedness is already included in the balance sheet. However, the 
current  presentation  of  capitalisation  and  indebtedness  does  not  harmonise  with  IFRS  accounting.  For  this  reason,  there  is  an  additional 
effort  that  is  also  unnecessary.  Since  the  required  framework  does  not  correspond  to  any  standard,  the  presentation  is  so  different  that 
investors cannot even compare the prospectuses at this point. In the worst case, there is even irritation among investors who do not know 
this background. The effort is higher when issuers may have to prepare a separate new balance sheet, as the statement on capitalisation and 
indebtedness may not be older than 90 days. And this is the case even if they submit full quarterly reporting in accordance with IFRS. Such 
a balance sheet preparation thus also contradicts the valuations of the Transparency Directive. At least no disclosure beyond the historical 
financial information or, if applicable, interim financial information should be required. The following information could be incorporated by 
reference:  names  and  addresses  of  issuers’  auditors  may  be  inferred  from  the  audit  report);  important  events  in  the  development  of  the 
issuer's  business  (already  included  in  the  issuer's  financial  information  and  in  the  description  of  the  issuer's  business),  remuneration  and 
benefits and related party transactions (part of the disclosures required by IAS 24 for the issuer's consolidated financial statements), capital 
resources (can be taken from the balance sheet and the cash flow statement as part of the IFRS financial statements).  

166 

 
 
                                                           
Financial information concerning 
the issuer’s assets and liabilities, 
financial position and profit and 
losses 

Administrative, management and 
supervisory bodies and senior 
management 

Business overview 

Statement of capitalisation and 
indebtedness 

8.3% 
(2 respondents) 

9.1% 
(2 respondents) 

Regulatory environment 

- 

Trend information 

Working capital statement 

Summary 

Related party transactions 

31.8% 
(7 respondents) 

12.5% 
(3 respondents) 

39.1% 
(9 respondents) 

39.1% 
(9 respondents) 

16% 
(4 respondents) 

32% 
(8 respondents) 

52% 
(13 respondents) 

27.3% 
(6 respondents) 

22.7% 
(5 respondents) 

50% 
(11 respondents) 

45.8% 
(11 respondents) 

45.5% 
(10 respondents) 

63.6% 
(14 respondents) 

36.4% 
(8 respondents) 

58.3% 
(14 respondents) 

34.8% 
(8 respondents) 

39.1% 
(9 respondents) 

45.8% 
11 respondents) 

45.5% 
(10 respondents) 

36.4% 
(8 respondents) 

31.8% 
(7 respondents) 

29.2% 
(7 respondents) 

26.1% 
(6 respondents) 

21.7% 
(14 respondents) 

Source: Targeted consultation on the Listing Act (Question 9: “What are the sections of a prospectus that you 
find the most cumbersome and costly to draft?”). 

As regards the format of the prospectus, almost all respondents who answered the dedicated 
questions (50 stakeholders or 92.6%) consider that a prospectus should only be provided in 
an  electronic  format,  which  would  entail  that  paper  copies  could  no  longer  be  requested. 
Furthermore,  the  efficiency  of  the  prospectus  may  be  impacted  by  the  language  regime.  In 
that regard, 21 stakeholders388 who provided an answer to the dedicated question (35.6% of 
respondents) agreed that the prospectus should be drawn up only in English as the language 
customary in the sphere of international finance and additional 20 stakeholders389 (accounting 
for 33.9%) agreed on the same statement except for the prospectus summary. This feedback 
indirectly  addresses  the  issue  of  prospectus  length  (Table  4  shows  that  multiple  language 
prospectuses  are  much  lengthier  than  single  language  prospectuses),  and  directly  addresses 
the issue of translation costs. 
Finally, for share prospectuses, the majority of respondents (26 stakeholders390 accounting for 
57.8%) consider that the minimum period of 6 working days between the publication of the 
prospectus  and  the  end  of  an  offer  of  shares  should  be  relaxed  to  facilitate  swift  book-

388  Including  11  business  associations  (of  banks,  trading  venues,  issuers,  law  firms,  institutional  investors),  8  companies/business 
organisation (7 operators of a trading venue and 1 investment bank), 1 NGO, 1 NCA. 
389 Including 6 business associations (of banks and issuers), 7 companies/business organisations (issuers, operators of trading venues, banks), 
2 academia, 4 NCAs. 
390 Including 11 business associations (of issuers, banks, investors, trading venues, law firms), 4 companies/business organisations (issuers, 
law firms, operators of trading venues, investment banks), 2 NCAs, 1 NGO and 1 academic. 

167 

 
 
                                                           
building  processes.  The  CMU  HLF391  also  recommended  to  consider  decreasing  that 
minimum period from 6 to 3 days. 

C)  Coherence 

The  disclosures  requirements  of  the  standard  prospectus  are  coherent  with  other  EU 
legislations. In particular, the expansion of the list of information that can be incorporated by 
reference in the prospectus allows issuers to avoid duplicating the disclosure of information 
already published in accordance with other EU legislations. For example, issuers are allowed 
to incorporate by reference regulated information published under Transparency Directive392, 
management  reports  and  corporate  governance  statements  disclosed  under  the  Accounting 
Directive393,  remuneration  reports  as  referred  to  in  the  Shareholders  Rights  Directive394, 
annual reports or any disclosure of information required under AIFMD395. 

D)  Relevance in terms of value added for the EU 

While  the  Prospectus  Regulation  has  harmonized  prospectus  rules  compared  to  the 
Prospectus Directive, the format of the standard prospectus might be further standardized, as 
indicated  by  some  stakeholders  in  the  targeted  consultation,  which  would  improve 
comparability of prospectuses throughout the EU and facilitate cross-border investing. 

4.2. The Prospectus summary 

The Prospectus  Regulation sets  out  that a summary of the prospectus  must provide the key 
information  that  investors  need  to  understand  the  nature  and  the  risks  of  the  issuer,  the 
guarantor  and  the  securities  that  are  being  offered  or  admitted  to  trading  on  a  regulated 
market396.  According  to  the  Prospectus  Regulation,  no  civil  liability  shall  attach  to  any 
persons  only  on  the  basis  of  the  prospectus  summary,  unless  the  latter  is  misleading, 
inaccurate  or  inconsistent  (when  read  together  with  the  prospectus)  or  does  not  provide 
together with the other parts of the prospectus the  key information in order to aid investors 
when considering whether to invest in the securities397. 

A)  Effectiveness 

391 See CMU HLF final report (page 68). 
392  Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the  harmonisation  of  transparency 
requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 
2001/34/EC (OJ L 390, 31.12.2004, p. 38). 
393 Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated 
financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of 
the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19). 
394 Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in 
listed companies (OJ L 184, 14.7.2007, p. 17). 
395  Directive  2011/61/EU  of  the  European  Parliament  and  of  the  Council  of  8 June  2011  on  Alternative  Investment  Fund  Managers  and 
amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1). 
396 Article 7(1) of the Prospectus Regulation. 
397 Article 11(2), second subparagraph, of the Prospectus Regulation. 

168 

 
 
 
 
                                                           
As  shown  in  Figure  9,  in  the  targeted  consultation,  the  majority  of  respondents  (26 
stakeholders398  or  53.06%)  considers  that  the  summary  of  the  standard  prospectus  has 
achieved its objectives (i.e. to make the summary short, simple, clear and easy for investors 
to  understand).  As  regards  the  summary  of  the  EU  Growth  prospectus,  despite  a  large 
majority of stakeholders did not express an opinion, the respondents that answered positively 
and negatively are almost equally split. Finally, as regards the summary of the EU Recovery 
prospectus, the number of stakeholders that consider it has achieved its objectives is greater 
than the number of respondents who answered negatively (most respondents did not express 
an opinion). Some stakeholders also provided feedback on how to improve the summary of 
the standard prospectus, such as to further streamline it, further align it to the key information 
document (KID) requirements under the PRIIPs Regulation, improve its format, usability and 
style  to  make  it  more  user-friendly,  allow  to  insert  tables  and  graphs  to  make  it  more 
comprehensible.  

Figure 9. Stakeholders’ feedback on the prospectus summary 

Source: stakeholders’ feedback from the targeted consultation. 

B)  Efficiency 

The  Prospectus  Regulation  has  streamlined  the  prospectus  summary  for  the  standard 
prospectus399, making it retail investor-friendly, limiting the risk factors to be disclosed and 
introducing a page limit. However, a derogation is possible where a single summary covers 
several securities that differ only in some very limited details (e.g. the issue price or maturity 
date, where there is a guarantor, or where the KID prepared under the PRIIPs Regulation (if 
relevant) substitutes the section on key information on the securities in the summary.  

398 Including 12 business associations (of banks, issuers, investors), 6 companies/business organisations (3 operators of a trading venue, 2 
investment banks, 1 law firm), 5 NCAs, 1 academic. 
399 Article 7 of the Prospectus Regulation. 

169 

 
 
 
                                                           
Table 5 shows that the distribution in terms of number of pages of the summary of a standard 
prospectus for equity or non-equity securities is rather stable, with a median length of 6 to 7 
pages  and  percentile  75  only  slightly  higher  (9  to10  pages).  However,  while  this  might 
suggest lower costs for issuers to prepare the summary, some stakeholders who responded to 
the targeted consultation have expressed concerns about the page-size limit and the maximum 
number of risk factors, which are considered burdensome for issuers (in particular, the cap on 
the number of risk factors obliges issuers to make a selection of the most material ones). 

Table 5 - Page numbers analysis for the prospectus summary 

Document type 

Percentile 10 

Percentile 25 

Median 

Percentile 75 

Summary of equity prospectus 

Summary of non-equity 
prospectus 

Source: ESMA’s data for 2021. 

7 

8 

7 

5 

7 

6 

9 

10 

While  the  specific  summary  of  the  EU  Growth  prospectus400  is  similar  in  its  format  and 
content to the summary of the standard prospectus, its maximum length is 6 pages (however 
the same page size-derogations as for the standard prospectus are possible). 

Finally,  the  summary  of  the  EU  Recovery  prospectus401  is  the  most  streamlined  summary 
type, with a maximum size of 2 pages. As the EU Recovery prospectus can only be drawn up 
for shares, the size-limit derogations provided for the summary of the standard prospectus are 
not applicable. 

C)  Coherence 

The summary of the standard prospectus and of the EU Growth prospectus are coherent with 
the PRIIPs regulation, as they both allow to replace the section on the key information on the 
securities with the PRIIPs KID. 

D)  Relevance in terms of value added for the EU 

In fact, albeit the Prospectus Regulation clarifies that the summary of the prospectus is to be 
read together with the other parts of the prospectus to aid investors when considering whether 
to invest in the issuer’s securities402, retail investors tend to read mainly the summary and less 
frequently the whole or part of the prospectus, as reported by several stakeholders. Therefore, 
it is considered that the prospectus summary plays an important role in terms of protection of 
retail investors. For this reason, as qualified investors are considered to possess the skills and 
expertise  to  navigate  through  the  whole  prospectus,  for  non-equity  securities  issued  with  a 
minimum denomination of EUR 100 000 or to be admitted to trading on regulated markets or 

400 Article 33 of Commission Delegated Regulation (EU) 2019/980. 
401 Article 7(12a) of the Prospectus Regulation. 
402 Article 7(1) of the Prospectus Regulation. 

170 

 
 
 
 
 
                                                           
ring-fenced segments  thereof only open to  qualified investors, a prospectus  summary is  not 
required. 

4.3. The EU Growth prospectus 

To  facilitate  access  to  financing  on  capital  markets  for  SMEs  in  the  Union,  the  Prospectus 
Regulation  introduced  the  EU  Growth  prospectus403,  for  both  equity  and  non-equity 
securities (for the latter, it may be also drawn up as a base prospectus), as a single document 
or in a tripartite form. While the EU Growth prospectus may be used by other categories of 
beneficiaries (e.g. mid-caps listed on SME growth markets with a market capitalisation up to 
EUR  500  million,  certain  offerors  of  securities,  unlisted  offers  up  to  EUR  20  million  by 
companies with less than 500 employees), SMEs are the primary focus of this prospectus, as 
shown in figure 10. 

Figure 10. EU Growth prospectuses by category of beneficiaries approved in 2021 in the EEA. 

Source: ESMA’s data for 2021404. 

A)  Effectiveness 

Figure  11  shows  that  the  uptake  of  the  EU  Growth  prospectus  has  been  rather  limited,  if 
compared to the total number of prospectuses approved. Even if we exclude the year 2019, as 

403 Article 15 of the Prospectus Regulation. 
404 Methodological note: unique number of prospectus identifiers for which the EU Growth prospectus category is not empty. 

171 

 
 
 
 
 
                                                           
the  EU  Growth  prospectus  was  introduced  by  the  Prospectus  Regulation  that  entered  in 
application  only  in  July  of  that  year,  the  number  of  EU  Growth  prospectuses  approved 
account for 7.1% of total prospectuses in 2020 and 8.5% in 2021.  

172 

 
 
 
 
Figure 11. EU Growth prospectuses approved in the EEA (exc. UK) from 2019 to 2021 

Source: ESMA’s EEA prospectus reports for 2019, 2020 and ESMA’s data for 2021 

Furthermore, Figure 12,  which shows the breakdown of EU Growth prospectuses approved 
by Member States in 2019, 2020 and 2021, indicates that there is a clear concentration of EU 
Growth prospectuses approved in one EU jurisdiction (Sweden). 

Figure 12. EU Growth prospectuses approved in the EEA by Member State from 2019 to 2021 

Source: ESMA’s data for 2021. 

173 

 
 
 
 
 
 
It should however be highlighted that the mere admission to trading of securities on an MTF 
(including an SME growth market) or the publication of bid and offer prices does not require 
per  se  the  publication  of  a  prospectus405,  unless  coupled  with  an  offer  of  securities  to  the 
public. Therefore, issuers listing securities on an SME growth market and benefiting from a 
prospectus exemption for the offer (such as an offer addressed solely to qualified investors), 
are not required to publish a prospectus. In such case, issuers are required to publish, under 
their  responsibility,  an  admission  document  in  accordance  with  the  SME  growth  market 
rulebook  and  clearly  state  whether  or  not  that  admission  document  has  been  approved  or 
reviewed  and  by  whom406.  According  to  the  feedback  received  from  some  stakeholders, 
listings  on  MTFs/SME  growth  markets  are  in  most  cases  exempted  from  the  prospectus 
obligation  (e.g.  90%  of  listings  on  Nasdaq  Baltic  Exchange  and  almost  all  listings  on 
Euronext  Growth  Milan).  Figure  13  also  shows  that  EU  Growth  prospectuses  are 
predominantly drawn up for equity securities, despite the fact that it can be also drawn up as a 
base prospectus for frequent issuances of non-equity securities. 

Figure 13. EU Growth prospectuses approved in 2021 by type of securities. 

Source: ESMA’s data for 2021407. 
In the targeted consultation, it emerged that many respondents (21 stakeholders408 or 43.8%) 
do  not  believe  that  the  EU  Growth  prospectus  strikes  a  proper  balance  between  investor 
protection  and  the  reduction  of  administrative  burden  for  SMEs  (while  6  stakeholders409  or 
12.5% believe it does and the rest expressed no opinion). Some stakeholders provided several 

405 Recital 14 of Regulation (EU) 2017/1129. 
406 Article 78(2), point (c), of Commission Delegated Regulation (EU) 2017/565. 
407 Methodological note: all EU Growth approved prospectuses in 2021 grouped by prospectus type and by securities type (equity vs non-
equity) using the reported annexes. This might cause a limited double counting of prospectuses (i.e. for the same prospectus, there might be 
a document with annexes belonging to the equity category and another belonging to the non-equity category). In case that the EU Growth 
annexes are not reported, these prospectuses are not counted, as they cannot be classified.  
408 Including 7 business associations (of issuers, trading venues, investors, law firms), 10 companies/business organisations (5 operators of 
trading venues, issuers, law firms, investment banks), 2 NCAs, 1 NGO.  
409 Including 3 operators of trading venues and 2 investment banks). 

174 

 
 
 
                                                           
comments  on  how  the  EU  Growth  prospectus  might  be  improved  (e.g.  for  SMEs  a  more 
streamlined  format  as  the  EU  Recovery  prospectus  should  be  taken  as  reference;  the  EU 
Growth  prospectus  should  be  made  lighter  and  possibly  a  page  limit  introduced;  a  new 
prospectus for SMEs should be introduced and aligned to the level of disclosures required for 
the  listing  on  MTFs/SME  Growth  markets;  instead  of  a  prospectus,  another  form  of 
admission or listing document should be introduced). One stakeholder remarked that, while 
not  being sufficiently alleviated for SMEs,  the EU Growth prospectus  is  a simpler, shorter, 
and clearer document than a standard prospectus. 

B)  Efficiency  

The EU Growth prospectus is more streamlined than the standard prospectus, it has a bespoke 
summary  and  a  standardised  format.  Table  6  outlines  the  main  alleviations,  for  equity 
securities, of an EU Growth prospectus compared to a standard prospectus.  

Table 6 - Main alleviations of an EU Growth prospectus compared to a standard prospectus  

DISCLOSURE ITEMS REMOVED FROM THE EU GROWTH PROSPECTUS 

Information relating to the joint ventures and undertakings 

  Statutory auditors 
  Patents and licenses 
  The basis for any statements made by the issuer regarding its competitive position 
 
  Description of environmental issues that may affect the issuer’s utilisation of the tangible fixed assets 
  Financial condition, not required for: 
o  non-equity issuers 
o 
o 

equity issuers with market capitalisation < EUR 200 million  
equity issuers with market capitalisation >= EUR 200 million who include the Management Reports in 
accordance with Articles 19 and 29 of Directive 2013/34/EU 

  Operating results 
  Capital resources (with the exception of information on the issuer’s borrowing requirement and funding 

structure) 

  Regulatory environment (required only when relevant to the issuer’s strategy and objectives) 
  Board practices 
  Employees (with the exception of shareholdings and stock options in relation to members of the administrative, 

management and supervisory bodies and senior management) 

  Cash flow statement and a statement of changes in equity (where not required under the applicable financial 

 

reporting framework) 
Information on the registry and entry number of the Memorandum and Articles of Association and a brief 
description of the issuer’s objects and purposes 

  Capitalization and indebtedness (not required for equity issuers with market capitalisation < EUR 200 million) 

DISCLOSURE ITEMS ALLEVIATED IN THE EU GROWTH PROSPECTUS 

Investments (the geographic distribution of investments not required) 

  Principal activities 
  Principal markets 
  Organisational structure 
 
  Trend information 
  Administrative, management and supervisory bodies and senior management 
  Conflicts of interest 
 

Interim and other financial information 

175 

 
 
 
  Dividend policy 
  Memorandum and Articles of Association 

Source: Annexes 1, 11, 24 and 26 to Commission Delegated Regulation (EU) 2019/980 

However,  the  EU  Growth  prospectus  for  equity  securities  includes  two  disclosure 
requirements  that  are  not  present  in  the  standard  prospectus,  which  take  into  account 
respectively the link between the use of proceeds and the business objectives and strategy410, 
as  well  as  environment  and  employee  matters411.  Unlike  the  standard  prospectus,  the  EU 
Growth prospectus cannot be used by issuers whose securities are already admitted to trading 
or to be admitted to trading on regulated markets. 

According to the Oxera study, feedback from market participants indicates that there has not 
been a substantial decrease in the length of documents submitted after July 2019412. However, 
the  Oxera  report  indicates  that  only  two  EU  Growth  prospectuses  (of  202  and  221  pages 
respectively)  had  been  approved  on  Euronext  Growth  and  AIM  Italia  since  the  entry  into 
application of the Prospectus Regulation. This data seems to match with the page size of the 
two  multiple  language-EU  Growth  prospectuses  shown  in  Table  4  to  this  Annex,  which 
average is 248 pages. However, Table 4 includes a wider sample of EU Growth prospectuses 
drawn up in a single language, which average of 72 pages and median length of 59 pages is 
more significant, as it is based on 195 documents. 

Finally, in addition to the data on costs provided in Tables 5, 6 and 7 of Annex 4, which show 
that  an  EU  Growth  prospectus  can  allow  25%  cost  savings  compared  to  a  standard 
prospectus,  Figure  14  shows  some  additional  indications  of  cost  savings  provided  by 
stakeholders.  The  largest  part  of  respondents  (5  stakeholders)  consider  that  an  EU  Growth 
prospectus  can  allow  to  save  from  20  to  40%  compared  to  a  standard  prospectus,  which  is 
broadly in line with the estimation provided for in Table 7 to Annex 4. 

Figure 14. Savings achieved with an EU Growth prospectus compared to a standard prospectus. 

410 Item 1.7.2 of Annex 26 to Commission Delegated Regulation (EU) 2019/980: “An explanation about how the proceeds from this offer 
align with the business strategy and strategic objectives described in the registration document”. 
411 Item 2.5.1 of Annex 24 to Commission Delegated Regulation (EU) 2019/980: (…) “To the extent necessary for an understanding of the 
issuer’s  development,  performance  or  position,  the  analysis  shall  include  both  financial  and,  where  appropriate,  non-financial  Key 
Performance  Indicators  relevant  to  the  particular  business,  including  information  relating  to  environmental  and  employee  matters.  This 
analysis shall, where appropriate, include references to, and additional explanations of, amounts reported in the annual financial statements”. 
412 See Oxera report, page 68. 

176 

 
 
 
                                                           
Source: targeted consultation on the Listing Act. 

C)  Coherence 

The EU Growth prospectus is coherent with the objective of the CMU action plan to support 
SME’s  access  to  capital  markets.  In  particular,  the  EU  Growth  prospectus  aims  to  foster 
listings  on  SME  growth  markets,  by  allowing  its  use  by  non-SMEs  with  a  market 
capitalisation up to 500 million and that are listed or to be listed on those venues. However, 
the  latter  category  of  beneficiaries  has  so  far  only  made  marginal  use  of  the  EU  Growth 
prospectus as shown in Figure 10 (only 5 EU Growth prospectuses were drawn up in 2021 by 
mid-caps listed or to be listed on an SME growth market).  

Furthermore,  Table  8  of  Annex  4  shows  that  135  prospectuses  were  approved  in  2021  for 
IPOs  in  SME  growth  markets.  Although  information  is  not  available  on  the  type  of 
prospectus used for those IPOs, the fact that at least 50% of issuers listed on an SME growth 
markets must be SMEs413, and that 182 EU Growth prospectuses drawn up in 2021 were from 
SMEs,  suggests  that  for  most  of  those  IPOs  on  SME  growth  markets  an  EU  Growth 
prospectus was used. Finally, the same considerations for the incorporation by reference and 
coherence of disclosures compared to other legislations made for the standard prospectus also 
apply to the EU Growth prospectus. 

D)  Relevance in terms of value added for the EU 

The EU Growth prospectus is the only prospectus type that has a standardized format: issuers 
must follow the order of disclosure of the prospectus sections414. The EU Growth prospectus 
is  therefore  the  only  prospectus  type  that  allows  for  an  enhanced  comparability  across  EU 
jurisdictions. However, it is possible to deviate from the order of the information items within 
the prospectus sections, a rule which grants some flexibility to issuers. 

413 Article 33(3), point (a) of MiFID II. 
414 Article 32 of Commission Delegated Regulation (EU) 2019/980. 

177 

 
 
 
 
                                                           
4.4. Simplified prospectus regimes for secondary issuances 

The  Prospectus  Regulation  exempts  from  the  prospectus  obligation  for  the  admission  to 
trading securities fungible with securities already admitted to trading on the same regulated 
market, up to a 20% threshold415. This exemption needs to be combined with an exemption 
for public offers (e.g. offers solely addressed to qualified investors) to avoid the publication 
of  a  prospectus.  A  similar  exemption  exists  also  for  the  admission  to  trading  of  shares 
resulting from the conversion or exchange of other securities from the exercise of the rights 
conferred by other securities416.  

When  the  aforementioned  exemptions  do  not  apply,  or  where  the  obligation  to  publish  a 
prospectus  is  triggered  by  an  offer  of  securities  to  the  public,  the  Prospectus  Regulation 
enable certain categories of beneficiaries to benefit from alleviated prospectus types, namely 
the  simplified  prospectus  for  secondary  issuances417  and  the  EU  Recovery  prospectus418. 
Both  regimes  mainly apply to  issuers that have  a track record (minimum continuous listing 
for  at  least  the  last  18  months)  on  a  regulated  market  or  an  SME  growth  market  and  are 
subject to periodic and ad hoc disclosure under MAR, as well as Transparency Directive (for 
regulated markets) or Commission Delegated Regulation (EU) 2017/565419 (for SME growth 
markets).  A  delay  of  18  months  ensures  that  the  issuer  has  complied  at  least  once  with  its 
obligation to publish an annual financial report under the Transparency Directive or under the 
rules of the operator of an SME growth market420.  

A)  Effectiveness 

In  the  targeted  consultation  on  the  Listing  Act,  the  majority  of  respondents  (31 
stakeholders421 accounting for 50.8%), considered that the obligation to publish a prospectus 
for companies with continuous listing of not less than 18 months on a regulated market or an 
SME  growth  market  should  remain.  However,  a  significant  minority  (26  stakeholders  or 
42.6%422,) considers that it should be lifted. 

Among the  first  group (that  would like to  maintain the prospectus  obligation  for secondary 
issuances),  the  majority  of  respondents  (57.1%)  considers  that  a  significantly  simplified 
prospectus  focusing  on  essential  information  only  (often  referring  to  the  EU  Recovery 
prospectus as a model) should be available on permanent basis.  

Some stakeholders in the group that would be favourable in lifting the prospectus obligation 
for  secondary  issuances,  made  several  proposals  on  the  best  way  to  achieve  this  objective 
(such  as  replacing  the  prospectus  with  a  statement  confirming  compliance  with  continuous 
disclosure and financial reporting obligations; increasing the existing exemption threshold for 

415 Article 1(5), first subparagraph, point (a), of the Prospectus Regulation. 
416 Article 1(5), first subparagraph, point (b), of the Prospectus Regulation. 
417 Article 14 of the Prospectus Regulation. 
418 Article 14a of the Prospectus Regulation. 
419 Article 78. 
420 Recital 50 of the Prospectus Regulation. 
421 Including 11 business associations (of issuers, banks, trading venues and 1 association of investors), 8 companies/business organizations 
(including 5 operators of a trading venue and 2 law firms), 10 NCAs, and 1 NGO. 
422  Including 9 business associations (of issuers, banks and 2 associations of investors), 12 companies/business organizations (including 8 
operators of a trading venue, 2 investment banks, 1 law firm and 1 issuer), 2 academia, 1 NGO and 1 NCA. 

178 

 
 
 
 
                                                           
fungible  securities;  replacing  the  prospectus  for  fungible  securities  with  a  document  to  be 
filed  to  NCAs  containing  few  key  information;  exempting  public  offers  of  non-equity 
securities  fungible  to  existing  non-equity  securities  issued  pursuant  to  a  valid  base 
prospectus;  removing  the  prospectus  obligation  for  transferring  shares  from  a  SME  growth 
market to a regulated market; replacing the prospectus with a MAR-compliance statement on 
the impact  of dilution and the use of proceeds;  publishing a document  with  information  on 
the characteristics of the securities and terms and conditions of the offer/admission). 

4.4.1. 

Simplified prospectus for secondary issuances 

As regards the simplified prospectus for secondary issuances, Figure 15 shows that its uptake 
has been rather limited, if compared to the total number of prospectuses approved during the 
same  years.  Even  if  we  exclude  the  year  2019,  as  the  simplified  prospectus  for  secondary 
issuances  was  introduced  by  the  Prospectus  Regulation  that  entered  in  application  only  in 
July  of  that  year,  the  number  of  simplified  prospectus  for  secondary  issuances  approved 
accounts for 5.9% of total prospectuses approved in 2020 and 7.7% in 2021. 

The  simplified  prospectus  for  secondary  issuances  can  also  be  used  by  issuers  who  have  a 
minimum  and  continuous  listing  of  2  years  on  an  SME  growth  market  and  who  have  fully 
complied  with  reporting  and  disclosure  obligations  to  seek  admission  to  trading  on  a 
regulated  market  of  securities  fungible  with  existing  securities  that  have  been  previously 
issued (aka ‘transfer prospectus’)423. According to ESMA’s data, in 2021 there was only one 
prospectus approved for the initial admission to trading on regulated market from previously 
being traded on an SME growth market. 

Figure 15. Simplified prospectuses for non-secondary issuances approved in the EEA (exc. UK) from 2019 
to 2021 

Source: ESMA’s EEA prospectus reports for 2019, 2020 and ESMA’s data for 2021. 

423 Article 14(1), point (d) of the Prospectus Regulation. 

179 

 
 
 
                                                           
Figure  16,  showing  the  breakdown  of  simplified  prospectuses  for  secondary  issuances 
approved by countries in 2019, 2020 and 2021, indicates that there is a concentration in few 
jurisdictions (notably, Norway, Sweden, Germany, Italy, Greece and Finland).  

Figure 16. Simplified prospectuses for secondary issuances approved in the EEA (exc. UK) from 2019 to 
2021. 

Source: ESMA’s EEA prospectus reports for 2019, 2020 and ESMA’s data for 2021424. 

Figure  17  shows  the  breakdown  of  the  simplified  prospectus  for  secondary  issuances  by 
securities type. Like for the EU Growth prospectus, the simplified prospectus for secondary 
issuances is mainly used for equity securities. Several stakeholders have highlighted that non-
equity issuers who use base prospectuses are less interested to alleviated prospectus types for 
secondary  issuances,  given  the  flexibility  to  only  file,  for  any  issuance  of  non-equity 
securities  within  the  base  prospectus,  final  terms  with  NCAs  (i.e.  no  need  to  have  a 
prospectus scrutinised and approved for any secondary issuance). One item of the simplified 
prospectus for secondary issuances that has been flagged by some stakeholders as particularly 
burdensome  is  the  summary  of  information  disclosed  under  MAR  over  the  last  12  months 
which is relevant as at the date of the prospectus. 

Figure 17. Simplified prospectus for secondary issuances approved in 2021 by securities type. 

424 Methodological note: secondary issuance prospectuses approved in 2021 grouped by prospectus type and by securities type (equity vs 
non-equity)  using  the  reported  annexes.  This  might  cause  a  limited  double  counting  of  prospectuses  (i.e.  for  the  same  prospectus,  there 
might  be  a  document  with  annexes  belonging  to  the  equity  category  and  another  belonging  to  the  non-equity  category).  In  case  that  the 
secondary issuance annexes are not reported, these prospectuses are not counted, as they cannot be classified. 

180 

 
 
 
                                                           
Source: ESMA’s EEA prospectus reports for 2019, 2020 and ESMA’s data for 2021. 

4.4.2. 

The EU Recovery prospectus 

The  EU  Recovery  prospectus,  introduced  by  the  CMRP  in  order  to  support  the 
recapitalisation  of  companies  to  recover  from  the  negative  impact  of  the  COVID-19 
pandemic,  is  at  present  the  most  streamlined  prospectus  type  (30  page-document  with  a  2 
page-summary), it benefits from a reduced NCAs’ notification time for the decision regarding 
its  approval  (7  days  instead  of  10  days)  and  is  available  for  secondary  issuances  of  shares 
fungibles  with  shares  already  admitted  to  trading  that  account  for  no  more  than  150%  of 
existing share capital (aka ‘anti-dilution cap’).  

The  EU  Recovery  prospectus  regime,  which  is  due  to  expire  on  31  December  2022,  is 
currently  not  available  for  the  secondary  issuance  of  securities  other  than  shares,  for  non-
fungible  securities  or  for  transferring  listing  from  an  SME  growth  market  to  a  regulated 
market  .  In  those  cases,  the  issuer  has  the  choice  between  the  standard  prospectus  and  the 
simplified prospectus for secondary issuances.  

The  final  report  published  by  the  TESG  recommended  that  a  new  simplified  prospectus 
similar in its form to the EU Recovery prospectus, should be adopted on a permanent basis 
both  equity  and  non-equity  securities,  including  to  transfer  listing  from  an  SME  growth 
market to a regulated market, and replace the simplified prospectus for secondary issuances. 

Figure 18 shows that the uptake of the EU Recovery prospectus has been rather soft in 2021, 
albeit this new regime is only in application since March 2021. 

Figure 18. EU Recovery prospectuses approved in 2021 in the EEA. 

181 

 
 
 
 
Source: ESMA’s data for 2021425. 

Some  stakeholders,  in  particular  companies  and  business  associations,  highlighted  some 
possible reasons for the soft performance of the EU Recovery prospectus: issuers still need to 
adjust  to  this  new  regime,  which  is  only  available  for  shares;  issuers  frequently  tapping 
capital  markets  don’t  see  the  value  to  adapt  to  a  transitional  regime  that  expires  in  a  short 
time  period  (and  then  revert  to  the  normal  prospectus);  the  30  page-limit  is  difficult  to 
comply with as the disclosure requirements have not been sufficiently reduced and some are 
complex to produce (e.g. working capital statement and the risk factors specific to the issuer 
and  the  shares);  the  name  of  the  prospectus  and  the  requirement  to  describe  the  effects  of 
COVID-19  might  discourage  non-distressed  issuers  to  use  this  prospectus;  unfamiliarity  of 
advisors and professional investors with this new type of prospectus. 

Figure 19 shows that the largest part of stakeholders who responded to the dedicated question 
are  in  favour  of  making  the  EU  Recovery  prospectus  permanent  and  extend  it  to  securities 
other than shares. 

Figure 19. Stakeholders’ feedback on EU Recovery prospectus. 

425 Methodological note: the EU Recovery Prospectus was implemented after the RTS was approved and the  IT development was almost 
finished. Consequently, instead of changing all NCAs and ESMA reporting systems for a temporary regime, NCAs were instructed to use 
the already existing fields comments to report the wording “EU Recovery Prospectus” in English. 

182 

 
 
 
 
 
                                                           
Source: Targeted consultation on the Listing Act. 

B)  Efficiency 

As  highlighted  in  Tables  5  and  6  of  Annex  4,  the  simplified  prospectus  for  secondary 
issuances is on the same average cost range of an EU Growth prospectus. Table 7 of Annex 4 
also indicates that an EU Recovery prospectus allows to save average 40% costs compared to 
a  simplified  prospectus  for  secondary  issuances.  In  addition  to  these  costs  estimates,  few 
stakeholders provided ambitious estimations of percentage cost savings for the drawing up of 
an EU Recovery prospectus  as opposed to  a standard prospectus  or a simplified prospectus 
for secondary issuances for equity securities (non-equity securities are not considered as the 
EU Recovery prospectus can only be used for shares). As shown in Figure 20, 3 stakeholders 
consider  that  an  EU  Recovery  prospectus  might  allow  to  save  costs  from  40%  to  50% 
compared to a simplified prospectus for secondary issuances (in line with estimations set out 
in Table 7 of Annex 4), and 3 other stakeholders consider that savings can go beyond 50%.  

183 

 
 
 
 
 
 
Figure 20. Savings achieved with an EU Recovery prospectus. 

Source: Targeted consultation on the Listing Act. 

Finally,  the  simplified  prospectus  for  secondary  issuances  is  subject  to  the  10  day  NCA’s 
notification regarding approval like a standard prospectus and includes a summary  with the 
same format and size of a standard prospectus (7 pages, subject to few derogations). On the 
contrary,  the  EU  Recovery  prospectus  is  subject  to  a  reduced  notification  time  of  7  days 
regarding approval and includes a short-form summary of two pages only. 

C)  Coherence 

The  basis  for  justifying  the  reduced  disclosures  under  the  simplified  disclosure  regime  for 
secondary issuances and the EU Recovery prospectus regime is that issuers whose securities 
are  admitted  to  trading  on  a  regulated  market  or  on  an  SME  growth  market  are  subject  to 
transparency  and  reporting  obligations  that  stem  from  other  pieces  of  EU  legislations.  In 
particular,  the  Prospectus  Regulation  refers  to  the  ongoing  and  periodic  disclosures 
requirements under MAR and Transparency Directive or, in the case of SME growth markets, 
Commission Delegated Regulation (EU) 2017/565426. 

The  same  considerations  for  the  incorporation  by  reference  and  coherence  of  disclosures 
compared to other legislations made for the standard prospectus also apply to the simplified 
prospectus for secondary issuances and the EU Recovery prospectus. 

D)  Relevance in terms of value added for the EU 

The  EU  Recovery  prospectus  was  one  of  the  most  tangible  prospectus  measures  that  was 
introduced  by  the  CMRP  to  support  the  real  economy  by  facilitating  the  recapitalisation  of 
highly  indebted  companies  in  the  aftermath  of  the  COVID-19  crisis.  Furthermore,  the 
maximum page limit of an EU Recovery prospectus makes the document more standardized 

426 Article 78. 

184 

 
 
 
 
 
                                                           
and easier to be analysed by investors, given the short size of 30 pages (albeit the information 
incorporated by reference is not counted for the size-limit). As shown in Table 3 of section 
4.1  of  this  Annex,  the  EU  Recovery  prospectus  has  a  median  and  an  average  length  of  32 
pages, and percentiles 10 and percentile 90 are respectively 29 and 35 pages (i.e. no major 
outliers). As information incorporated by reference is not considered for the purposes of the 
page-size limit allows issuer to take advantage of incorporation by reference. 

4.5. The Universal Registration Document (URD) 

Issuers whose securities  are  admitted to  trading  on a regulated market  or an MTF have the 
possibility  to  draw  up  a  universal  registration  document427  (URD),  to  be  approved  by  the 
NCA for two consecutive years and filed every year after (i.e. kept on ‘the shelf’). The URD 
allows the issuer to keep the information up-to-date and to draw up a prospectus when market 
conditions become favourable by adding a securities note and a summary and submitting the 
prospectus to the NCA for approval. The URD allows issuers that comply with its conditions 
to  obtain  the  status  of  frequent  issuers  and  benefit  of  a  ‘fast-track’  approval  time  (5  days 
instead of 10 days).  

A)  Effectiveness 

As shown in Figure 21, so far the uptake of the URD has been very limited and concentrated 
mainly  in  one  jurisdiction  (France428).  Even  if  we  exclude  the  year  2019,  as  the  URD  was 
introduced by the Prospectus Regulation that entered in application only in July of that year, 
the  number  of  URDs  approved  was  relatively  marginal.  However,  the  data  from  ESMA  do 
not include the number of URDs that are filed every year. According to ESMA’s reply to the 
targeted consultation429, the number of URDs filed in France was signalled to be 323, which 
suggests the number of new approvals is quite high relative to the number of URDs which are 
eligible for filing only.  

Figure 21 – URDs approved in the EEA (exc. UK) from 2019 to 2021 

427 Article 9 of Regulation (EU) 2017/1129. 
428  Before  the  introduction  of  the  URD,  listed  companies  in  France  used  to  use  a  similar  national  document  called  the  “document  de 
reference”. See: Du document de référence au document d'enregistrement universel (ou URD) : l'AMF attire l'attention des sociétés cotées 
pour cette prochaine échéance réglementaire | AMF (amf-france.org). 
429 See: https://www.esma.europa.eu/sites/default/files/library/esma32-384-5357_annex_-
_response_to_ec_consultation_on_the_listing_act.pdf. 

185 

 
 
 
 
                                                           
Source: ESMA’s data for 2021430 and ESMA’s EEA prospectus reports for 2019, 2020. 

B)  Efficiency 

Despite  the  efficiency  stemming  from  the  frequent  issuer’s  status  and  the  fact  that  a 
prospectus  drawn  up  by  a  frequent  issuer  and  incorporating  a  URD  is  subject  to  the  5  day 
NCA’s  notification  regarding  approval  (instead  of  10  days  for  a  standard  prospectus),  the 
URD is only marginally used across the EU, with the exception of France. On possible issues 
to explain why the URD has had so far a very soft take up, few stakeholders that responded to 
the dedicated question in the targeted consultation highlighted that the content of the URD is 
too  burdensome  (7  stakeholders),  the  time  period  necessary  to  benefit  from  the  status  of 
frequent issuer is too lengthy (7 stakeholders); the URD supervisory approval process is too 
lengthy (7 stakeholders); the costs of regularly updating, supplementing and filing the URD 
are  not  outweighed  by  its  benefits  (7  stakeholders);  the  URD  is  not  suitable  for  non-equity 
securities as it builds on the more comprehensive registration document for equity securities 
(6  stakeholders);  the  URD  language  requirements  are  too  burdensome  (3  stakeholders).  In 
addition,  few  stakeholders  highlighted  that  there  should  be  more  synergies  between  the 
Prospectus  Regulation  and  the  TD,  to  more  effectively  use  the  URD  to  disclose  the  annual 
and half-yearly financial report. 

Furthermore,  the  majority  of  respondents  (16  stakeholders431  accounting  for  51.6%)  to  the 
dedicated  question  consider  that  the  URD  should  be  based  on  the  level  of  disclosures  for 
secondary issuances instead of primary issuances (as this document can only be used by listed 
companies),  while  there  is  an  equal  split  from  stakeholders  that  would  like  to  require  the 
approval  of  the  URD  for  one  year  only  and  those  that  would  like  to  keep  the  current  two 
years  in  order  to  obtain  the  status  of  frequent  issuer.  Finally,  there  is  full  support  to  allow 

430 Methodological note: URDs received in 2021. URDs IDs are only counted once even if they are used in multiple prospectuses. 
431  Including  7  business  associations  (of  issuers,  investors,  banks),  5  companies/business  organisations  (including  3  operators  of  trading 
venues, 1 law firms, 1 issuer), 2 NCAs and 1 NGO. 

186 

 
 
 
 
 
                                                           
drawing  up  the  URD  in  English,  which  is  in  line  with  the  feedback  received  for  the 
prospectus in general.  

C)  Coherence 

Issuers that comply with the procedures for the filing, dissemination and storage of regulated 
information  and  with  the  deadlines  set  out  in  the  Transparency  Directive  are  allowed  to 
publish the annual and half-yearly financial reports required under that directive as parts of 
the  URD,  provided  that  the  language  of  the  URD  and  the  home  Member  States  for  its 
approval are the same as for the purposes of the Transparency Directive requirements432. 

D)  Relevance in terms of value added for the EU 

The URD is a relevant tool to foster frequent issuances of securities, maximize efficiency and 
therefore  provide  benefits  for  issuers  that  are  listed  on  an  EU  public  market.  However,  in 
order  to  achieve  this  objective,  and  taking  into  account  the  feedback  received  from 
stakeholders, the existing framework might need to be improved. 

4.6. Exemptions from the prospectus for small offer of securities to the public. 

The  Prospectus  Regulation  provides  two  exemptions  from  the  obligation  to  publish  a 
prospectus in case of small offers of securities to the public. The new prospectus framework 
has increased the “lower threshold”433 below which the Prospectus Regulation does not apply 
to  EUR  1  million  (previously  EUR  100  000),  and  the  “upper  threshold”434  up  to  which 
Member  States  may  decide  to  exempt  public  offers  form  the  prospectus  to  EUR  8  million 
(previously EUR 5 million). 

A)  Effectiveness 

The upper threshold grants Member States discretion to exempt small offers of securities to 
the  public  between  EUR  1  million  and  8  million,  provided  that  those  offers  do  not  require 
notification  (passporting)  and  are  not  coupled  with  an  admission  to  trading  on  a  regulated 
market (which would trigger the prospectus obligation even in presence of an exemption for 
the public offer). ESMA highlighted in its response to the targeted consultation that both the 
current  drafting  of  Article  1(3)  and  Article  3(2)  of  the  Prospectus  Regulation  is  creating 
issues in terms of legal clarity and proposed a clarification.  
At  the  time  of  writing  this  impact  assessment,  according  to  ESMA’s  published  data435,  the 
EEA  landscape  in  terms  of  the  upper  thresholds  set  out  by  Member  States  looks  rather 
fragmented  as  shown  in  Figure  22  (note:  national  rules  may  apply  and  few  Member  States 
may allow to use a different threshold depending on certain conditions). However, it should 
be noted that there is a trend towards the highest thresholds: Member States that set out the 

432 See recital 45 and Articles 9(12) and 9(13) of the Prospectus Regulation. 
433 Article 1(3) of the Prospectus Regulation. 
434 Article 3(2) of the Prospectus Regulation. 
435 See: esma31-62-1193_prospectus_thresholds.pdf (europa.eu). 

187 

 
 
 
 
 
                                                           
maximum threshold of EUR 8 million account for 47%, which combined with Member States 
that chose the second highest threshold of EUR 5 million accounts for 74% of the total.  

188 

 
 
 
 
 
Figure 22. Thresholds under Article 3(2) of the Prospectus Regulation in the EEA  

Source: ESMA’s website 

In  response  to  the  question  about  whether  Member  States  should  be  allowed  to  exercise 
discretion over the threshold set out in Article 3(2) of the Prospectus Regulation with a view 
to  tailoring  it  to  national  specificities  of  their  markets,  the  majority  of  stakeholders  (27 
stakeholders436  accounting  for  56%)  responded  negatively.  Within  that  group,  some 
stakeholders  also  expressed  their  concerns  about  the  complexity  of  adapting  to  different 
national thresholds and highlighted a preference for a harmonised EU threshold.  

B)  Efficiency 

The  targeted  consultation  also  included  a  question  on  whether  stakeholders  would  consider 
that the lower and upper thresholds should be adjusted to allow a larger number of offers to 
be carried out without a prospectus. Seventeen stakeholders provided some specific feedback 
as shown in Table 7. 

436  Including  12  business  associations  (of  issuers,  trading  venues,  banks,  law  firms,  institutional  investors),  11  companies/business 
organisations (including 7 operators of trading venues, 1 law firm, 1 investment bank), 3 NCAs, and 1 NGO. 

189 

 
 
 
 
 
 
                                                           
Table 7 - Stakeholders’ feedback on lower and upper exemption thresholds for public offers. 

Source: Feedback from targeted consultation. 

The  two  stakeholders  flagged  in  Table  7  remarked  that  (*)  the  upper  threshold  of  EUR  8 
million should only be kept for private companies making offers, while the prospectus should 
be lifted for companies with securities listed on an MTF or admitted to trading on a regulated 
market; and (**) the upper exemption  threshold should be consistent with  the threshold for 
the admission to trading on a regulated market of securities fungible with securities already 
admitted to trading on the same regulated market, with a 20% cap.  

Taking into account the overall feedback provided, in monetary terms, it emerges that: 

  The average lower threshold proposed (in accordance with Article 1(3) of the Prospectus 

Regulation) would be EUR 3 400 000; 

  The average upper threshold proposed (in accordance with Article 3(2) of the Prospectus 

Regulation) would be EUR 12 062 500; 

  There should be no flexibility for Member States to set out a national threshold. 

If one or both thresholds were to be adjusted upwards, or if only the upper threshold would be 
retained  and  national  discretion  would  be  removed,  more  offers  of  securities  to  the  public 
would  be  exempted  from  the  costs  and  burden  of  drawing  up  a  prospectus,  which  can  be 
disproportionate for issuers for such low considerations. 

C)  Coherence 

190 

 
 
 
The  possibility  to  exempt  small  offers  of  securities  to  the  public  from  the  prospectus 
obligation is coherent with other EU legislations, such as the Crowdfunding Regulation. 

D)  Relevance in terms of value added for the EU 

Granting  national  discretion  on  the  upper  threshold  does  not  fit  with  the  objective  of 
supporting the single market and creates difficulties for issuers that seek to make cross-border 
offers. According to the feedback received from the majority of stakeholders, there is ground 
to  consider  harmonizing  the  upper  threshold,  which  would  also  entail  removing  the  lower 
threshold. Furthermore, allowing companies to  access  capital markets without a prospectus, 
for small offers of securities to the public, contributes to the objectives of the CMU, which is 
the  reason  why  the  Prospectus  Regulation  increased  both  lower  and  upper  thresholds 
compared to the Prospectus Directive.  

4.7. Scrutiny and approval of the prospectus  

One  of  the  key  changes  stemming  from  the  Prospectus  Regulation  is  the  promotion  of 
convergence  and  enhanced  harmonization  of  rules  about  scrutiny  and  approval  of  the 
prospectus  by  NCAs.  In  particular,  the  criteria  for  the  scrutiny  of  the  completeness, 
comprehensibility and consistency of the prospectus were put on equal  ground and a list of 
those  criteria  was  laid  down  in  Commission  Delegated  Regulation  (EU)  2019/980437. 
However, as it was not considered feasible to draw up an exhaustive list of criteria that takes 
into  account  the  developments  and  innovations  in  financial  markets,  a  legal  hook  was 
included  in  Article  40438  of  that  Delegated  Regulation  to  allow  NCAs  to  apply  additional 
criteria  for  the  scrutiny  of  the  completeness,  comprehensibility  and  consistency  where 
necessary  to  protect  investors.  Furthermore,  recital  24439  of  that  Delegated  Regulation 
clarifies  that  if  new  securities  stemming  from  the  evolution  in  financial  markets  are  not 
covered by the existing prospectus annexes, the NCA should decide in consultation with the 
issuer which information should be included in the prospectus.  

As  regards  the  approval  of  the  prospectus,  the  Prospectus  Regulation440  sets  out  rules  and 
timelines  for  NCAs  to  notify  the  issuer,  the  offeror  or  the  person  asking  for  admission  to 
trading  on  a  regulated  market  of  its  decision  regarding  the  approval  of  the  prospectus, 
including  for  the  case  where  the  latter  does  not  meet  the  standards  of  completeness, 
consistency  and  comprehensibility  and  changes  or  supplementary  information  is  needed,  as 
well  as  on  the  circumstances  that  enable  NCAs  to  refuse  the  approval  and  terminate  the 
review process. 

The  Prospectus  Regulation  includes  a  requirement  for  ESMA  to  organise  at  least  one  peer 
review of the scrutiny and approval procedures of NCAs (including notifications of approval 
between  competent  authorities),  which  shall  also  assess  the  impact  of  different  approaches 

437 Articles 35 to 45 of Commission Delegated Regulation (EU) 2019/980 specifically  relate to the process of scrutinising and approving 
prospectuses and URDs. In particular, Articles 36 to 38 lay down scrutiny criteria for the completeness, consistency, and comprehensibility 
of the prospectus. 
438 “Where necessary for investor protection, the competent authority may apply criteria in addition to those laid down in Articles 36, 37 and 
38 for the purposes of scrutinising the completeness, comprehensibility and consistency of the information in the draft prospectus”. 
439  “Due  to  the  rapid  evolution  of  securities  markets,  there  is  the  possibility  that  certain  types  of  securities  that  are  not  covered  by  the 
Annexes  to  this  Regulation  will  be  offered  to  the public  or  admitted  to trading.  In  such  a case, to  enable  investors  to  make  an informed 
investment decision, competent authorities should decide in consultation with the issuer, offeror or person asking for admission to trading on 
a regulated market which information should be included in the prospectus”. 
440 Article 20 of the Prospectus Regulation. 

191 

 
 
                                                           
with  regards  to  scrutiny  and  approval  by  competent  authorities  on  issuers’  ability  to  raise 
capital  in  the  EU441.  The  peer  review  mandate  was  approved  by  ESMA’s  Board  of 
Supervisors in July 2021, and the peer review report was published on 21 July 2022. The peer 
review  covered  five  assessment  areas  concerning  the  prospectus  scrutiny  and  approval 
processes:  

1.  the scrutiny of prospectuses having regard to their completeness, comprehensibility and 

consistency;442  

2.  the approval process by NCAs of prospectuses, including the notification of approvals by 

NCAs;443  

3.  NCAs’ application of Guidelines 1-5, 7 and 11 on risk factors;  
4.  the adequacy of NCAs’ resources to carry out the scrutiny and approval of prospectuses; 
5.  the  independence  and  the  liability  regime  of  the  NCA  in  relation  to  the  supervision  of 

prospectuses. 

Amongst the several areas under assessment, the peer review report identified some specific 
element of NCAs’ scrutiny and approval of prospectuses that can particularly impact issuers’ 
ability to raise capital: (i) communication with issuers; (ii) flexibility of approval procedures; 
(iii) expertise of NCAs’ staffing; and (iv) NCAs’ attitude towards liability.  

Furthermore, the peer review report highlighted some areas where material differences exists 
across the EU, such as the deadlines imposed by NCAs to issuers to  respond to comments, 
NCAs’ procedures for the approval of prospectuses and additional criteria that NCAs apply to 
prospectuses under their scrutiny.  

Finally, additional findings related to the issuers’ ability to raise capital in the EU concern: (i) 
the  number  of  draft  prospectuses  submitted  to  NCAs  before  approval;  (ii)  the  length  of 
prospectuses (significant variations across Member States); and (iii) the length and number of 
risk factors in prospectuses (significant variations observed). 

A)  Effectiveness 

The targeted consultation included a question on whether there is alignment in the way NCAs 
assess the completeness, comprehensibility and consistency of the draft prospectuses that are 
submitted to them for approval. The majority of respondents (23 stakeholders444, accounting 
for  53.5%)  responded  negatively,  while  only  16%  answered  positively  (7  stakeholders445). 
Some  stakeholders  provided  comments  about  what  they  consider  the  key  issues  with  the 
current  scrutiny  and  approval  process.  Some  stakeholders  pointed  out  to  divergent  scrutiny 
and  approval  practices  from  NCAs  and  highlighted  in  particular  the  frequent  requests  to 
produce  additional  information  going  even  beyond  the  Prospectus  Regulation  requirements 
(even in presence of clear ESMA’s guidelines) and the tendency of some NCAs to challenge 
the issuer on most items of the  relevant  prospectus annexes.  Two stakeholders advocated  a 
more  harmonized  approach  about  additional  documentation  that  NCAs  may  request,  which 

441 Article 20(13) of the Prospectus Regulation). 
442 Pursuant to Articles 35 to 45 of Commission Delegated Regulation (EU) 2019/980. 
443 Pursuant to Article 25 of the Prospectus Regulation. 
444  Including  10  business  associations  (of  banks,  issuers,  and  law  firms),  7  companies  (including  2  operators  of  trading  venues,  a  trade 
association and a law firm), 3 NCAs and 2 NGOs 
445 3 NCAs, 1 operator of a trading venue, 1 association of trading venues, 2 issuers’ associations). 

192 

 
 
                                                           
should  not  be  over  and  above  what  is  required  under  the  Prospectus  Regulation,  and  a 
stronger oversight from ESMA, including more frequent use of peer reviews. 

The peer review on prospectus assessed several areas that may impact the effectiveness of the 
scrutiny and approval of prospectuses. Some of the key findings are summarised below: 

  the ‘4-eyes principle’446 is generally applied in a satisfactory manner by NCAs; 

  most NCAs published guidance for issuers and their advisors regarding the process for the 
scrutiny and approval of the prospectus and have generally in place practices that ensure 
sufficient consistency of review of prospectuses and comments raised; 

  for the scrutiny of prospectuses, the majority of NCAs tend to involve other departments, 
product  governance  specialists  and  also  other  supervisory  authorities,  and  have 
mechanisms in place for the escalation of issues that may emerge during the process; 

  in general,  NCAs have in place rules or code of conducts to prevent conflict of interests 

concerning prospectus readers;  

  in  most  Member  States,  NCAs’  civil  liability  is  considered  to  reasonably  ensure  that 
NCAs’ staff may carry out the scrutiny and approval of a prospectus in an impartial and 
objective manner; 

  NCAs’ staff involved in the scrutiny and approval is overall proportionate to the number 

of prospectuses approved. However, there are divergent situations across the EU447; 

  in most NCAs the team dealing with scrutiny and approval is subject to internal audit. 

B)  Efficiency 

To the question on whether the current approval times set out in the Prospectus Regulation448 
are adequate, stakeholders responses were almost equally split between a positive answer (20 
stakeholders449)  and  a  negative  answer  (19  stakeholders450).  However,  some  stakeholder 
remarked that the review process by NCAs might result in a significant cost of producing a 
prospectus, given the additional information that some NCAs regularly ask issuers to provide 
and  the  multiple  rounds  of  questions  which  delays  the  whole  approval  process,  leading  to 
missed opportunities for issuers in terms of offering securities at the right time.  

ESMA’s  peer  review  process  provides  an  insight  into  whether  different  approaches  to 
scrutiny  and  approval  may  impact  issuers’  ability  to  raise  capital  in  the  EU,  including  the 
efficiency  of  NCAs’  procedures,  the  experience  of  NCA  staff,  communication  with  issuers 

446 Peer Review’s mandate: “Competent Authority should have ‘four-eye principle” in place to be used as appropriate and depending on, 
for example the nature of the structure, the type of securities, the type of issuer. If applicable, the second person should review at least what 
is  considered  by  the  Competent  Authority  to  be  the  more  sensitive  parts of  the  prospectus  document.  Depending  on the  circumstances  it 
might  be  appropriate  that  the  second  person  reviewing  the  prospectus  has  more  experience  in  scrutinising  prospectus  than  the  first 
reviewer”. 
447 The most extreme cases are relating to 2 NCAs having a ratio of about 40 prospectuses per reader and 2 other NCAs having a ratio of 2 
prospectuses per reader. 
448 Article 20 of the Prospectus Regulation. 
449  Including  2  NCAs,  9  business  associations  (of  banks,  issuers,  investors,  and  trading  venues),  6  companies/business  organisations 
(including 2 investment banks and 4 operators of trading venues). 
450 6 NCAs, 8 business associations (of issuers, investors, banks, law firms), 4 companies/business organisations, 1 NGO. 

193 

 
 
 
                                                           
and their advisors and the amount of time that NCAs take to provide issuers with comments 
and approve prospectuses. Some of the key findings are summarized below: 

  NCAs  tend  to  engage  with  issuers  and  their  advisors  before  a  formal  prospectus 
application is submitted and communicate about desired timelines to help them plan their 
offering of securities (29 NCAs allow for pre-consultation with issuers). 

  NCAs approving fewer prospectuses typically have longer approval procedures451, often 
due to the requirement to seek their Board’s approval of the prospectus. Other NCAs allow 
prospectus readers or a member of management (or both in a joint effort) to do so; 

  the staff of NCAs  approving a  greater number of prospectuses tend to  develop  expertise 
(e.g.  about  types  of  securities)  that  appears  to  influence  issuers’  choice  of  the  home 
Member State for prospectus approval (where possible); 

  NCAs  have  different  approaches  about  requiring  issuers  to  make  changes  to  the 
prospectus,  for  example  to  delete  risk  factors  or  amend  sections  not  considered 
comprehensible (as issuers are ultimately liable for the information disclosed). 

  the  level  of  liability  of  NCAs  and  their  staff  can  lead  to  a  defensive  approach  in  the 

prospectus supervision; 

  there  is  a  wide  divergence  regarding  both  issuers’  turnaround  times  (i.e.  deadlines  for 

issuers to respond to comments); 

  there is a great deal of variation between NCAs in relation to the additional documentation 

necessary for the approval of prospectuses452; 

  there is a wide range of practices concerning withdrawal and refusals. 

Furthermore, the peer review report considered additional areas that might impact the issuers’ 
ability to raise capital: the number of draft prospectuses submitted to NCAs before approval; 
the length of prospectuses and the length and number of risk factors in prospectuses. Some of 
the key findings are summarized below: 

  The  peer  review  report  provided  for  the  average  number  of  draft  prospectuses 
submitted before approval to NCAs, distinguishing amongst IPO prospectuses, types of 
securities and some alleviated prospectus types. Table 8 shows that the number of rounds 
does  not  decrease  for  alleviated  prospectus  types.  The  peer  review  also  highlighted  that 
issuers have the tendency to include in those drafts information that is not required by the 
Prospectus Regulation and that may increase the number of rounds. 

Table 8 - Average number of draft prospectuses submitted before approval. 

IPO 

Other equity 
securities 

Non-equity 
securities 

EU Growth 
prospectus 

Simplified 
prospectus for 
secondary 
issuances 

451 In some cases it takes 3 days or more after the actual scrutiny of the prospectus has been completed. 
452  Such  as  a  signed  copy  of  the  prospectus,  signed  responsibility  statements,  documentation  to  support  statements  in  prospectuses,  the 
minutes of board meetings authorising the offering/programme and copies of the ISIN documentation. 

194 

 
 
 
                                                           
Average number of 
rounds 

5.3 

4.8 

4.13 

4.28 

5.15 

Source: ESMA’s peer review report 

  The peer review report indicates that length of prospectuses varies significantly across 
the  EU,  also  depending  on  the  type  of  document  (the  longest  documents  being  base 
prospectuses and URDs). As previously shown in Figure 8 of section 4.1, prospectuses 
approved  in  Sweden  are  in  the  lower  range,  while  prospectuses  approved  in  Germany, 
Luxembourg  and  Poland  feature  in  the  upper  range.  Differences  in  civil  liability  (that 
could  push  issuers  and  their  advisors  to  include  more  information  in  the  prospectus  to 
protect themselves against lawsuits) are mentioned as possible reasons.  

  Risk factors sections can be particularly lengthy, especially in securities notes and base 
prospectuses, as shown in Figure 23, while the shortest risk factor sections are included 
in  alleviated  prospectus  types  (EU  Growth  prospectus  and  EU  Recovery  prospectus). 
However, in terms of proportion compared to the size of the document in which they are 
included,  risk  factors  represent  a  significant  percentage  of  the  size  of  registration 
documents  of  standard  prospectuses  (up  to  40%)  and  simplified  prospectuses  for 
secondary issuances (up to 30%), as well as in EU Recovery prospectuses (up to 30%). 
On  the  opposite  side,  risk  factors  sections  represent  a  small  percentage  of  the  size  of 
securities  notes  and  EU  Growth  prospectuses,  as  shown  in  Figure  24.  The  peer  review 
report also indicates that 5 Member States have the longest risk factors sections (at least 
40 risk factors in more than half of the documents filed in those jurisdictions and 60 or 
more risk factors in more than a quarter of the documents). 

Figure 23. Length of risk factors sections in terms of number of pages453 

453 Each box shows the range of the length of the risk factor section for documents of a specific type. The horizontal line in each box is the 
median for that respective document type. Box edges are the 25th and 75th percentiles of the length within each document type, while the 
whiskers represent the 5th and 95th percentiles. 

195 

 
 
                                                           
Source: ESMA’s peer review report 

Figure 24. Size of risk factors’ section as a percentage of the size of the document454 

454 Each box shows the range of the length of the risk factor section as a percentage of the total document length for documents of a specific 
type.  The  horizontal  line  in  each  box  is  the  median  for  that  respective  document  type.  Box  edges  are  the  25 th and 75th percentiles  of  the 
percentage length within each document type, while the whiskers represent the 5th and 95th percentiles. 

196 

 
 
 
 
                                                           
Source: ESMA’s peer review report. 

The peer review report also pointed out to areas where  material differences amongst NCAs 
were  observed,  such  as  deadlines  imposed  by  NCAs  for  issuers  to  respond  to  comments, 
NCAs’  procedures  for  the  approval  of  prospectuses  and  the  additional  criteria  that  NCAs 
apply to prospectuses under their scrutiny. Some of the key findings are summarized below: 

  NCAs have a different understanding of the additional criteria, which can be used where 
necessary for investor protection, for the scrutiny of the completeness, comprehensibility 
and consistency of the prospectus455. This results in a divergent application across the EU, 
as shown in Figure 25, with 20 NCAs that haven’t applied additional scrutiny criteria as 
opposed  to  10  NCAs  that  have  done  so  (no  frequency  specified).  Furthermore,  8  NCAs 
have  in  place  internal  guidance  for  the  application  of  additional  criteria,  and  5  NCAs 

455 Article 40 of Commission Delegated Regulation (EU) 2019/980. 

197 

 
 
 
                                                           
mentioned  to  have  formalised  the  additional  criteria456.  Finally,  1  NCA  has  published  a 
communication  which,  inter  alia,  provides  guidance  on  the  application  of  additional 
criteria for the scrutiny. The publication provides a non-exhaustive list of topics that may 
be  subject  to  additional  checks.  The  peer  review  report  also  highlighted  the  lack  of  a 
common  understanding  by  NCAs  of  the  concept  of  “criteria”  and  whether  the  latter 
encompasses additional checks on an ad hoc basis or is related to internal procedures for 
the verification of information in the prospectus. 

Figure 25. Overview of application of additional scrutiny criteria in the EEA. 

Source: ESMA peer review report. 

  Beyond the deadlines set out in the Prospectus Regulation457, half of the NCAs do not have 
pre-specified  timeframes  and  strive  to  return  comments  within  a  shorter  deadline 
sometimes or regularly. The remaining NCAs either have shorter timeframes arising from 
national rules or as self-imposed or agree an indicative timeline with the issuer; 

  There is a wide divergence regarding issuers’ turnaround times (i.e. deadlines imposed 
by NCAs for issuers to respond to comments). 11 NCAs do not impose a specific deadline 
for issuers to respond, while a small majority of NCAs have timeframes set out in national 
rules  (ranging  from  10  to  30  working  days).  Where  the  deadline  has  passed  without  an 
issuer’s  response,  some  NCAs  suspend  or  terminate  the  review  process.  As  regards 
compliance  with  the  deadlines,  15  NCAs  indicated  that  it  is  directly  monitored  by  the 
prospectus reader, however other approaches are also in place (e.g. IT system, interactive 
spreadsheets). 

  Overall  21  NCAs  reported  a  number  of  withdrawal  of  applications  during  the  review 
period  (ranging  from  1  to  56  withdrawals),  mainly  concerning  IPOs  and  EU  Growth 

456  For  example  completeness  and  consistency  checks  with  information available  within  the  NCA  or  information  on the issuer’s  website, 
additional measures included in the Supervisory Briefing, issuers’ announcements, suitability of the product for the target group. 
457 Article 20 of the Prospectus Regulation. 

198 

 
 
 
                                                           
prospectuses,  while  8  NCAs  did  not  experience  any  withdrawal  within  that  timeframe. 
Several NCAs indicated possible reasons for the withdrawal458, albeit issuers generally do 
not  communicate  in  that  regard.  Furthermore,  only  6  NCAs  noticed  about  refusals 
occurred during the review period (18 refusals in total), mainly due to failure to adequately 
address the received comments within the deadline or inability to comply with regulatory 
requirements,  while  24  NCAs  did  not  report  any  refusals.  All  NCAs  have  procedural 
requirements  in  place  for  refusals  mainly  aligned  with  national  administrative  laws. 
However,  timeframes  for  refusals,  set  out  in  national  law  or  NCAs’  internal  procedures 
may vary significantly across NCAs (ranging from 5 working days to 3 months). 

Finally, the peer review report makes several proposal for ESMA’s possible intervention and 
invites the Commission to take action on five areas: 

1)  Review the notion of ‘criteria’ under Article 40 of Commission Delegated Regulation 

(EU) 2019/980459. 

2)  Consider  setting  out  a  common  approach  regarding  issuers’  turnaround  times  and 

NCAs’ deadlines placed upon issuers during the approval process. 

3)  Consider aligning the timelines for the refusal of prospectuses at an EU level to ensure 

a level playing field across NCAs. 

4)  Undertake  a  behavioural  study  that  would  look  at  the  use  of  prospectuses  and  their 
comprehensibility as regards retail investors with a mind to using the outcome of this 
study  to  improve  the  prospectus  regulatory  framework  and  ensure  consistency  of 
comprehensibility checks by NCAs. 

5)  Carry  out  a  behavioural  study  to  look  at  whether  and  how  retail  investors  use  the 
prospectus summary in order to make concrete improvements to the summary regime. 

C)  Coherence 

Harmonisation  of  criteria  for  scrutiny  and  procedures  for  the  approval  of  the  prospectus  is 
coherent  with  other  EU  legislations  that  contribute  to  the  objectives  of the  Capital  Markets 
Union action plan. 

D)  Relevance in terms of value added for the EU 

The harmonisation and convergence of the prospectus supervisory activity by NCAs provides 
certainty  and  to  issuers  and  confidence  to  investors,  which  contributes  to  the  overarching 
objectives  of  the  Prospectus  Regulation  and  in  general  to  the  objectives  of  the  Capital 
Markets Union.  

4.8. Supplements to the prospectus 

The CMRP introduced some clarifications on supplements rules, in particular which investors 
shall  be  contacted  and  in  which  case  by  financial  intermediaries  when  a  supplement  is 
published. Furthermore, the time period to contact investors as well as the time period for the 
latter to exercise their withdrawal rights were extended.  

458 For example: issuers deciding not to proceed with the offer/issue due to market circumstances, inability to  fulfil Prospectus Regulation 
requirements or respond to NCAs’ comments, closing of market window, changes in circumstances of the issuer or funding needs. 
459 ESMA is also invited to provide technical assistance to the Commission as needed. 

199 

 
 
                                                           
A)  Effectiveness 

Table 9 shows 1915 supplements were approved by NCAs in 2021 and published by issuers.  

Table 9 - Supplements approved in the EEA in 2021. 

Number of supplements 
approved in 2021 

Number of issuers publishing 
supplements 

Number of supplements 
approved per issuer in average 

1 915 

681 

3 

Source: ESMA’s data for 2021. 

Three quarters of supplements were approved in four Member States (Luxembourg, Ireland, 
Germany and France), as shown in Figure 26. 

Figure 26. Percentage of supplements approved by Member State in 2021. 

Source: ESMA’s data for 2021460. 

Given such high numbers, in some jurisdictions (e.g. Germany) financial intermediaries were 
under  heavy  pressure  given  that  the  original  version  of  Article  23  required  them  to  inform 
‘investors’  in  general  about  the  publication  of  a  summary,  which  led  to  confusion  about 
which investors had to be contacted. The new provisions introduced by the CMRP461 specify 
that  financial  intermediaries  shall  only  inform  investors  that  purchased  or  subscribed 

460 Methodological note: distinct number of issuers (LEI) reported in supplements related to prospectuses approved in 2021. 
461 Articles 23(2a) and 23(3a) of the Prospectus Regulation. 

200 

 
 
                                                           
securities  through  a  financial  intermediary  between  the  time  when  the  prospectus  for  those 
securities  is  approved  and  the  closing  of  the  initial  offer  period  and  that  are  enabled  to 
exercise withdrawal rights. Furthermore, the new provisions allow financial intermediaries to 
contact  those  investors  by  the  end  of  the  first  working  day  following  that  on  which  the 
supplement  is  published  (instead  of  on  the  day  when  the  supplement  is  published)  and 
investors to exercise withdrawal rights within three working days after the publication of the 
supplement (instead of two working days). 

The  majority  of  stakeholders  that  responded  to  the  dedicated  question  in  the  targeted 
consultation (21 stakeholders462 accounting for 52.5%) considered that the temporary regime 
for  supplements  introduced  by  the  CMRP  has  provided  additional  clarity  and  flexibility  to 
financial  intermediaries  and  investors,  without  endangering  the  protection  of  the  latter,  and 
should therefore be made permanent. 

B)  Efficiency 

Some  stakeholders  (including  ESMA)  made  proposals  on  how  to  improve  further  the 
provisions  on  supplements,  such  as  specifying  further  that  only  clients  of  financial 
intermediaries should be contacted by the latter and via electronic means. 

C)  Coherence 

The new rules on supplements are coherent with the objectives of the CMRP, as they aimed 
to  provide  breathing  space  to  financial  intermediaries  that  were  key  pillars  to  support  the 
recovery of companies from the negative effects of the Covid-19 pandemic.  

D)  Relevance in terms of value added for the EU 

The  new  rules  on  supplements  are  supporting  the  overall  objectives  of  the  Prospectus 
Regulation as they strike the right balance between market efficiency and investor protection. 

4.9. Equivalence regime 

The  Prospectus  Regulation  allows  third  country  issuers  to  offer  securities  to  the  public  or 
seek  admission  to  trading  on  a  regulated  market  made  under  a  prospectus  drawn  up  in 
accordance with either the Prospectus Regulation463, or the laws of a third country464.  

Figure 27 shows the number of prospectuses from third country issuers approved in the EEA 
in 2021 (378 in total) and the number of issuers who drew them up (262 in total).  

Figure  27.  Number  of  third  country  prospectuses  approved  in  the  EEA  in  2021  and  of  third  country 
issuers who produced those prospectuses. 

462 Including 10 business associations (of banks and issuers), 4 companies/business organisations (2 law firms, 1 operator of trading venues 
and 1 financial research provider), 6 NCAs and 1 academic. 
463 Article 28 of the Prospectus Regulation. 
464 Article 29 of the Prospectus Regulation. 

201 

 
 
                                                           
Source: ESMA’s data for 2021465. 
Most  prospectuses  stemmed  from  the  UK  (27%),  followed  by  Switzerland  (19%),  Jersey 
(10%) and US (9%). All those prospectuses have been drawn up in accordance with Article 
28  of  the  Prospectus  Regulation,  as  so  far  no  equivalence  decision  has  been  taken  under 
Article 29. 

Figure  28  shows  the  number  of  prospectuses  of  third  country  issuers  approved  by  EEA 
competent authorities. Overall, 3 Member States approved 88% of third country prospectuses, 
namely Ireland (46%), Luxembourg (32%) and Germany (10%). 

Figure 28. Third country prospectuses approved by EEA competent authorities in 2021. 

465  Methodological  note:  computation  of  the  issuers  (LEIs)  belonging  to  approved  prospectuses  in  2021,  including  related  documents,  as 
well as the issuer legal residence country. 

202 

 
 
 
                                                           
Source: ESMA’s data for 2021. 

A)  Effectiveness 

The targeted consultation included a question on whether the equivalence regime set  out  in 
Article  29  of  the  Prospectus  Regulation  should  be  amended  to  make  it  possible  for  the 
Commission  to  take  equivalence  decisions  in  order  to  allow  third  country  issuers  to  access 
EU  markets  more  easily  with  a  prospectus  drawn  up  in  accordance  with  the  law  of  a  third 
country.  While  almost  half  of  stakeholders  did  not  express  any  opinion,  the  number  of 
stakeholders who responded positively (12 stakeholders466 accounting for 37.5%) outnumbers 
stakeholders that responded negatively (5 stakeholders467 or 15.6%). 

The current equivalence framework has never been used, as general equivalence criteria have 
not  been  set  out  in  a  Delegated  Act.  In  ESMA’s  letter  to  the  Commission  relating  to  the 
technical advice on general equivalence criteria for prospectuses drawn up under the laws of 
third  countries468,  ESMA  highlighted  serious  practical  challenges  that  would  stem  from  the 
current  Article  29  of  the  Prospectus  Regulation.  In  particular,  under  that  provision,  third 
country  prospectuses should  be drawn up  according to  equivalent requirements and  also  be 
scrutinized and approved under the disclosure rules of the Prospectus Regulation. In addition, 
ESMA  pointed  out  that  the  list  of  articles  of  the  Prospectus  Regulation  that  according  to 
Article 29(3) should form the basis of the general equivalence criteria (i.e. Articles 6, 7, 8 and 
13 of the Prospectus Regulation) is not sufficient to ensure an effective equivalence regime. 
That list does not encompass some important aspects of the prospectus regime, such as risk 
factors  disclosure,  and  does  not  clarify  key  elements,  such  as  the  rights  and  obligations 
connected to a third country prospectus in the EU. 

Furthermore,  one  stakeholder  noticed  that  a  double  approval  of  a  third  country  prospectus 
should  be  avoided  and  that  a  sound  equivalence  regime  should  include  the  supervisory 

466 Including 4 business associations (of issuers, investors, and trading venues), 3 companies/business organisations (1 operator of trading 
venues, 1 investment bank and 1 financial research provider) and 4 NCAs). 
467 Including 2 business associations (of trading venues and law firms), 2 operators of a trading venue and 1 NGO. 
468 See: esma31-59-1451_letter_to_ec_on_esmas_techical_advice_on_general_equivalence_criteria.pdf (europa.eu) 

203 

 
 
 
                                                           
framework,  rules  on  advertisements,  languages,  passporting,  supplements,  liability  and 
validity  of  the  prospectus.  Furthermore,  equivalent  rules  should  be  in  place  regarding  the 
prevention of market abuse and the periodic and ongoing reporting by issuers. 

B)  Efficiency 

While  the  Prospectus  Regulation  allows  third  country  issuers  to  access  EU  markets  by 
drawing  up  a  prospectus  under  the  Prospectus  Regulation  and  have  it  approved  by  an  EU 
NCA469,  a  functioning  equivalence  framework  could  drive  efficiency  especially  for  dual  or 
multiple listed issuers that could use the same document to access markets in more than one 
jurisdiction. However, the current equivalence framework requires a double approval by the 
third  country  authority  and  the  EU  NCA,  which  would  not  have  the  right  expertise  to 
scrutinize a prospectus drawn up under third country rules.  

Therefore, an efficient equivalence regime could allow a prospectus drawn up under the law 
of a third country jurisdiction for which the Commission has taken an equivalence decision, 
to be only filed with the EU NCA. 

C)  Coherence 

A workable equivalence regime would be coherent with other EU legislations, such as MiFID 
II/MiFIR, under which frameworks the Commission has already taken equivalence decisions. 

D)  Relevance in terms of value added for the EU 

An  efficient  and  effective  equivalence  regime  could  contribute  to  improving  market 
efficiency by facilitating third country issuers’ offer of securities or admission to trading on 
EU regulated markets without endangering the protection of investors.  

5.  Conclusions 

Based on the analysis performed in this Annex and taking into account the feedback received 
from  stakeholders’  groups,  from  respondents  to  the  targeted  consultation,  and  studies  and 
reports consulted, in  certain key areas a legislative intervention  would be merited to  ensure 
that the Prospectus Regulation meets its overarching objectives. The key areas that should be 
addressed  are:  (i)  the  prospectus  for  primary  issuances,  including  the  disclosure  regime  for 
SMEs;  (ii)  the  prospectus  for  secondary  issuances;  and  (iii)  the  scrutiny  and  approval  of 
prospectuses.  

Furthermore,  additional  areas  that  could,  for  example,  be  subject  to  review  are  the  URD 
regime,  which  could  be  made  more  efficient  and  effective,  the  prospectus  exemption  for 
small  offers  of  securities  to  the  public,  which  should  be  harmonized  at  EU  level,  the 
minimum period of 6 working days between the publication of the prospectus and the end of 
an offer of shares, which should be decreased to facilitate swift book-building processes, and 
prospectus rules on supplements (by making the CMRP rules permanent and exploring how 
to better frame them). 

469 Article 28 of the Prospectus Regulation. 

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ANNEX 7: ANALYSIS OF IPO-PHASE: THE LISTING DIRECTIVE 

1.  Introduction and problem description 

The Listing Directive, a minimum harmonisation directive adopted in 2001, is the legislation 
that  provides  the  basis  for  listing  on  European  markets.  It  lays  down  the  rules  on  the 
admission of securities to official listing of a stock exchange.470 The Listing Directive aims to 
coordinate the rules with  regard to  (i) admitting securities to  official  stock exchange listing 
and  (ii)  the  information  to  be  published  on  those  securities  in  order  to  provide  equivalent 
protection for investors at EU level. It also lays down the rules of regulatory and supervisory 
framework  for  European  primary  markets.  This  includes  the  designation  of  the  NCA  for 
listing.  

The  Prospectus  and  Transparency  Directives  have  replaced  most  of  the  provisions 
harmonising  the  conditions  for  the  provision  of  information  regarding  requests  for  the 
admission  of  securities  to  official  stock  exchange  listing  and  the  information  on  securities 
admitted  to  trading.  MiFID  introduced  the  notion  ‘admission  of  financial  instruments  to 
trading on a regulated market’.  

According  to  ESMA’s  Securities  Markets  Standing  Committee  (SMSC)  analysis  on  the 
implementation of the Listing Directive, many Member States are not applying the concepts 
used in the Listing Directive in national law anymore. Only 7 NCAs noticed that the Listing 
Directive  is  still  in  force  or  partially  in  force  in  their  jurisdiction.  Member  States  that  still 
apply the concept of the Listing Directive under national law have a rather broad discretion to 
deviate  from  the  rules  set  out  in  the  Listing  Directive  to  take  into  account  specific  local 
market conditions.  

The  free  float  requirement  is  one  example  where  Member  States  are  exercising  their 
discretion. The free float describes the portion of a company’s issued share capital that is in 
the hands of public investors, as opposed to company officers, directors, or shareholders that 
hold controlling interest. The Listing Directive sets out a minimum 25% free float. According 
to  information  received  from  stakeholders,  the  percentages  in  the  EU-27  vary  from  5%  to 
45% (see also Table 1).  

Table 1 - Free float requirement in the EU471 

Regulated Market  Free float requirement 

for the regulated 
market 

Derogation from the 
minimum free float 
requirement for 
regulated markets is 
possible. 

Minimum free float 
requirement for the SME GM 

Athens SE 

Minimum free float 25% 
and at least 300 persons 
holding < 5% 

Yes 

Athens does not operate an SME 
GM472 

470 The concept of “official listing” is not defined anywhere.  
471  Data  comes  from  FESE,  collected  as  part  of  a  data  collection  exercise  2022  for  the  Listing  Act  initiative.  Empty  rows  mean  that  no 
specification has been made. 
472  ATHEX  does  not  operate  a  SME  GM,  only  an  MTF  (2  segments,  ENA  PLUS  with  minimum  free  float  requirement  of  15%  and  50 
shareholders and ENA STEP with no minimum free flat requirements). 

205 

 
 
                                                           
BME473 

Boerse Stuttgart 

Budapest SE 

Bulgarian SE 

DBG 

Euronext 

Ljubljana 

Luxembourg SE 

Nasdaq 

Vienna SE 

Warsaw SE 

Zagreb SE 

25% 

10% 

10% 

25% 

25% 

25% 

25% 

25% 

25% or 10% spread 
among at least 50 
shareholders 

Regular Market - Free 
float min. 15% 
Official Market - Free 
float min. 25 % of the 
shares shall be 
distributed to at least 30 
shareholders. 
Prime Market - Free 
float min. 35%, at least 
1000 shareholders 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

EUR 2 million 

10% 

No 

No 

20% or EUR 1 million 

EUR 2.5 million 

No 

- 

- 

- 

Yes474 

Yes 

10% 

The  foreseeable  market  capitalisation  is  another  provision  in  the  Listing  Directive  where 
Member States exercise their discretion. The foreseeable market  capitalisation of the shares 
for which admission to official listing is sought or, if this cannot be assessed, the company's 
capital and reserves, including profit or loss, from the last financial year, must be at least one 
million  euro  (Article  43(1)  of  the  Listing  Directive).  Table  2  provides  an  overview  of  the 
rules on foreseeable market capitalization in place in the different Member States. 

Table 2 - Foreseeable market capitalisation requirement in the EU475 

Regulated market 

Required minimum market 
capitalisation 

Is it possible to 
derogate from the 
minimum market 
capitalisation 
requirement for 
regulated markets? 

Minimum market 
capitalisation 
requirement for 
listing shares on SME 
GM 

473 Bolsa de Madrid 
474 No figure was provided. 
475  Data  comes  from  FESE,  collected  as  part  of  a  data  collection  exercise  2022  for  the  Listing  Act  initiative.  Empty  rows  mean  that  no 
specification has been made. 

206 

 
 
 
 
 
                                                           
Athens SE 

ATHEX does not have a minimum 
market capitalisation requirement. 
The relative listing requirement is 
the Shareholders' Equity that must 
be at least EUR 3 million. 

BME 

No minimum required 

Boerse Stuttgart 

Budapest SE 

Bulgarian SE 

DBG 

Euronext 

Ljubljana 

Luxembourg SE 

Nasdaq 

Vienna SE 

EUR 2.5 million 

250 million HUF 

EUR 1.25 million 

NOK 300m on Oslo Bors* 
EUR 40million on Euronext Milan 
EUR 1 million for Euronext Dublin 

EUR 10 million 

EUR 1 million 

No rule regarding market 
capitalisation 

Warsaw SE 

EUR 15 million or EUR 12 million 

Zagreb SE 

Official Market – 
1 061 853 EUR 
Prime Market – 
EUR 66 365 808  

No 

Yes 

No 

No 

No 

No 

Yes 

- 

- 

No 

No 

Athex does not operate 
an SME GM476 

No 

EUR 2.5 million 

No 

No 

EUR 30 million 

No 

- 

- 

- 

- 

No 

No 

Different rules among Member States also apply to the requirement to publish or file annual 
accounts  in  accordance  with  national  law  for  the  three  financial  years  preceding  the 
application  of  official  listing.  As  shown  in  Table  3,  in  most  Member  States,  the  minimum 
number of years required with published/filed annual accounts is three years. Data show that 
there are also Member States that use their discretionary power and reduce the requirements 
to publish/file an annual account pre-IPO from three to two or one year.  

Table 3 - Pre-IPO disclosure requirements in the EU477 

Regulated market 

Derogation from the requirement 
on the minimum number of 
published/filed annual accounts is 
possible. 

Minimum number of years 
required with published/filed 
annual accounts 

Athens SE 

BME 

Boerse Stuttgart 

Budapest SE 

Yes 

Yes 

Yes 

Yes 

3 

2 

2 

1 

476 Athex operates only an MTF (2 segment, ENA PLUS, ENA STEP). There is no minimum market capitalisation or  shareholders' equity 
requirement on ENA PLUS and ENA STEP. 
477  Data  comes  from  FESE,  collected  as  part  of  a  data  collection  exercise  2022  for  the  Listing  Act  initiative.  Empty  rows  mean  that  no 
specification has been made. 

207 

 
 
 
 
 
 
 
                                                           
Bulgarian SE 

DBG 

Euronext 

Ljubljana 

Luxembourg SE 

Nasdaq 

Vienna SE 

Warsaw SE 

Zagreb SE 

No 

Yes 

Yes 

Yes 

Yes 

- 

Yes 

Yes 

Yes 

- 

3 

3 

3 

3 

- 

3 

3 

3 

Another  major  topic  of  the  Listing  directive  is  the  concept  of  official  listing.  Some 
stakeholders pointed out in the consultation that such concept is an important aspect of public 
markets that needs to be maintained to provide for both options, i.e. listing with and without 
trading. Issuers may seek admission of their securities to official listing without being traded. 
Some  stakeholders,  in  contrast,  argue  that  the  concept  of  “admission  to  the  official  listing” 
under the Listing Directive is outdated and should be aligned with the concept of “admission 
of financial instruments to trading on a regulated market” under MiFID II. ESMA's research 
on  the  Listing  Directive  shows  that  the  majority  of  the  Member  States  where  the  Listing 
Directive has been reported to be still (partially) in force still retains the concept of an official 
list, either for the entire regulated market or certain segments thereof. Even among NCAs, the 
question whether to  keep the official list  was split.  Some NCAs (3) had no particular view 
whereas other NCAs (2) mentioned that they did not consider keeping the concept of official 
list in EU legislation to be relevant. Table 4 gives an overview whether the stock exchange 
has an official listing and, if so, it also shows the competent authority for the listing.  

Table 4 - Official listing and the competent authority for the listing in the EU478 

Regulated Market 

Competent authority for the listing in accordance with Directive 
2001/34/EC 

Athens SE 

BME 

Boerse Stuttgart 

Budapest SE 

Bulgarian SE 

DBG 

Euronext 

Ljubljana 

No 

 - 

Yes 

Central Bank of Hungary 

- 

- 

Euronext Amsterdam, Euronext Dublin, Euronext Brussels, Borsa 
Italiana 

Securities Market Agency 

Luxembourg SE 

Luxembourg Stock Exchange 

478  Data  comes  from  FESE,  collected  as  part  of  a  data  collection  exercise  2022  for  the  Listing  Act  initiative.  Empty  rows  mean  that  no 
specification has been made. 

208 

 
 
                                                           
Nasdaq 

Vienna SE 

Warsaw SE 

Zagreb SE 

- 

Vienna Stock Exchange 

Polish Financial Supervision Authority 

Croatian Financial Services Supervisory Agency - HANFA 

Against  this  backdrop,  the  targeted  changes  proposed  will  contribute  to  the  harmonisation 
and simplification of listing rules in the Union and facilitate the access to capital markets for 
EU companies. The proposed options are also in line with the feedback received in the public 
consultation, where 60% of the respondents indicated that the Listing Directive, in its current 
form,  is  not  achieving  its  objectives  and  needs  to  be  amended.  On  the  contrary,  18%  of 
respondents thought the Listing Directive in its current form achieves its objective while 23% 
expressed no opinion. 

2.  Description of the options 

Option 1: Repeal the Listing Directive and transfer relevant provisions to another legal 
framework 

A  first  option  would  be  to  repeal  the  Listing  Directive.  The  few  provisions  identified  as 
relevant in the consultation and stakeholder workshops would be updated and transferred to 
another legal framework, e.g. to the MiFID II framework. MiFID II was most frequently cited 
in  the  consultation  as  the  appropriate  legal  framework  where  to  include  the  provision  from 
the  Listing  Directive.  E.g.  MiFID  II  RTS  17479  contains  requirements  for  financial 
instruments  that  are  admitted  to  trading  on  a  regulated  market.  Transferring  ‘relevant’ 
requirements  from  the  Listing  Directive  to  MiFID  II  would  also  consolidate  the  rules  on 
listing in one place.  

Option 2: Retain and revise the Listing Directive 

A second option would entail retaining and revising the Listing Directive to align it to more 
recent  legislation  (e.g.  Prospectus  Regulation,  MiFID  II,  and  Transparency  Directive).  For 
example the revision of the definitions would have to reflect the current terminology in other 
legislation  such  as  the  Prospectus  Regulation  or  MiFID  II.  Redundant  provisions  would  be 
deleted.  The  thresholds  for  existing  and  relevant  provisions  like  the  foreseeable  market 
capitalisation  and/or  the  minimum  free  float  requirements  could  be  updated  and/or  the 
requirements regarding the publication or filing of the  company’s annual accounts could be 
adjusted.  

Discarded option: Repeal the Listing Directive without further amendments 

The Commission services considered the possibility to repeal the Listing Directive altogether 
without transferring any provisions to other legislation. This option would pursue a maximum 
harmonisation of national legislation as it would remove an outdated piece of legislation that 
is not applied uniformly across the EU anyway. However, this option was discarded in order 
to  take  into  account  the  implementation  of  the  Listing  Directive  into  national  law  in  some 
Member States. The Listing Directive underpins certain listing regimes and is considered as 

479 Commission Delegated Regulation (EU) 2017/568 of 24 May 2016 supplementing Directive 2014/65/EU of the European Parliament and 
of the Council with regard to regulatory technical standards for the admission of financial instruments to trading on regulated markets”. 

209 

 
 
                                                           
particularly  important  in  those  jurisdictions  that  apply  it  as  the  legislative  basis  for  listing 
securities on their markets. This option was therefore discarded from the outset. 

3.  What are the impacts of the options? 

Option 1: Repeal Listing Directive and transfer relevant provisions to another legal 
framework  

Effectiveness in meeting the specific objectives 

Option 1 would lead to a greater harmonisation of the listing rules across the Union as MiFID 
II  is  a  maximum  harmonisation  directive,  and  thereby  be  more  effective  in  deepening  the 
Capital  Markets  Union.  Member  States  would  still  have  a  certain,  albeit  more  limited, 
discretion  in  framing  their  national  laws.  The  result  would  minimize  the  implementation 
arbitrages among Member States leading to more competition in the market.  

The ‘relevant’ provisions that would be transferred to MiFID  II and amended as necessary, 
include  the  foreseeable  market  capitalisation480,  the  minimum  free  float  requirements, 
and  the  requirements  regarding  the  publication  or  filing  of  the  company’s  annual 
accounts481.  According  to  55%  of  those  who  responded  to  the  consultation,  the  expected 
market  capitalisation  is  relevant  or  very  relevant.  Almost  60%  stated  that  the  requirements 
regarding  the  publication  of  filing  of  the  company’s  annual  accounts  and  the  free  float 
requirements are each relevant or very relevant. Even though a large majority of respondents 
to  the  consultation  consider  free  float  to  be  a  good  measure  to  ensure  liquidity,  most 
respondents  indicate  that  they  believe  the  25%  minimum  free  float  requirement  creates  a 
barrier  to  listing.  One  argument  is  that  the  free  float  requirement  makes  new  listings  more 
difficult, as the minimum threshold of 25% only refers to the public within the EU/ECC, i.e. 
the requirement includes a geographical limitation. Thus, a revision of the free float measure 
could be considered.  

The foreseeable market capitalisation requirement with EUR1 million is also seen as outdated 
by market participants. Some stakeholders indicated in the consultation that this requirement 
could  be  increased  for  regulated  markets.  The  change  (e.g.  an  increase)  on  this  threshold 
could better reflect the current conditions of capital markets in the Union. 482 If changes are 
to  be introduced an extensive analysis must of course be  carried out.  The evaluation  of the 
received data from stakeholders also shows that the requirement pertaining to the publication 
or  filing  of  the  company’s  annual  accounts  that  some  Member  States  have  derogations  in 
place. In some Member States, the competent authority can accept an issuer even if the issuer 
does  not  meet  the  three-year  requirement.  Option  1  would  be  effective  in  updating  and 
harmonising these rules and create equal conditions for all issuers.  

480  Pursuant  to  Article  43(1)  of  the  Listing  Directive,  the  foreseeable  market  capitalisation  of  the  shares  for  which  admission  to  official 
listing is sought or, if this cannot be assessed, the company's capital and reserves, including profit or loss, from the last financial year, must 
be at least one million euro. 
481 Pursuant to Article 44 of the Listing Directive, a company must have published or filed its annual accounts in accordance with national 
law for the three financial years preceding the application for official listing (…).  

482 The UK Financial Conduct Authority (FCA) for example raised its minimum market capitalisation to GBP 30m from GBP 700.000. The 
UK FCA argued that their analysis showed that over 85% of cases where high share price volatility was observed and alerts of  suspected 
suspicious  trading  from  2018-2021  were  revived  were  from  companies  with  a  market  cap  of  below  GBP  50m.  A  GBP  30m  threshold 
captures a 75% of a majority of the smaller number of companies where FCA is investigating cases of serious misconduct.  
(see https://www.fca.org.uk/publication/policy/ps21-22.pdf)  

210 

 
 
                                                           
 
Cost-benefit analysis 

Cost-benefits for issuers: Option 1 would result in a maximum harmonised rules in Europe. 
This  would  be  beneficial  for  issuers  as  currently  different  rules  apply  across  Europe.  This 
option would remove the possibility to apply more stringent conditions  to issuers by NCAs 
which would give issuers more clarity and certainty when listing. It would also eliminate the 
additional legal advisory costs for issuers that choose to list in another Member State. 

Cost-benefits for investors: Option 1 is unlikely to have a direct impact on investors. 

Cost-benefits  for  exchanges:  Exchanges  would  have  to  adapt  their  rules.  Some  exchanges 
operating  in  several  Member  States  could  benefit  from  harmonised  rules  in  the  medium  to 
long run, even if the adaptation would initially involve costs. 

Cost-benefits for NCAs: NCAs would have to adapt their rules, which would entail costs for 
the  NCAs.  In  Member  States  where  the  Listing  Directive  has  not  been  transposed  into 
national  law,  the  rules  transferred  to  MiFID  II  would  have  to  be  implemented  by  Member 
States depending on how the rules are ultimately drafted. This would also incur costs.  

Option 2: Retain and revise the Listing Directive 

Effectiveness in meeting the specific objectives 

Option  2  would  be  less  effective  in  harmonising  the  rules.  Member  States  would  still  have 
broad discretion on how to frame the rules in their respective jurisdiction. Discrepancies of 
market  practices  would  still  exist.  Therefore,  the  effects  to  pursue  CMU  objectives  and 
deepen the CMU would be limited with this option. On the other hand, amending the Listing 
Directive to update old, outdated concepts and terminology would provide clarity to market 
participants. 

The  provisions  that  would  be  revised  in  Option  2  would  also  include  those  described  in 
Option 1 as ‘relevant’ options. Therefore, Option 2 would have the same effects as Option 1 
regarding the provisions that would be updated and adjusted (if necessary) (see effectiveness 
in meeting specific objective for Option 1). 

Cost-benefit analysis 

Cost-benefits  for  issuers:  Issuers  would  benefit  from  clarification  of  terminology  that  is 
inconsistent with that used in other recent legislation. 

Cost-benefits for investors: Option 2 is unlikely to have a direct impact on investors. 

Cost-benefits for exchanges: Some exchanges may need to adapt their rules. The adjustments 
would be minor keeping the costs within reasonable limits.  

Cost-benefits for NCAs: In the Member States where the Listing Directive is applied, some 
NCAs would have to adapt their rules, which in turn would create costs for NCAs, but these 
would be limited.  

Other economic, environmental, social and fundamental rights impacts of the two options:  

It  is  considered  that  option  2  does  not  have  any  relevant  impact  on  other  economic, 
environmental, social and fundamental rights. 

Coherence with other initiatives of the two options:  

211 

 
 
Both options are coherent with other initiatives, especially in the context of the CMU Action 
Plan, which aims to facilitate companies’ access to public markets by harmonising rules, and 
ensure the protection of investors. 

4.  How do the options compare 

When  assessing  which  option  is  better  suited  to  address  the  lack  of  harmonisation  and 
convergence  across  Member  States,  Option  1  is  considered  more  effective  than  Option  2. 
While Option 2 revises an outdated directive and contributes to an extent to aligning outdated 
rules  and  terminology  with  those  used  in  current  legislation,  Option  1  would  be  more 
effective in aligning rules in all Member States. MiFID II, which would be the legislation to 
incorporate the ‘relevant’ rules of Listing Directive in Option 1, is a maximum harmonisation 
directive that limits the possibility for Member States to put forward additional requirements 
at national level.  

5.  Preferred option 

When  it  comes  to  harmonising  and  simplifying  listing  rules,  and  facilitating  the  listing  for 
issuers as well as with regard to the CMU objective to tackle market fragmentation, Option 1 
should be considered as the preferred option. The Listing Directive has not been transposed 
in  all Member States  into  national  law. The rules are  applied differently  from  one Member 
State  to  another.  Option  1  could  drive  market  harmonisation  at  EU  level  and  be  beneficial 
with regards to the applicable listing requirements (that would be maintained). 

212 

 
 
 
 
ANNEX 8: ANALYSIS OF THE POST-IPO PHASE: MAR 

1.  Overview of MAR 

MAR replaced the Market Abuse Directive in 2014 to further harmonise measures preventing 
market  abuse  throughout  the  EU.  It  is  accompanied  by  the  Market  Abuse  Directive  on 
criminal sanctions (“CS MAD”), which provides sanctions for the most serious infringements 
of market abuse.  

2.  Analysis of the key measures 

This  analysis  is  based,  to  a  large  extent,  on  ESMA’s  assessment  of  the  functioning  of  the 
MAR  framework.  In  2019-2020,  ESMA  conducted  a  review  of  this  legislative  framework 
and,  in  September  2020,  following  a  formal  request  from  the  Commission,  provided  its 
technical advice in its MAR Review report483. In summary, ESMA concluded that the MAR 
framework  was  working  well  overall  and  excluded  that  a  major  overhaul  of  the  legislative 
framework  would  be  necessary,  while  proposing  a  number  of  adjustments  of  a  rather 
technical nature. The Report also identified some areas for which ESMA deemed additional 
guidance as beneficial/necessary. 

ESMA’s  report  is  based  on  extensive  feedback  received  from  market  participant 
representatives  in  reply  to  a  public  consultation,  including  from  the  Securities  and  Markets 
Stakeholder Group. The public consultation was published on 3 October 2019 and ran until 
November 2019 (ESMA70-156-1459)484:  97 responses were  received  from  a wide range of 
respondents (i.e. credit institutions, asset managers, issuers, legal and accountancy firms and 
trading  venues).  Some  of  the  Report’s  conclusions  are,  however,  contrasted  by  the 
conclusions  of  the  CMU  HLF  and  of  the  TESG,  as  well  as  by  the  feedback  received  from 
stakeholders  in  the  context  of  the  targeted  consultation  on  the  Listing  Act  and  during  the 
technical meetings.  

The sections below summarise the assessment carried out by the Commission in relation to 
the  most  relevant  MAR  provisions  for  which  ESMA’s  conclusions  are  not  in  line  with  the 
feedback received from experts and stakeholders, namely: the definition of inside information 
(Article  7),  delayed  disclosure  (Article  17(4)),  administrative  sanctions  (Article  30)  market 
soundings (Article 11), and insider lists (Article 18). This Annex also contains a section on 
cross market order book surveillance (Article 38) which is further elaborated in Annex 11. 

2.1. Definition of inside information 

Inside information is defined in Article 7(1)(a) of MAR as “information of a precise nature, 
which  has  not  been  made  public,  relating  to  the  issuer  or  to  a  financial  instrument,  and 
which, if it were made public, would be likely to have a significant effect on the price of that 
financial instrument or on the price of a related derivative financial instrument.” 

On the basis of this definition, all inside information has to be:  

a)  of  a  precise  nature;  Article  7(2)  clarifies  that  the  information  is  of  a  precise  nature  if  it 
“indicates a set of circumstances which exists or which may reasonably be expected to come 
into  existence,  or  an  event  which  has  occurred  or  which  may  reasonably  be  expected  to 

483 https://www.esma.europa.eu/sites/default/files/library/esma70-156-2391_final_report_-_mar_review.pdf 
484 https://www.esma.europa.eu/sites/default/files/library/mar_review_-_cp.pdf 

213 

 
 
                                                           
occur, where it is specific enough to enable a conclusion to be drawn as to the possible effect 
of that set of circumstances or event on the prices of the financial instruments or the related 
derivative  financial  instrument,  the  related  spot  commodity  contracts,  or  the  auctioned 
products based on the emission allowances”485; 

b)  not public, and 
c)  likely, if it were made public, to have a significant effect on the relevant prices of financial 
instruments, derivative financial instruments, related spot commodity contracts, or auctioned 
products based on emission allowances (as identified in Article 7(1) of MAR). As regards the 
likelihood  to  have  a  significant  effect  on  the  above  prices,  it  concerns  information  a 
reasonable  investor  would  be  likely  to  use  as  part  of  the  basis  of  his  or  her  investment 
decisions. 

Currently,  the  notion  of  inside  information  as  defined  in  Article  7  makes  no  distinction 
between its application in the context, on the one hand, of market abuse (e.g. insider dealing) 
and, on the other hand, of the obligation to publicly disclose inside information. This means 
that the same definition constitutes the basis for both: 

a)  the issuers’ disclosure obligation according to Article 17(1); 
b)  as well as the insider dealing prohibition486 (Article 8). 

While the broadness of the notion of inside information allows to cater for a wide and very 
early  prohibition  of  insider  dealing,  it  also  implies  that  issuers  are  required  to  disclose 
information at a very early stage, when information on circumstances or events have not yet 
reached a high degree of certainty.  

A)  Effectiveness 

In the MAR review report, ESMA considered whether the definition of inside information in 
Article  7  MAR  is  sufficient  to  cover  all  information  relevant  for  competent  authorities  to 
effectively combat market abuse. It came to the conclusion that such definition is sufficiently 
broad  to  combat  market  abuse  cases  and  that  it  allows  for  adequate  protection  of  investors 
and of market integrity. According to ESMA, such definition appears to strike a good balance 
between being sufficiently comprehensive to cater for a variety of market abuse behaviours, 
and overall sufficiently  prescriptive to enable market participants, in most cases, to identify 
when information becomes inside information. 

Weighting the information received from NCAs, on the one hand, and market participants, on 
the  other  hand,  on  the  application  of  the  current  definition  against  the  risks  arising  from 
amending  it,  ESMA  recommended  the  Commission  to  leave  the  definition  of  inside 
information in Article 7 unchanged. One exception to this recommendation is an amendment 
proposed  to  Article  7(1)(d)  of  MAR.  The  application  of  “front  running”  conducts  only  to 
persons  charged  with  the  execution  of  orders  is  too  limited.  ESMA  therefore  considers  the 
option  of  removing  the  words  “for  the  persons  charged  with  the  execution  of  orders 

485 The same paragraph also specifies that “in the case of a protracted process that is intended to bring about, or that results in, particular 
circumstances or a particular event, those future circumstances or that future event, and also the intermediate steps of that process which 
are connected with bringing about or resulting in those future circumstances or that future event, may be deemed to be precise information.” 
In addition, Article 7(3) of MAR provides that an “intermediate step in a protracted process shall be deemed to be inside information if, by 
itself, it satisfies the criteria of inside information as referred to in this Article”. 
486 Insider dealing occurs when a legal or natural person in possession of inside information takes unfair advantage of that information by 
entering into market transactions or by amending or cancelling an existing order, to the detriment of third parties who are unaware of such 
information. 

214 

 
 
                                                           
concerning financial instruments, it also means” from Article 7(1)(d). With this change, the 
definition  would  also  include  other  categories  of  persons  that  may  be  aware  of  a  future 
relevant order.  

However, ESMA also acknowledged that the broadness of the definition comes at a cost and 
results in some elements of the text being unclear. Respondents to the ESMA’s consultation 
requested guidance on elements, such as on when information is sufficiently precise to trigger 
disclosure,  intermediate  steps,  the  moment  when  the  information  may  be  considered  as 
public,  etc.  In  light  of  the  concerns  raised  by  the  respondents  to  the  public  consultation, 
ESMA expressed its willingness to provide guidance on the notion. 

B)  Efficiency 

In  contrast  to  ESMA’s  position,  the  TESG,  the  CMU  HLF  as  well  as  the  stakeholders’ 
feedback to targeted consultation on the Listing Act, pointed to the need for alleviation in the 
MAR definition of inside information.  

In the public consultation, 64% of respondents considered the definition to be burdensome for 
issuers,  which  contrasted  with  only  25%  of  respondents  who  considered  it  not  to  be 
burdensome  or  neutral.487  Similarly,  the  CMU  HLF  concluded  in  its  final  report  that  the 
existing MAR definition of inside information is too broad and should be further clarified at 
EU level, given that the same notion triggers at the same time and at the same “threshold” an 
insider  dealing  prohibition  and  an  immediate  disclosure  obligation.  According  to  the  CMU 
HLF, this raises several problems, notably, (i) the issue of identifying when the information 
becomes  “inside  information”  and  (ii)  the  risk  of  publishing  information  which  is  not  yet 
mature enough. The CMU HLF concluded that the definition should be narrowed down in a 
manner  that  improves  legal  certainty  about  what  constitutes  inside  information  and  market 
abuse, while reducing unnecessary disclosure. At the same time, the CMU HLF indicated that 
amendments to MAR should seek to reduce compliance costs without sacrificing the primary 
objective of fair, orderly and transparent public markets. 

The TESG also disagreed with the current definition of inside information. According to the 
TESG, MAR should distinguish between a definition of inside information for the purposes 
of  market  abuse  prohibition,  and  a  more  ‘advanced’  notion  of  inside  information,  typically 
linked to a higher degree of certainty of the information, triggering the disclosure obligation. 
In  their  final  report,  they  recommended  to  clarify  the  notion  of  inside  information,  by 
applying  a  two-step  approach,  and  to  better  identify  the  moment  when  this  information 
should be disclosed. They indicated that this would reduce issuers’ expenses associated with 
the disclosure procedure, as well as the risk of sanctions for non-compliance. 

ESMA  collected  data  on  the  number  of  public  disclosures  in  Q1  2022  (see  table  1  below). 
The highest number of public disclosures per issuers took place in France (6.76 information 
disclosed  per  issuer  per  quarter),  followed  by  Romania  (6.14),  the  Netherlands  (5.91), 
Slovenia  (5.29),  Lithuania  (2.59)  and  Ireland  (2.44).  The  number  of  public  disclosures  of 
inside information in other Member States is much lower, with the lowest levels in Slovakia 
(0.02),  Czech  Republic  (0.21),  Spain  (0.27),  Sweden  (0.46)  and  Belgium  (0.58).  Such 

487  Out  of  28  respondents  who  replied  believes  that  the  definition  of  the  inside  information  is  burdensome  for  all  companies,  11  are 
company/business  organisation,  11  business  associations,  2  academic/research  institutions,  1  public  authority,  1  non-governmental 
organisation and 2 other. Out of 11 respondents who are of the opposite view (or opted for “neutral”), 5 are company/business organisation, 
3 are business associations, 2 are public authorities and 1 is an academic/research institution. 

215 

 
 
                                                           
divergences  may  be  indicative  of  discrepancies  in  how  the  notion  of  inside  information  is 
interpreted across the EU.  

Table 1 - Number of public releases of inside information in each Member State in Q1 2022, ESMA data 

Member 
State 

Number of 
public 
disclosures488 

Comments (if any) 

Number of 
Issuers489 

Number of public 
disclosures in Q1 
2022 per issuer 

1 

2 

3 

4 

5 

6 

7 

8 

9 

AT 

BE 

BG 

CY 

CZ 

89 

114 

240 

75 

24 

DE 

523 

DK 

EE 

EL 

344 

79 

108 

10 

ES 

134 

11 

FI 

129 

12 

FR 

2 925 

13 

HR 

87 

Ad hoc reports (public disclosures of 
inside information) 

111 (regulated 
market: Amtlicher 
Handel) 

Including notifications for managers 
transaction 

196 

293 

58 

110 

This figure relates to regulated 
market and open market 
(Freiverkehr) as BaFin does not 
provide a breakdown by regulated 
market. 

574 (including 
government and 
municipal bonds) 

174 

31 

143 

0.80 

0.58 

0.81 

1.29 

0.21 

0.91 

1.97 

2.54 

0.75 

In 17 public disclosures of inside 
information, the same piece of inside 
information was contained in other 
disclosures of inside information 
from the issuer. Therefore, the net 
number of public disclosures of 
inside information during Q1 2022 is 
117. 

481 

0.27 

167490 

433 [issuers 
whose shares are 
admitted to 
trading on a 
regulated market] 

104 

0.77 

6.76 

0.84 

488 The figure reported refers to the first quarter of the year (Q1 2022) and relates to issuers whose instruments are admitted to trading on a 
regulated market. 
489 The figure reported refers to issuers whose instruments are admitted to trading on a regulated market on January 1st, 2022. 
490 135 issuers who have issued shares and additional 32 bond issuers who have not issued shares bringing the total number to 167 issuers 

216 

 
 
 
 
 
 
 
 
 
 
 
 
                                                           
Member 
State 

Number of 
public 
disclosures488 

Comments (if any) 

Number of 
Issuers489 

Number of public 
disclosures in Q1 
2022 per issuer 

14 

15 

HU 

IE 

- 

78 

16 

IT 

264 

17 

LT 

18 

LV 

75 

63 

19 

LU 

351 

20 

21 

22 

MT 

NL 

PL 

67 

762 

1387 

23 

PT 

108 

24 

25 

26 

27 

RO 

SE 

SI 

SK 

522 

281 

164 

2 

- Caveat: this is an estimate 

- No info available on double 
counting  

Including 5 cancellations  

According to the manual checks 
which CSSF carried out for certain 
issuers whose shares are admitted to 
trading on the regulated market of the 
Luxembourg Stock Exchange, 
instances of double or multiple 
disclosures of the same piece of 
inside information seem to be rare, 
but CSSF cannot totally exclude this. 

Only inside information disclosures, 
not including other disclosures such 
as managers’ transactions or other 
types of disclosures; the English 
versions of the press releases have 
not been counted. 

Single counting  

46 

32 

241 

29 [Instruments 
traded on Nasdaq 
Vilnius] 

22 issuers [13 
equity issuers, 9 
bond issuers]. 

453 issuers [for 
which LU is the 
home Member 
State under the 
TD. Almost 400 
of those issuers 
are debt issuers 
(as opposed to 
share issuers)] 

72 

129 

501 

2.44 

1.1 

2.59 

2.86 

0.77 

0.93 

5.91 

2.77 

66 

1.64 

85 

609 

31 [3 Jan 2022] 

84 

6.14 

0.46 

5.29 

0.02 

While the legislation needs to  be effective in  achieving its policy  objectives (i.e. of market 
integrity  in  the  case  of  MAR),  it  should  also  strive  to  do  so  in  the  most  efficient  manner. 
Wide divergences across Member States in the number of disclosures of inside information 

217 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
are indicative of the fact that the rules are not designed in an efficient manner, as they do not 
appear to be interpreted consistently by stakeholders across different Member States (i.e. in 
the  opposite  case,  the  data  on  disclosures  across  Member  States  would  be  comparable).  As 
the notion of inside information triggers a varying level of disclosure, it is likely to give rise 
to costs of legal interpretation, rendering the current rules costly for issuers.  

C)  Coherence  

Clarifying the notion of inside information at EU level would reduce divergent interpretations 
of the moment of disclosure and increase the level of comparability of the information. This 
result  would  be  coherent  with  the  objectives  pursued  by  the  Commission  proposal  on  the 
ESAP491 which, among others, seeks to provide access to comparable disclosure information 
by companies across the EU.  

D)  Relevance in terms of value added for the EU 

Streamlining the process of identifying inside information for the purposes of disclosures will 
increase  harmonisation  of  the  application  of  MAR  and  ensure  a  higher  level  playing  field, 
thereby supporting the single market and thus contributing to the CMU.  

2.2. Delayed disclosure of inside information  

Once  the  issuer  identifies  inside  information,  MAR  requires  it  to  be  disclosed  as  soon  as 
possible (Article 17(1)). However, Article 17(4) MAR allows for a delay of such disclosure, 
as long as certain conditions are met. The delay mechanism comes into play when immediate 
disclosure is likely to prejudice the legitimate interests of the issuer (for instance, when the 
issuer  is  conducting  negotiations  and  the  outcome  of  such  negotiations  would  likely  be 
jeopardised by immediate disclosure). 

Article 17(4) of MAR in particular allows issuers and emission allowance market participants 
to delay on their own responsibility the disclosure of inside information provided that all the 
three conditions below are met:  

(a)  immediate  disclosure  is  likely  to  prejudice  the  legitimate  interests  of  the  issuer  or 

emission allowance market participant;  

(b) delay of disclosure is not likely to mislead the public; and  

(c) the issuer or emission allowance market participant is able to ensure the confidentiality 

of that information. 

In  terms  or  procedure,  Article  17(4)  of  MAR  requires  the  issuer  or  emission  allowance 
market participant to inform the relevant NCA that the disclosure was delayed immediately 
after such disclosure occurred. The issuer / emission allowance market participant must also 
provide a written explanation of how the three conditions listed above were met, unless the 
relevant  Member  State  opted  to  require  that  the  record  of  the  explanation  can  be  provided 
only upon request of the competent NCA. 

491 The overall objective of establishing a European single access point (ESAP) is to provide for seamless, EU-wide access to all relevant 
information disclosed to the public by companies. By providing investors with a user-friendly, EU-wide mechanism to access information 
disclosed by companies, the ESAP would foster access to capital markets, including by SMEs, and promote cross-border investments.   

218 

 
 
                                                           
The  provisions  on  disclosure  of  inside  information  and  related  delay  require  issuers  and 
emission  allowance  market  participants  to  perform  an  assessment  where  information  they 
possess meets the requirement of inside information. A further assessment is required if the 
issuer  or  emission  allowance  market  participant  intends  to  delay  the  disclosure  of  such 
information, in which case the assessment is performed under the responsibility of the issuer 
or emission allowance market participant (under Article 17(4)).  

A)  Effectiveness 

ESMA collected data on the number of delays in each Member State from July 2016 to June 
2019.  

Table 2 - Number of cases of delayed disclosure according to Article 17(4) of inside information in each 
Member State (and Norway) per year, ESMA data, July 2016-June 2019 

2016 2H 

2017 FY 

2018 FY 

2019 1H 

Total 

Austria 
Belgium 
Bulgaria 
Croatia 
Cyprus 
Czech Republic 

Denmark 

Finland 
France 
Germany 
Greece 

Hungary  
Ireland 
Italy 
Lithuania 
Luxembourg 
Malta 
Netherlands 

Norway 

Poland 
Portugal 

Romania 

Slovakia 

Slovenia 
Spain 
Sweden 

0 
15 
- 
13 
0 
1 

49 

96 
21 
231 
- 

0 
12 
70 
29 
0 
0 
0 

157 

67 
2 

1 

0 

1 
0 
319 

0 
35 
- 
4 
0 
2 

84 

183 
141 
484 
- 

3 
27 
260 
23 
7 
0 
0 

324 

167 
9 

4 

0 

0 
52 
- 
3 
0 
0 

117 

177 
154 
532 
- 

10 
41 
362 
5 
0 
0 
0 

351 

142 
2 

2 

0 

0 
14 
- 
2 
0 
0 

67 

108 
71 
300 
- 

8 
22 
165 
2 
0 
0 
0 

171 

73 
1 

1 

0 

1 
2 
1 639 

2 
0 
2 367 

0 
4 
2 072 

0 
116 
4 
22 
0 
3 

317 

564 
387 
1 547 
10 

21 
102 
857 
59 
7 
0 
0 

1 003 

449 
14 

8 

0 

4 
6 
6 397 

Average 
number of 
delays per 
quarter 
0 
9.67 
0.33 
1.83 
0 
0.25 

26.42 

47 
32.25 
128.92 
0.83 

1.75 
8.5 
71.46 
4.92 
0.58 
0 
0 

83.58 

37.42 
1.17 

0.67 

0 

0.33 
0.5 
533.08 

Data collected by ESMA in the review process.  

Table 3 - Comparison between public releases of inside information in each Member State (and Norway) 
per issuer and number of delays per issuer, ESMA data 

219 

 
 
 
Average number of 
delays per quarter for 
2H2016 – 1H2019 
0 
9.67 
0.33 
1.83 
0 
0.25 
26.42 

47 
32.25 
128.92 
0.83 

1.75 

8.5 

71.46 
4.92 
0.58 
0 
0 
83.58 

37.42 

1.17 
0.67 
0 
0.33 

0.5 

533.08 

Austria 
Belgium 
Bulgaria 
Croatia 
Cyprus 
Czech Republic 

Denmark 

Finland 
France 
Germany 

Greece 

Hungary  

Ireland 
Italy 
Lithuania 
Luxembourg 
Malta 
Netherlands 
Norway 

Poland 
Portugal 
Romania 
Slovakia 
Slovenia 

Spain 

Sweden 

Number of delays per 
issuer 

0 
0.05 
0.001 
0.004 
0 
0.009 
0.15 

0.28 
0.07 
0.22 
- 

0.04 

0.27 

0.3 
0.17 
0.001 
0 
0 
- 

0.07 

0.02 
0.008 
0 
0.01 

0.001 

0.88 

Number of public 
disclosures in Q1 2022 
per issuer 
0.80 
0.58 
0.81 
0.84 
1.29 
0.21 

1.97 

0.77 
6.76 
0.91 

- 

- 

2.44 
1.1 
2.59 
0.77 
0.93 
5.91 
- 

2.77 
1.64 
6.14 
0.02 
5.29 

0.27 

0.46 

As  the  data  in  tables  2  and  3  show,  in  some  Member  States,  issuers  regularly  rely  on  the 
mechanism  for  delaying  the  disclosure  of  inside  information,  while  in  others  issuers  do  so 
only on an exceptional basis. From July 2016 to June 2019, the possibility to delay has been 
evoked  in  about  14  000  cases  with  significant  discrepancies  across  the  EU.  Member  states 
where issuers most often delay disclosure are Sweden (0.88 per issuer within quarter), Italy 
(0.3),  Finland  (0.28)  Ireland  (0.27)  and  Germany  (0.22).492  However,  even  among  those  5 
countries  significant  differences  persist.  Swedish  issuers  use  delays  four  times  more  than 
German issuers. In some Member States, in a 3-year period, issuers have never notified delay 

492 Not all Member States transmitted data allowing for calculation.  

220 

 
 
 
 
                                                           
to  their  respective  NCAs  (Austria,  Cyprus,  Malta,  Netherlands,  and  Slovakia),  in  others, 
issuers barely used delay (Czech Republic, Bulgaria, Slovenia, and Luxembourg).  

To  summarise,  there  are  clear  divergences  among  Member  States,  stemming  from  the  data 
presented above, on how often issuers disclose inside information and how often they delay 
disclosure.  It  is  possible  that  differences  in  the  interpretation  of  the  notion  of  inside 
information  as  well  as  of  the  conditions  for  the  delay  of  disclosure  among  Member  States 
might be among the reasons behind this variation. 

Despite these differences, in the MAR review report, ESMA found that no amendments to the 
conditions to delay disclosure of inside information were necessary, as the delay of disclosure 
of  inside  information  is  mostly  clear  for  issuers.  According  to  ESMA,  amending  the 
conditions  to  delay  disclosure  would  risk  opening  loopholes,  increasing  legal  uncertainty. 
ESMA,  however,  acknowledging  that  those  conditions  pose  interpretative  challenges, 
committed  to  review  the  existing  guidelines  adopted  pursuant  to  article  17(11)  to  provide 
clarity  on  the  conditions  for  delay,  as  well  on  the  moment  when  the  disclosure  should  be 
made.  

Most  market  participants  who  responded  to  the  Commissions  consultation,  disagree  with 
ESMA’s assessment.  

With  respect  to  ESMA’s  conclusion  that  the  delay  of  disclosure  of  inside  information  is 
mostly clear for issuers, the feedback to the targeted consultation on the Listing Act show that 
a  significant  majority  finds  the  requirements  burdensome  (68%  of  respondents  find  it 
burdensome for all companies, and 76% of respondents find it burdensome for issuers listed 
on  SME  growth  markets  specifically).  A  significant  portion  of  these  respondents  indicates 
that these requirements are ‘very burdensome’, especially in relation to issuers listed on SME 
growth  markets.  Several  respondents  indicated  the  requirement  to  disclose  “as  soon  as 
possible”  to  be  extremely  challenging  in  particular  for  SME  issuers  due  to  their  limited 
compliance resources.  

In a similar vein,  the  TESG report suggests to  amend the conditions  regarding the delay of 
disclosure  by  removing  the  reference  to  the  possibility  that  investors  are  misled  (if  the 
information is “price sensitive”, delay is inherently misleading).  

Clarifying  conditions  for  delays  would  represent  a  more  effective  solution  to  achieve  the 
objective of adequate and non-misleading disclosures for investors. Furthermore, changes to 
the notion of the inside information would limit the necessity to delay disclosure and render 
the overall disclosure regime both more efficient and effective.  

B)  Efficiency 

Proposed  changes  would  make  the  regime  for  delays  more  cost  efficient  for  issuers  and, 
ultimately, for NCAs reviewing notifications for delay. 

C)  Coherence 

The proposal to clarify the conditions for delay is overall coherent with other EU legislation 
that aim to ensure effective investor protection and market integrity. 

D)  Relevance in terms of value added for the EU 

221 

 
 
The effective and efficient framework for delays shall protect the legitimate interests of issuer 
and  thus  contribute  to  the  overall  objectives  of  this  initiative  by  striking  the  right  balance 
between market efficiency and investor protection.  

2.3. Administrative measures and sanctions 

With respect to sanctions, ESMA expressed the view that there is no need to amend Article 
30(1) MAR. In addressing the concerns, voiced during the public consultation, that sanctions 
are  calibrated  for  big  issuers,  ESMA  stated  that,  although  no  maximum  administrative 
sanctions is  set,  NCAs are still obliged to  take into  account  relevant  circumstances  like the 
size of the issuer. 

In  the  targeted  consultation  on  the  Listing  Act,  half  of  the  respondents  (50%)  find  that  the 
punitive regime is not proportionate to the objective sought by the legislation. According to 
some respondents,  the regime does not  differentiate between the issuer size and the market 
size. The majority of respondents also express  a preference for a decrease of the maximum 
administrative sanctions for infringements of Article 17 (disclosure of inside information and 
delayed disclosure), 18 (insider list), 19 of MAR (managers’ transaction) by issuers listed on 
SME  growth  markets  and  for  infringements  of  Article  17  also  by  issuers  listed  on  other 
venues.  Stakeholders  were  also  in  favour  of  decreasing  the  maximum  administrative 
pecuniary sanctions for conducts defined in Article 30(1)(a), other than for infringements of 
Articles 17, 18 and 19 of MAR, by issuers on SME growth markets. Respondents also point 
out that sanctions ought to be administrative and not criminal.  

Following the CMU HLF’s advice, the TESG proposes that the sanctions provided in Art. 30, 
and, in particular, the infringements by issuers and managers of Articles 17, 18 and 19 should 
be alleviated. 

A)  Effectiveness 

Overview of sanctions in Europe 

The  ESMA  Enforcement  Network  Working  Document  of  December  2019  contains  an 
overview of the transposition of the MAR by the Member States (see Figure 1 below). 

Figure 1. Transposition of the MAR by the Member States 

222 

 
 
223 

 
 
 
 
Enforcement Network Working Document, Overview of the transposition of the Market Abuse 
Regulation (MAR) ((EU) 1031/2010) by the Member States, ESMA43-388-690, 4 December 
2019. 

224 

 
 
 
 
In  the  majority  of  Member  States,  the  maximal  penalty  expressed  in  absolute  amounts  for 
infringements of Articles 17, 18 and 19 of MAR corresponds to the minimum of the maximal 
sanctions prescribed by MAR for these infringements. This indicates that the majority of the 
Members States opted for the lowest level of maximal pecuniary sanctions.  

There  are  also  some  (limited)  differences  between  Member  States  on  the  maximum  of 
pecuniary  sanctions.  In  the  case  of  the  infringement  of  Article  17  of  MAR,  it  ranges  from 
EUR  2.5  million  (the  majority)  to  EUR  100  million  (one  Member  State).  In  the  case  of 
infringements of Article 18 and 19 of MAR it ranges from EUR 1 million (the majority) to 
EUR 100 million (one Member State). 

Table  4  below  shows  data  on  the  imposition  of  administrative  sanctions  for  all  MAR 
infringements other than infringements of Articles 14 and 15 of MAR from the ESMA Report 
on Administrative and criminal  sanctions and other administrative measures imposed under 
the Market Abuse Regulation in 2020.  

225 

 
 
 
 
Table 4 - Imposed administrative sanctions for all MAR infringements (other than infringements of 
Articles 14 and 15), ESMA Report, 2020 

Table  5  below  shows  data  on  the  imposition  of  administrative  sanctions  for  all  MAR 
infringements other than infringements of Articles 14 and 15 of MAR, from ESMA Report 
on Administrative and criminal  sanctions and other administrative measures imposed under 
the Market Abuse Regulation in 2019.  

Table 5 - Imposed administrative sanctions for all MAR infringements (other than infringements of 
Articles 14 and 15), ESMA Report, 2019 

There  is  no  indication  that  MAR  sanctions  are  currently  ineffective  (i.e.  fail  to  deter 
infringement).  On  the  contrary,  many  stakeholders  consider  that  the  level  of  sanctions  for 
“technical” infringements is too high and should be lowered. A lower level of the minimum 
of the maximal sanctions would aim to  make sanctions regime more proportionate, without 
rendering it less effective. 

B)  Efficiency 

The  level  of  sanctions  imposed  depends  on  many  factors.  When  determining  the  type  and 
level  of  administrative  sanctions,  NCAs  are  obliged  to  take  into  consideration  relevant 
circumstances,  including,  where  appropriate,  those  indicated  in  Article  31(1)  of  MAR  (as 
well as comply with thresholds set out in law). 

The  rationale  of  the  sanctioning  regime  is  to  enable  NCAs  to  punish  the  misbehaviour  of 
market  participants,  as  well  as  to  dissuade  them  from  committing  infringements  of  MAR 
provisions. The current level of sanctions is considered to be inefficient (see the stakeholders’ 

226 

 
 
 
 
 
responses  in  Annex  2),  as  it  reaches  the  policy  objective  at  a  too  high  cost.  In  fact,  the 
excessive  sanctioning  regime  for  SMEs’  infringements  of  disclosure  provisions  had  an 
unintentional consequence in deterring issuers from going public altogether.  

C)  Coherence 

The proposal to review the sanctions is overall coherent with other EU legislation that aim to 
ensure effective investor protection and market integrity. 

D)   Relevance in terms of value added for the EU 

An efficient and effective sanction regime would contribute to facilitating the access of SMEs 
to public markets without endangering the protection of investors and market integrity. 

2.4. Market soundings 

MAR  provides  for  a  prescriptive  regime  to  regulate  the  interactions  between  a  seller  of 
financial  instruments  and  one  or  more  potential  investors,  prior  to  the  announcement  of  a 
transaction,  conducted  in  order  to  gauge  the  interest  of  potential  investors  in  a  possible 
transaction  and  its  pricing,  size  and  structuring  (so  called  “market  sounding”).  Market 
soundings  are  extremely  useful  for  issuers  to  ensure  that  deals  run  smoothly,  and  that  the 
views  of  issuers,  existing  shareholders  and  potential  new  investors  are  aligned.  However 
conducting  market  soundings  may  require  disclosure  of  inside  information  to  the  potential 
investors. MAR introduces obligations on issuers (or investment firms acting on their behalf) 
carrying  out  such  soundings,  as  well  as  on  the  investors  who  are  sounded  out,  aimed  at 
maintaining  record  of  the  information  disclosed  and  avoiding  they  could  be  exploited  for 
insider dealing purposes.  

According to many stakeholders, the obligations provided in MAR have a deterrent effect on 
both  potential  issuers  and  potential  investors.  Although  the  market  sounding  regime  was 
already  alleviated  under  the  SME  Listing  Act  to  exempt  private  placements  of  bonds 
addressed  to  qualified  investors,  the  majority  (59%)  of  market  participants  in  the  public 
consultation considered those provisions in MAR very burdensome.  

A)  Effectiveness 

ESMA, in its report, pointed to the existence of two different readings of the market sounding 
regime,  one  according  to  which  those  obligations  are  mandatory  and  another  one  which 
considers  those  rules  a  mere  safe  harbour,  the  compliance  with  which  would  grant  the 
protection from allegations of unlawful disclosure of inside information by disclosing market 
participants.  

Despite the fact that the majority of stakeholders consulted by ESMA interpreted the rules as 
a  safe  harbour  and  considered  a  compulsory  market  sounding  regime  too  burdensome  and 
disproportionate,  ESMA  concluded  that  the  current  market  sounding  regime  is  compulsory 
and that an optional regime it should not be changed. According to ESMA, under the reading 
where  the  market  sounding  regime  were  a  safe  harbour  (i.e.  optional),  different  investors 
would run the risk of information asymmetries among investors to go undetected, leading to 
selective disclosures without the relevant record keeping obligation. Such a requirement may 
be viewed as an incentive for. The other reading, whereby the regime were mandatory, would 
in contrast encourage proper management of inside information. ESMA’s recommendation to 
the Commission was to amend Article 11 MAR, so that it is clear that there is an obligation 

227 

 
 
for an issuer (or seller) to comply with the relevant prescriptions (including record keeping), 
when carrying out market sounding. ESMA also recommends to the Commission to introduce 
sanctions for the violation of the sounding requirements.  

In parallel, ESMA also stressed the need to keep the broad definition of market sounding to 
be able to adapt it to different typologies of soundings and different practices across the EU. 
According to ESMA, the scope of Article 11 should be extended to clarify that it applies also 
to  cases  of  transactions  eventually  announced,  as  the  announcement  does  not  really  impact 
the nature of the soundings.  

In  light  of  respondents’  concerns,  ESMA  was  however  of  the  opinion  that  procedures  and 
requirements  for  carrying  out  market  soundings  could  be  simplified,  putting  forward  a 
number of recommendations for limited technical amendments. ESMA recommended that, in 
cases  where  no  inside  information  is  passed  on,  Article  11  of  MAR  should  be  amended  to 
state  that  Article  11(5)(a)  to  (d)  and  Article  11(6)  of  MAR  should  not  apply.  ESMA 
recommended that in cases of inside information, the Commission should amend Article 11 
of MAR to clarify that the requirement to cleanse contained in Article 11(6) could be waived 
wherever the transaction is publicly announced. ESMA further recommended to ensure that 
written minutes as well as emails and other electronic means should suffice where recording 
facilities  are  unavailable.  Finally,  ESMA  suggested  to  delete  repeat  reminders  of  the  wall 
crossing requirements for follow up calls after the initial one.  

Most  respondents  in  the  public  consultation  for  the  Listing  Act  considered  that  ESMA’s 
limited proposals  to  amend the market  sounding  procedure were not  sufficient to  provide a 
balanced solution to the need to simplify the burden and maintain the market integrity. 

B)  Efficiency 

A  majority  of  respondents  to  the  Commission  public  consultation,  consider  the  market 
sounding regime as burdensome, with 59% of respondents considering it burdensome for all 
companies  and  53%  of  respondents  considering  it  burdensome  for  issuers  listed  on  SME 
growth markets.  

Contrary  to  ESMA,  the  TESG  recommends  to  review  the  market  sounding  regime  under 
MAR,  finding  it  too  burdensome  and  hence  inefficient  for  achieving  the  objective.  More 
specifically, TESG would prefer to see the market sounding regime repealed and replaced by 
the  clarification  that  inside  information  for  market  sounding  purposes  may  be  disclosed, 
provided that adequate non-disclosure agreements are in place. 

As  second  best  options,  the  TESG  supports  the  proposal  (a)  to  clarify  that  the  market 
soundings may be applied only in presence of inside information being passed on, and (b) to 
simplify  the  burdensome  procedure  for  both  disclosing  market  participants  and  persons 
receiving  market  soundings,  while  recognising  that  the  regime  is  a  mere  option  to  benefit 
from the protection of the allegation of unlawful disclosure of inside information.  

Finally,  the  TESG  proposes  to  extend  the  exemption  introduced  for  private  placements  of 
bonds addressed to qualified investors to equity placements and to include, for both types of 
placements, external funding providers (who may not qualify as qualified investors). 

C)  Coherence 

228 

 
 
The  proposal  to  clarify  the  market  sounding  regime  is  overall  coherent  with  other  EU 
legislation that aims to ensure effective investor protection and market integrity. 

D)  Relevance in terms of value added for the EU 

An  efficient  and  effective  market  sounding  regime  would  contribute  to  market  integrity  by 
allowing the gauging of investors’ interests, while limiting the risk of market abuse. 

2.5. Insider lists 

Insider  lists  have  to  be  drawn  up  by  issuers  and  persons  acting  on  their  behalf  or  on  their 
account pursuant to Article 18 of MAR, so as to serve as a tool at the disposal of NCAs that 
they  can  request  when  investigating  market  abuse  cases.  ESMA  assessed  the  usefulness  of 
such lists in the context of its review report. From the evidence gathered, ESMA concluded 
that insider lists remain a key tool in market abuse investigations undertaken by NCAs and, 
accordingly, is widely used by them. It can then be considered as an effective tool. 

However,  the  feedback  received  from  market  participants  in  the  public  consultation  shows 
that an overwhelming majority of respondents considers this requirement burdensome for all 
companies and in particular for issuers listed on SME growth markets, hence questioning the 
efficiency  of  the  tool.  Most  market  participants  would  be  in  favour  of  removing  such  a 
requirement  altogether,  while  the  TESG  recommended  to  remove  the  obligation  for  SME 
Growth Market issuers to keep an insider list or as a second-best scenario to further reduce 
and simplify the content of the insider list for all issuers.  

Considering the stakeholders’ feedback, and despite the fact that some simplifications to the 
regime for insider lists for issuers listed on an SME growth market have been introduced only 
recently  under  the  SME  Listing  Act493,  there  is  merit  in  considering  ways  to  alleviate  the 
obligations for other issuers (i.e. non-SMEs). 

2.6. Cross-market order book surveillance  

In  its  Final  Report,  ESMA  has  analysed  the  framework  for  cross-market  order  book 
surveillance  and  deems  necessary  to  set  a  reinforced  cooperation  framework  in  order  to 
facilitate  exchange  of  order  book  data  between  NCAs  whose  markets  are  more 
interconnected.  It  would  be  beneficial  for  certain  NCAs  to  more  easily  get  access  to  data 
requested for their investigations. The Commission has confirmed these findings after several 
interviews with different trading venues and NCAs. 

Currently, under Article 25 of MIFIR, investment firms are required to keep their orderbook 
data at the disposal of NCAs. In turn, NCAs have different approaches to request such data 
from  trading  venues  under  their  jurisdiction:  they  either  do  it  on  an  ad  hoc  basis  or 
systematically,  by  requiring  them  to  regularly  submit  delayed  or  real-time  orderbook  data. 
Furthermore,  while  the  content  of  the  data  to  report  has  been  harmonized  through  an  RTS, 
with precise fields specifying the information that trading venues need to keep at the disposal 
of  NCAs,  trading  venues  are  not  required  to  use  a  specific  technical  template  or  message 
standard when they send data to NCAs, as the empowerment for the RTS was not considered 
including this possibility. 

493 Regulation (EU) 2019/2115 of the European Parliament and of the Council. 

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Order book data is exchanged, where appropriate, between NCAs on the basis of Article 25 
of MAR where such exchange is necessary to get a full view of the order book in relation to 
the  trading  activity  in  one  or  several  financial  instruments.  The  interviews  that  the 
Commission  conducted with  several  trading  venues  and  NCAs  shows  that,  while  NCAs  do 
submit  requests  for  non-domestic  orderbook  data  to  other  NCAs,  this  process  can  often  be 
lengthy  and  burdensome,  with  received  data  sets  of  varying  quality.  This  information 
gathering also showed that there are differing approaches to orderbook analysis; while some 
NCAs receive continuous real-time or delayed data on orders from trading venues, others rely 
on STORs and transaction data analysis to uncover instances which warrant further analysis 
of  related  orders.  In  general,  order  book  data,  whether  exchanged  cross-border  or  analysed 
intra-jurisdiction, is quite voluminous and can be said to be a large multiple of the transaction 
data itself.  

Several  NCAs  also  consider  that  the  existing  framework  is  not  working  effectively  and 
efficiently. The recording of order book data in an electronic and machine-readable form and 
in  a  common  XML  template,  in  accordance  with  ISO  20022  methodology,  appears  as  a 
prerequisite for improving such surveillance, according to ESMA.  

Further developments in this area, by reinforcing market integrity at a European level, would 
be coherent with the objectives of MAR and would be relevant in terms of value added to 
the EU, while the current framework seems insufficient in respect of these criteria. 

Since the implementation of the standardization of order data and of the measures to ensure 
data  quality  need  to  be  achieved  first,  ESMA  does  not  consider  at  this  stage  the 
recommendation of mandatory reporting for order book data appropriate. 

A  more  in-depth  assessment  of  cross-market  book  surveillance  is  provided  in  Annex  8, 
section 1, with a potential way forward on how to enhance the framework. 

3.  Conclusions 

Based on the analysis performed in this Annex and taking into account the feedback received 
from  stakeholders’  groups,  from  respondents  to  the  targeted  consultation,  and  studies  and 
reports consulted, in  certain key areas a legislative intervention would be merited to  ensure 
that MAR meets its overarching objectives. The key areas that should be addressed are: the 
clarification of the notion of inside information with respect to the moment of its disclosure 
and  to  the  conditions  for  delaying  it,  a  disproportionate  sanctions  regime  for  SMEs  (for 
disclosure  breaches  only).  Other  areas  evaluated  in  this  Annex  may  also  be  considered, 
notably  the  excessively  burdensome  rules  for  the  market  soundings  and,  possibly,  insider 
lists.  

Furthermore,  the  current  framework  for  surveillance  of  cross-market  order  book  was 
considered insufficient, due to a lack of harmonisation of the format of order book data and 
the absence of a strong cooperation mechanism. 

230 

 
 
 
 
 
 
 
ANNEX 9: ANALYSIS OF RULES ON INVESTMENT RESEARCH 

1.  Introduction 

This  annex  assesses  the  impact  of  the  MIFID  II  rules  on  the  provision  of  research,  in 
particular on SMEs, and hence the visibility of listed companies to investors in the EU. It 
also sets out possible additional measures that could accompany the main set of measures 
presented in  the main body of the impact  assessment to  make listing more attractive in 
the EU (by making companies more visible and, hence, more attractive to investors). 

Investment  research  plays  an  essential  role  in  the  valuation  of  companies  and  financial 
instruments  and  in  guiding  investment  decisions  (research  can  help  in  particular  to 
determine an investment valuation or the value of an asset or to spot trends and may also 
include a recommendation to  buy or sell securities).  Investment  research is  particularly 
important to achieve greater visibility and inform potential investors about the prospect 
of investing in SMEs. Investment research is produced by investment firms, investment 
banks,  independent  research  providers  and,  when  it  comes  to  SMEs,  also  by  issuers 
themselves.  Diversity  in  research  is  essential  to  the  investment  markets  to  ensure  that 
investors  can  tap  different  sources  of  information  and  can  make  better  informed 
investment decisions.  

If  an  issuer,  in  particular  a  SME,  does  not  get  investment  research  coverage,  investors 
will not  have information on the company  readily  available  and will need to  engage in 
own research in order to establish a valuation. The time and costs involved can act as a 
deterrent to investing in these companies. In consequence, trading turnover (liquidity) in 
this company will suffer (be lower)494. This usually implies higher spread between quoted 
buy and sell (bid/ask) prices in the market (quoted spreads) and a reduced depth of posted 
quotes. In effect, investors will face worse execution prices and increased price slippage 
(disadvantageous price move when executing a market order) thus making the entity not 
covered by research an even less enticing prospect495. In consequence, the ability of this 
company  to  raise  capital  in  public  markets  is  likely  to  weaken  and  also  become  less 
attractive due to lower amounts of capital that can be raised (as increased liquidity risks 
will  negatively  impact  pricing  through  the  illiquidity  premium  that  would  need  to  be 
factored in). This may lead to companies relying more on non-market-based sources of 
financing  with  possible  negative  consequences  for  their  growth  potential  (and  for  the 
development of capital markets more broadly).  

494 AMF: Reviving research in the wake of MIFID II_ January 2020 “… Yet research, the appeal of small and midcaps for investors 
and their liquidity are all closely linked. The risk is the formation of a negative spiral: less followed companies have a lower degree 
of  visibility  among  investors,  who  turn  away  from  them,  thus  further  weakening  them  in  their  ability  to  obtain  financing.  Such  a 
situation seems especially prejudicial at a time when the French and European authorities share the strong ambition of strengthening 
means for financing the economy.”. 
In a SEC working paper (Staff Report on the Issues Affecting the Provision of and Reliance Upon Investment Research Into Small 
Issuers  (sec.gov),  of  18  February  2022,  it  is  reported  that  “…Broadly  speaking,  research  and  its  prompt  and  fair  dissemination  to 
investors  has  been  recognized  as  valuable  to  an  efficient  system  of  securities  markets.  There  is  substantial  evidence  that  research 
coverage of issuers is beneficial.5 Research coverage may be particularly important for a small issuer that seeks to increase its stock 
liquidity or gain investors’ recognition.” 
495 Investors/traders may not execute as often when the spread is large. The quoted spread constitutes a hidden cost for investors when 
they trade stocks.  

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Studies in the US have shown that research coverage of an issuer is positively related to 
its stock liquidity496 and that a reduction in research coverage of an issuer may reduce its 
stock  liquidity497.  Research  coverage  contributes  to  liquidity  by  increasing  investors’ 
recognition of issuers498. A recent SEC paper suggests that “research and its prompt and 
fair dissemination to investors has been recognized as valuable to an efficient system of 
securities  markets”  499  and  that  there  is  substantial  evidence  that  research  coverage  of 
issuers is generally beneficial and particularly important for smaller issuers that seek to 
increase stock liquidity and gain investors’ recognition. 

2.  The EU regulatory environment  

In  April  2016,  Commission  Delegated  Directive  (EU)  2017/593  supplementing  Article 
24(9) of MiFID II, introduced rules applicable to the provision of investment research by 
third  parties  to  investment  firms  providing  portfolio  management  or  other  investment 
services  to  clients.  The  Delegated  Directive  required  investment  firms  to  clearly 
distinguish  payments  received  as  brokerage  commissions  from  the  compensation 
perceived  for  the  provision  of  investment  research  and  to  assess  the  quality  of  the 
research purchased based on robust quality criteria and its ability to contribute to better 
investment decisions500. 

2019), 

https://www.sec.gov/spotlight/investor-advisory-committee-2012/investment-research-post-mfid-ii-world.pdf 

496  See,  e.g.,  Tung  L.  Dang  et  al.,  Analysts  and  Stock  Liquidity  –  Global  Evidence,  COGENT  ECON.  &  FIN.  (2019), available  at 
https://www.tandfonline.com/doi/full/10.1080/23322039.2019.1625480  (finding  that  firms’  analyst  coverage  is  positively  related  to 
stock  liquidity,  which  confirms  “the  notion  suggested  in  previous  studies  that  analyst  activities  provide  public  information  that 
reduces  information  asymmetries  between  firms  and  market  participants”);  see  also  Beyer  et  al.,  (discussing  empirical  evidence 
finding  that  “firms  with  sustained  improvements  in  analysts’  ratings  of  disclosure  quality  ...  show  an  increase  in  stock  liquidity, 
analyst following, institutional ownership, and stock performance”). 
497 For instance, one study found that issuers that lose analyst coverage for at least one year suffer a “significant deterioration in bid-
ask  spreads,  trading  volumes,  and  institutional  presence.”  Simona  Mola  et  al.,  Is  There  Life  After  the  Complete  Loss  of  Analyst 
Coverage?,  88  ACCT.  REV.  667,  670  (2013)  (“Mola  et  al.”)  (finding  that  “firms  that  lose  all  analyst  coverage  for  one  year  are 
significantly more likely to delist than their covered peers”). See, e.g., Inv’r Advisory Comm., Recommendation of the SEC Investor 
Advisory Committee Structural Changes to the US Capital Markets Re Investment Research in a Post-MiFID II World, SEC, 3 (Jul. 
25, 
(“A 
reduction  of  Research  coverage  has  a  knock-on  effect  on  liquidity,  which  is  also  an  essential  component  of  our  capital  markets 
ecosystem ....”); Merton, (finding that the loss of analyst coverage  for a stock will reduce investor interest, with adverse effects on 
liquidity); see also The IPO Task Force, Rebuilding the IPO OnRamp: Putting Emerging Companies and the Job Market Back on the 
Road to Growth, SEC (Oct. 20, 2011) (“IPO Task Force”), https://www.sec.gov/info/smallbus/acsec/rebuilding_the_ipo_on-ramp.pdf 
(“Lack  of  research  coverage  adversely  impacts  trading  volumes,  company  market  capitalizations  and  the  total  mix  of  information 
available  to  market  participants.”);  Jeffrey  M.  Solomon,  Cowen,  Inc.,  Capital  Formation,  Smaller  Companies,  and  the  Declining 
Number  of  Initial  Public  Offerings,  SEC,  14  (Jun.  22,  2017)  (“Cowen  Presentation”),  https://www.sec.gov/spotlight/investor-
advisory-committee-2012/jeffrey-solomon-presentation.pdf  (“Little  or  no  research  coverage  generally  corresponds  with  lower  stock 
liquidity.”). 
498 See, e.g., Mola et al., (“[W]e find that the loss of analyst coverage reduces the number of investors who recognize and trade the 
firm’s stock, with attendant effects of widening the bid-ask spread and decreasing trading volume and institutional presence.”). 
For example, one study found that market reactions to coverage changes are significantly correlated with the time and effort analysts 
devote to directing investors’ attention to issuers that they are covering, suggesting that coverage changes affect issuer value because 
they affect investors’ recognition. 
499  Staff  Report  on  the  Issues  Affecting  the  Provision  of  and  Reliance  Upon  Investment  Research  Into  Small  Issuers  (sec.gov), 
February  2022.  See  also  SEC,  Future  Structure  of  Securities  Markets,  37  Fed.  Reg.  5286  (Mar.  14,  1972)  (“1972  Commission 
Statement”.  The  SEC  suggests  that  a  number  of  factors  may  have  impacted  the  low  decline  of  research  coverage  of  small  issuers, 
including  legislative  and  regulatory  measures, MiFID  II.  The  SEC, among  those  variables,  mentions:  the  rise of  client  commission 
arrangements (“CCAs”), a decline in the overall number of IPOs until 2020, falling equity commissions, fewer institutional investors 
that invest in small issuers, a shift from active to passive investment strategies, an increase in reliance on in-house research and an 
increase in alternative data sources. For instance, small issuers are less likely to be covered by research coverage than large issuers. 
Specifically, the availability of research coverage and the number of analysts covering an issuer correlate with market capitalization. 
In  recent  years,  approximately  60%  of  small  issuers  have  received  research  coverage  versus  approximately  90%  of  large  issuers. 
Furthermore,  small  issuers  received  coverage  by  approximately  two  analyst  firms  on  average  while  large  issuers  were  covered  by 
approximately nine analyst firms on average. 
500 Article 13 of Commission Delegated Directive (EU) 2017/593  supplementing Directive 2014/65/EU of the European Parliament 
and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations 
and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits states that the 

232 

 
 
                                                           
 
The  aim  of  those  rules,  which  became  applicable  as  from  3  January  2018,  generally 
referred to as the “unbundling rule”, was twofold.  

On the one side, they served the purpose of ensuring transparency by investment  firms 
providing  both  execution  and  research  services  on  the  costs  of  investment  research 
(requiring  to  price  that  service  separately501)  as  well  as  of  managing  the  conflicts  by 
avoiding that (positive) research is used by such investment firms  to entice investors to 
trade more with the aim of increasing brokers’ commissions on trading.  

On  the  other  hand,  the  unbundling  rule  was  also  meant  to  reduce  barriers  to  entry  for 
independent  research  providers  (i.e.  entities  providing  research  services  only,  and  not 
also execution services) in order to ensure a higher level of research quality (which was 
at the time considered very low). Independent research providers persistently complained 
that the inability to properly price research led to investors consuming almost exclusively 
research provided by brokers, as the latter appeared to be provided essentially for free as 
part  of  the  brokerage  service  (this  approach  to  the  provision  research  originated  in  the 
US, where it is commonly referred to as “soft dollars”).  

After a few years of application, the success of the unbundling rule is contestable.  

The objectives to better manage the conflicts of interest, to limit the over production of 
research and to improve transparency on the costs associated to the provision of research 
the rules seem to have been largely met502.  

introduction  of  MIFID  II  unbundling  rules, 

However, it appears that the MiFID II “unbundling” rules have not resulted in favouring 
the access of more independent investment research providers. On the contrary, further to 
independent  research  became 
the 
unsustainable due the low price charged by some larger research providers503. As brokers 
have  “unbundled”  research  and  brokerage  –  essentially  advertising  how  “cheap”  their 
research  actually  is  –  research  boutiques  are  even  more  struggling.  The  independent 

provision of research by third parties to investment firms providing portfolio management or other investment or ancillary services to 
clients are not be regarded as an inducement where received in return for either of the following:  
(a) direct payments by the investment firm out of its own resources;  
(b)  payments  from  a  separate  research  payment  account  controlled  by  the  investment  firm,  provided  that  the  following  conditions 
relating to the operation of the account are met:  
(i) the research payment account is funded by a specific research charge to the client;  
(ii) as part of establishing a research payment account and agreeing the research charge with their clients, investment firms set and 
regularly assess a research budget as an internal administrative measure;  
(iii) the investment firm is held responsible for the research payment account;  
(iv)  the  investment  firm  regularly  assesses  the  quality  of  the  research  purchased  based  on  robust  quality  criteria  and  its  ability  to 
contribute to better investment decisions. 
In addition, such provision requires that, where an investment firm makes use of the research payment account (point (b) above), it 
should also provide the clients with: (a) information about the budgeted amount for research, before the provision of an investment 
service to clients, and the amount of the estimated research charge for each of them, before the provision of an investment service; as 
well as with (b) annual information on the total costs that each of them has incurred for third party research. 
501 Recital 26 of Commission Delegated Directive (EU) 2017/593  supplementing Directive 2014/65/EU of the European Parliament 
and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations 
and  the  rules  applicable  to  the  provision  or  reception  of  fees,  commissions  or  any  monetary  or  non-monetary  benefits states  that 
investment  firms  providing  both  execution  and  research  services  should  price  and  supply  them  separately  in  order  to  enable 
investment firms established in the Union to comply with the requirement to not accept and retain fees, commissions or any monetary 
or non-monetary benefits paid or provided by any third party or a person acting on behalf of a third party in relation to the provision 
of  the  service  to  clients  set  out  in  Article  24(7)  [i.e.  advice  provided  on  an  independent  basis]  and  24(8)  [portfolio  management 
service] of Directive 2014/65/EU 
502 ESMA working paper on MIFID II research unbundling: assessing the impact on SMEs – February 2021 
503  SEC  Staff  working  paper  on  investment  research  –  February  2022  :  “…In  at  least  two  other  studies,  75%  of  those  surveyed 
believed  that  the  low  prices  charged  by  research  providers  at  the  time  were  not  sustainable,  particularly  for  small  independent 
research providers…..Boutique or independent research providers in the EU, including the U.K. before its withdrawal from the EU, 
have complained that larger research providers have engaged in predatory pricing and unfair competition, with some rivals charging 
as little as $10 000 annually for access to all written research”. 

233 

 
 
                                                                                                                                                                            
research community, as well as some regulators504, allege that this resembles some form 
of “price dumping”, i.e., systematically selling research below the cost of producing it505. 

Evidence  further  suggests  that  the  unbundling  rules  might  have  impaired  the  overall 
availability of research, especially for SMEs, and that it produced a shrinking in market 
research  infrastructure506  which  would  seem  to  be  detrimental  to  a  healthy  competitive 
environment and a sufficiently diversified analysts’ market507. EU brokers, that had in the 
past provided SME research as part of their “bundled” investment services, scaled back 
SME  capacities  following  their  decision  not  to  pass  the  costs  of  research  to  their 
clients508. The first  “victim” of cost-cutting in  research expenditure was the listed SME 
segment. SME research suffered, notably due to the disappearance of the cross-subsidies 
that  previously  existed  (with  bundled  payments)  between  large  and  small  cap  research 
(brokerage  fees  on  large  cap  partially  subsidized  research  on  small  cap,  building  on 
brokers’  expectations  to  potentially  raise  fees  on  small  cap  brokerage  in  the  future). 
Overall,  several  surveys  show  that  the  SME  coverage  has  significantly  shrunk  or  even 
disappeared altogether in the years after the “unbundling” MiFID II rules took effect. It is 
considered  that  MIFID  II  unbundling  rules  favoured  selling  investment  research 

504 In its February 2021 report, ESMA indicates that a “possible area for future research concerns an evaluation of the actual price of 
research, with a view to examine whether any ‘dumping’ of research prices is taking place. Data limitations make this a challenging 
area to investigate, but material on this perspective would also contribute another element to this rich area for future study.”.  
In  the  AMF  paper:  several  firms  consider  that  the  prices  at  which  research  is  sold  are  highly  competitive,  with  no  common 
comparison to those offered previously, and even resemble dumping practices. 
505 This is also recognised by ESMA: “A final possible area for future research concerns an evaluation of the actual price of research, 
with a view to examine whether any ‘dumping’ of research prices is taking place. Data limitations make this a challenging area to 
investigate, but material on this perspective would also contribute another element to this rich area for future study.” ESMA MIFID 
II research unbundling: assessing the impact on SMEs – February 2021. 
506  CFA  Institute  (2017)  “MIFID  II:  a  new  paradigm  for  investment  research”,  Chartered  Financial  Analyst  Institute  and  AMF: 
Reviving research in the wake of MIFID II_ January 2020. The AMF in particular has found that MiFID II has led to the development 
of a supply of research services at extremely low prices, which would seem to be detrimental to a healthy competitive environment. 
Several firms consider that the prices at which research is sold are highly competitive, with no common comparison to those offered 
previously, and even resemble dumping practices. 
In literature there is no consensus on this issue and there are also studies finding no correlation between the unbundling rules and the 
volume or quality of research on SMEs (ESMA’s study). A study commissioned by FISMA showed that indeed research has fallen, 
but  this  is  partly  attributed  to  cyclical  effects  and  the  study  shows  a  somewhat  stronger  decline  for  the  large  firms,  which  the 
contractor attributes to the fact brokers are cutting costs and reduce the overproduction of research. 
507 While the decline of investment research is objectively recognised, there is no consensus on the extent to which the “unbundling” 
has  played  a  role  in  this  decline.  In  a  SEC  paper  of  February  2022,  on  “the  issues  affecting  the  provision  of,  and  reliance  upon, 
investment  research  into  small  issuers”,  the  SEC  suggests  that  a number  of  factors  may  have  impacted  research coverage  of  small 
issuers, including legislative and regulatory measures, MiFID II. While some NCAs (AMF : Reviving research in the wake of MIFID 
II_  January  2020,  and  other  stakeholders  (https://www.cfainstitute.org/-/media/documents/survey/cfa-mifid-II-survey-report.pdf) 
included those consulted by ESMA found that the unbundling rules constitutes a major hurdle for more  research on SMEs issuers, 
ESMA, in 2021, found no evidence that the unbundling requirement had any impact on the relative breadth and quality in research for 
SMEs  compared to  large  firms.  ESMA’s  report  (ESMA  MIFID  II  research unbundling:  assessing  the  impact  on  SMEs  –  February 
2021) concluded that in absolute terms, SMEs continue to be characterised by lower amount of analyst research, higher probability of 
losing coverage, worse quality of research and limited secondary market liquidity. However ESMA found that this situation appears 
to have been neither improved nor worsened by the MiFID II research unbundling provisions. The report in particular highlights that, 
since  MIFID  II,  (i)  the  quantity  of  research  per  SME  has  not  declined  relative  to  larger  firms,  (ii)  the  probability  of  an  SME 
completely losing research has not increased relative to a larger firm, (iii) the quality of SME research has not worsened relative to a 
larger  firm  and  (iv)  SME  liquidity  conditions  have  worsened  relative  to  larger  firms.  The  report  highlights  nonetheless  that  other 
academic  data  based  studies  and  industry  surveys  did  conclude  that  the  MIFID  II  research  unbundling  rules  has  led  to  a  general 
reduction in the number of analysts producing research per company. ESMA did not explore the consequences of this phenomenon, 
including the consequence of the actual price of research (and the possible dumping) nor did they explore whether those provisions 
had had an impact on firms’ decision to list on exchanges in the first place. The report acknowledges, nonetheless, that other academic 
data based studies and industry surveys did conclude that the MIFID II research unbundling rules has led to a general reduction in the 
number of analysts producing research per company.. In a different report released one month later (March 2021) and focusing on the 
functioning  of  the  rules  applicable  to  SME  growth  Markets,  ESMA  looked  at  ways  to  increase  research  coverage  of  SMEs, 
highlighting that market participants believe that availability of research in SMEs is an issue: “All but two respondents expressed the 
view that the unbundling rules in MiFID II represent a major hurdle for the production of research on SME issuers”. In its March 
2021 report, where the answers to the ESMA consultation are detailed, it clearly appears that nearly all the respondents (except 2) 
view this as the most important focus point. 
508 CFA Institute 2019 - “With clients (asset owners) of large investment firms expecting research costs to be paid by their managers, 
competitive pressures have forced most asset managers to absorb research costs.” 

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unbundled but at a price far below the cost of producing it. The consequence was further 
concentration  in  the  now  “unbundled”  research  market  and  a  reduction  in  the  diversity 
and breadth of the research on offer.  

While  the  MiFID  II  provisions  on  investment  research  in  the  delegated  directive  were 
designed to break the nexus between brokerage commissions and investment research as 
well as to create a “price” for investment research, unbundling has not actually allowed 
to  independently  price  research  and  has  also  not  opened  up  this  market  to  independent 
(non-brokerage) providers509. Most importantly, the unbundling rule has not stemmed the 
negative trend in SME research coverage and has not led to the promised emergence of 
independent, small cap focused research providers. If anything, there has been a drastic 
cut in research provision, as well as brokers focusing all of their research capacities on 
providing  “cheap”  coverage  for  large  cap  (blue  chip)  companies.  Some  studies  already 
suggest  that  “the  complete  removal  of  the  unbundling  rule  should  be  considered” 
(OECD, 2022510).  

In 2021, the “un-bundling rules” were amended,  as part of a more  general  effort under 
CMRP511 to help the recovery from the COVID-19 crisis which forced companies to rely 
more  heavily  on  debt,  weakening  their  funding  structures.  In  circumstances  when 
companies needed urgent re-capitalization, the need for more visibility of EU companies, 
in particular SMEs,512 was considered even more fundamental and the implicit cost of not 
having the research coverage even higher. In that context, the CMRP, applicable since 28 
February 2022, introduced a first attempt to improve the SMEs’ research coverage513 by 
providing an exemption from the “unbundling rules” for research covering issuers whose 
market  capitalization  does  not  exceed  EUR  1  billion  for  the  period  of  36  months 
preceding the provision of the research, hence allowing in such cases for joint payment 
for trade execution and research.  

While this measure was widely welcomed by some brokers that specialize in investment 
services  pertaining  to  this  small-  and  mid-cap  market  segment,  all  bigger  brokerage 
houses  that  provide  services  across  all  segments  stated  in  their  answers  to  the 
consultation514 that they would not make use of the new “joint payment” rule, as it proved 
too  cumbersome  to  run  two  payment  schemes  for  investment  research  in  parallel.  Also 

509 CFA Institute , 2019 “dependent research providers have not benefitted from MiFID II. A more competitive research marketplace 
is squeezing research providers; in particular, 57% of buy-side respondents report sourcing less research from investment banks than 
before  MiFID  II,  and  most  respondents  cite  a  reduction  in  sell-side  analyst  jobs”.  “….The  results  also  suggest  that  independent 
research providers have not benefitted much from the introduction of MiFID II. More transparency and separate pricing of research 
are intended to create a more level playing field among research providers, yet it appears independent houses have not been able to 
grow their market share. As shown in Figure 6, only 17% of respondents source relatively more research from independent providers, 
which  is  little  changed  from  expectations  before  MiFID  II.  As  bulge-bracket  investment  banks  have  cut  prices  to  maintain  client 
business and squeeze competitors, independent providers appear to have realized little, if any, market share gains at this stage.”. 
510 OECD working paper “Fostering cyclical convergence in the Euro area” , 03 January 2022. 
511 Directive (EU) 2021/338 of the European Parliament and of the Council of 16 February 2021 amending Directive 2014/65/EU as 
regards information requirements, product governance and position limits, and Directives 2013/36/EU and (EU) 2019/878 as regards 
their application to investment firms, to help the recovery from the COVID-19 crisis 
512 AMF: Reviving research in the wake of MIFID II, January 2020. 
513 Recital 8 of the CMRP (Directive (EU) 2021/338 of the European Parliament and of the Council of 16 February 2021 amending 
Directive 2014/65/EU as regards information requirements, product governance and position limits, and Directives 2013/36/EU and 
(EU)  2019/878  as  regards  their  application  to  investment  firms,  to  help  the  recovery  from  the  COVID-19  crisis)  states,  “In  the 
immediate aftermath  of  the  COVID-19 pandemic, issuers, and in particular  small and  middle-capitalisation companies, need  to be 
supported by strong capital markets. Research on small and middle-capitalisation issuers is essential to help issuers to connect with 
investors. That research increases the visibility of issuers and thus ensures a sufficient level of investment and liquidity. Investment 
firms  should  be  allowed  to  pay  jointly  for  the  provision  of  research  and  for  the  provision  of  execution  services  provided  certain 
conditions are met”. 
514  The  Commission  consultation  on  the  Listing  Act  launched  in  November  2021:  https://ec.europa.eu/info/consultations/finance-
2021-listing-act-targeted_en. 

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other respondents  to  this  consultation  argued that while the adjustments brought  by the 
CMRP were viewed as positive, their real impact was considered to be extremely limited. 
Many  admitted  that  the  new  regime  has  not  been  used  as  it  adds  to  operational 
complexity and costs (too many business models) and would see merit in alleviating the 
MiFID II regime on research even further.  

3.  Developing an investment research of quality for SMEs: the way forward  

While,  there  is  no  consensus  on  the  underpinning  causes,  the  decline  of  investment 
research is objectively recognized515.  
The consultation on the Listing Act also looked into measures that could be adopted in 
the EU to revitalise the market for investment research.  

While several  respondents,  in  particular NCAs, considered that it might  be too  early to 
assess  whether  the  alleviation  introduced  by  the  CMRP  has  already  produced  any 
meaningful results, other participating stakeholders already qualified the measure as not 
sufficiently  far-reaching.  Those  respondents  considered  that  the  market  capitalisation 
of SMEs below which the exemption applies should be increased to between EUR 5 
billion and 10 billion to properly cover the SMEs (including mid-cap) segment. This 
measure,  according  to  them,  should  support  the  re-bundling  of  payments  (for  research 
and execution services) in those firms which mostly suffered from the decline in research 
over the last years. It would in particular better capture the medium-cap companies which 
are  companies  that  have  already  proven  their  credibility  and  that  may  stand  a  better 
chance  to  attract  potential  investors.  It  is  however,  widely  recognised  that  unless 
investment  firms  are  ready  to  cross-subsidise  the  SMEs  research  coverage  with  the 
(higher)  revenues  deriving  from  execution  of  orders  on  large-caps/blue  chips,  the 
effectiveness  of  this  measure  may  remain  low.  Many  respondents,  however,  signalled 
that a dual payment system (for research covering SMEs and non-SMEs) would be too 
burdensome  and  too  costly.  To  ensure  the  effectiveness  of  the  measure,  the  threshold 
should  therefore  be  adequately  calibrated  to  allow  for  the  exclusion  of  some  smaller 
markets (and the respective brokerage community) in their entirety. 

Also considering that the EU is the only major jurisdiction to have adopted unbundling of 
research  and  brokerage  fees516,  several  business  associations517  participating  in  the 
consultation  requested  to  go  back  entirely  on  the  unbundling  regime  for  payment  of 
research,  arguing  that  it  would  be  the  only  way  to  boost  research  also  for  SMEs.  The 
MiFID  II  regime  is  seen  as  an  indirect  incentive  to  allocate  a  larger  part  of  research 
services value in the hands of a few big players, with the number of research publications 
on  SME  having  dropped  to  an  almost  non-existent  level.  If  MiFID  II  has  succeeded  in 
increasing  transparency  in  the  procurement  of  market  research  for  investors,  many 

515 ESMA working paper on MIFD II research unbundling Feb 2021 and MIFID II Review report on the functioning of the regime for 
SME growth Markets, March 2021: ESMA found no evidence that the unbundling requirement had any impact on the relative breadth 
and quality in research for SMEs compared to large firms. ESMA, acknowledging market participants’ concern on the availability of 
SME research, looked into ways to increase research coverage of SMEs, seeing merit in assessing the possibility of developing a pan-
European Program or programs at the level of trading venues that could participate to the funding of SME research. 
516 The UK, which was at the time of its adoption, one the main proponent of such a rule has however maintained it even after Brexit. 
In the United States, the largest global research market, regulators maintained payment of research via brokerage fees, periodically 
adopting no-action letters allowing their broker-dealers to cope with the differences among the two systems (the “soft dollar” rule) . 
517 In the consultation on Listing Act, the following business associations were in favour of a re-bundling: Finance Finland, European 
Issuers  (Belgium), BVI  (Germany  – for  fixed  income  research  ),  Association  Française  de  la  Gestion  Financiere  (for  fixed  income 
research), Bundesverband der Wertpapierfirmene e. V. (bwf) (Germany), FESE. 

236 

 
 
                                                           
market  actors518  consider  that  it  had  a  negative  impact  on  the  overall  availability  of 
research, especially for SMEs. Several respondents to the public consultation argue that 
re-bundling of payments on research and execution services could boost the production 
of  research,  allowing  the  emergence  of  more  analysts  and  more  competition  between 
research providers. More research should, in turn, support more visibility of the issuers, 
especially of SMEs, and more interest of investors to invest in those companies. It may 
however  take  some  time  to  restore  the  SME  research  capabilities  considering  that 
many519  have  observed  that  MIFID  II  had  altered  the  competition  environment  in  the 
research area. At the moment, investment research is often sold at a price below the cost 
of  producing  it,  leading  in  some  cases  to  what  is  known  as  “dumping”520,  making  it 
uneconomical for companies to produce research and also impacting on the quality of the 
research delivered.  

A majority of respondents to the consultation recommended to exempt the independent 
analysts from the MiFID II research payment regime on the basis that those analysts 
do  not  face  conflict  of  interest  like  analysts  belonging  to  groups  that  provide  both 
investment  research  and  execution  services.  This  is  an  approach  that  has  been  recently 
adopted in the UK521: research providers are exempted from the inducement rules where 
they do not  provide execution services and  are  not  part of  a  group that  includes a firm 
offering execution services522.  In 2019, the Chief Executive of the UK CFA523 clarified 
that those independent  research providers can  offer sample material  on an ad-hoc basis 
without it being an inducement for an asset manager. In the answers to the consultation 
on Listing Act, there were however a few respondents strongly opposed to this arguing 
that this would create an unacceptable un-level playing field between research provided 
by investment firms and other research producers. 

Flanking measures 

MIFID  II  reinforced  measures  to  manage  the  conflicts  of  interest,  in  particular  by 
introducing  organisational  requirements  in  relation  to  investment  research.  In  order  to 
ensure  a  good  level  of  transparency  (avoiding  falling  into  the  situation  pre-MiFID  II), 
both the measures of increasing the threshold for “re-bundling” payment on research and 
the  total  “re-bundling”  of  such  payment  could  be  accompanied  by  flanking  measures 
aimed to enhance transparency on the cost of the service.  

518 AMF: Reviving Research in the wake of MIFID II – January 2020, CFA Institute, To Bundle or Not to Bundle? A Review of Soft 
Commissions and Research Unbundling (Summary) (cfainstitute.org) - 23 June 2021 
519 AMF: Reviving Research in the wake of MIFID II – January 2020 - The AMF in particular has found that “MiFID II has led to the 
development of a supply of research services at extremely low prices, which would seem to be detrimental to a healthy competitive 
environment. Several firms consider that the prices at which research is sold are highly competitive, with no common comparison to 
those  offered  previously,  and  even  resemble  dumping  practices.”  and  also  CFA  Institute  (2019)  “MIFID  II:  a  new  paradigm  for 
investment research”, Chartered Financial Analyst Institute . Literature is however not consensual on this issue and there are studies 
finding  no  correlation  between  the  unbundling  rules  and  the  volume  or  quality  of  research  on  SMEs  (ESMA’s  study).  A  study 
commissioned by FISMA showed that indeed research has fallen, but this is partly attributed to cyclical effects and the study shows a 
somewhat  stronger  decline  for  the  large  firms,  which  the  contractor  attributes  to  the  fact  brokers  are  cutting  costs  and  reduce  the 
overproduction of research. 
520 In its February 2021 report, ESMA indicates that a “possible area for future research concerns an evaluation of the actual price of 
research, with a view to examine whether any ‘dumping’ of research prices is taking place. Data limitations make this a challenging 
area to investigate, but material on this perspective would also contribute another element to this rich area for future study.” 
521 PS21/20: Changes to UK MiFID’s conduct and organisational requirements | FCA 
522 Andrew Bailey keynote speech on MiFID II at the European Independent Research Providers Association | FCA: “We have heard 
loudly  and  clearly  your  views  that,  as  independents,  you  cannot  induce  an  asset  manager  to  do  anything  except  –  hopefully  – 
purchase your research services… For example, we have already said that, irrespective of trial periods, independent providers can 
pitch for business and offer sample material on an ad-hoc basis without it being an inducement for an asset manager.” 
523 Ibid 

237 

 
 
                                                           
Encouraging more research sponsored by the issuers could also be seen as a possible 
flanking measure to develop research on SMEs and increase their visibility. Safeguards 
would  be  however  necessary:  issuer-sponsored  research  could,  also  in  this  case,  be 
regulated by a “code of conduct”, setting out the minimum standards of independency 
and objectivity that providers of such research should respect. A mandate could be given 
to ESMA to develop such code of conduct. This would incentivize the research coverage 
of  SMEs  by  making  sponsored-research  more  transparent  on  the  relations  between 
issuers and analysts and on the independence of each party. If this may initially increase 
costs for the production of such research, ultimately this may create more opportunities 
for  SMEs  issuers  to  attract  investors  and  support  liquidity  in  their  stock.  Getting  more 
financing  via  the  capital  markets  may  hence  become  cheaper  for  SMEs  (e.g.  due  to  a 
lower  illiquidity  premium).  On  the  investors’  side,  it  would  allow  them  to  potentially 
better spot investment opportunities (in SMEs) and better diversify their portfolio. Some 
respondents  to  the  consultation  on  the  Listing  Act,  including  some  NCAs,  consider 
however that it cannot be seen as a substitute for independent research produced by the 
financial industry for the investors and that issuers-sponsored research would continue to 
suffer from a bad stigma and the belief that the investment research paid by the issuer is 
prepared in view of promoting its own company.  

Respondents  to  the  consultation  on  the  Listing  Act,  but  also  by  other  stakeholders524, 
raised  a  possibility  of  other  solutions  to  support  SMEs  research.  Amongst  the  frequent 
suggestions,  public  funding  (at  national  or  EU  level)  or  private  and  public  funding  to 
finance  SMEs  research  are  evoked.  Regulators  seem  to  favour  this  solution  less.  Some 
also  suggest  that  stock  exchanges  could  organise  investor  presentations  in  such  a  way 
that all SMEs could present  themselves to  analysts.  In the same spirit, some suggest  to 
create  platforms  where  written  research  could  be  openly  available.  Finally,  some 
respondents  to  the  consultation  considered  that  research  should  be  considered  as  a 
minor  non-monetary  benefit  and  would  thus  avoid  the  application  of  the  unbundling 
rule.  

524 AMF “Reviving research in the wake of MIFID II” – January 2020 

238 

 
 
 
                                                           
ANNEX 10: ACCOMPANYING MEASURES  

1.  Other MAR measures  

According  to  the  key  findings  of  the  evaluation  of  the  key  measures  of  the  MAR 
conducted in Annex 8525, it is appropriate to consider further simplifications of the MAR 
rules in addition to those described in the policy options of the impact assessment. 

A)  Review of the rules on Market soundings. 

Although alleviated through the SME Listing Act, the procedure for carrying out market 
sounding in the EU is still considered very burdensome by most stakeholders.  

Amendments  to  this  regime  should,  hence,  go  further  than  ESMA’s  recommendations. 
Firstly, by simplifying the procedure for both disclosing market participants (DMPs) and 
persons receiving market soundings and clarifying that this regime is to be applied only 
when inside information is  actually passed on. Secondly, by making the  regime clearly 
optional as a safe harbour, and not mandatory as it is currently perceived.  

In terms of implications,  the effects  of  a simplified and optional  regime  are  considered 
together,  noting  that  quantifications  prove  difficult  due  to  data  limitations  as  regards 
previous soundings and recordkeeping practices. Gearing the safe-harbour clause towards 
most  sensitive  soundings  decreases  regulatory  costs,  without  compromising  market 
integrity.  On  the  contrary,  envisaged  changes  will  foster  more  relevant  soundings  by 
focusing on (i) inside information, hence cases presumably posing higher risks, and (ii) 
situations where DMPs opt in to seek additional legal protection as regards their normal 
exercise  of  profession.  Against  this  background,  envisaged  changes  are  of  streamlining 
nature,  leading  to  negligible  impacts  on  the  cost  of  compliance  and  market  integrity 
compared to the status-quo. Notwithstanding, ESMA highlighted different readings with 
respect the optionality of the safe-harbour clause. By clarifying that the sounding regime 
is  strictly  optional  and  by  restricting  it  to  inside  information,  the  regulatory  burden 
arguably  is  reduced,  both  at  the  level  of  the  industry  as  well  as  the  supervisor.  The 
clarifications remove over-compliance of DMPs who previously filed market soundings, 
despite  no  presence  of  inside  information.  Another  potential  measure  to  simplify  the 
market sounding would be to exempt private placements of shares, extending the existing 
exemption  introduced  by  the  SME  Listing  Act526  for  private  placement  of  debt 
instruments. This would entail that communication of information to qualified investors 
for the purposes of negotiating the contractual terms and conditions of their participation 
in  an  issuance  of  equity  would  not  constitute  market  sounding  and  shall  not  constitute 
unlawful  disclosure  of  inside  information.  An  explicit  exemption  implies  a  more  equal 
treatment of equity and debt. It will furthermore save private equity issuers and investors 
the cost of applying MAR with respect to market soundings requirements. 

B)   Extension of the alleviations on insiders lists to all types of markets. 

While ESMA assessed the usefulness and effectiveness of insider lists in the context of 
its review report, in particular for authorities in the investigatory tasks,527 the efficiency 

525 See section 2.5 and 2.6 of Annex 8. 
526 Regulation (EU) No 2019/2115 on promotion of the use of SME growth markets, Article 1(1) 
527 Showing that 24 NCAs requested insider lists in the observation period running from July 2016 to the end of June 2019. 

239 

 
 
 
                                                           
of  the  tool  is  questioned  by  most  market  participants  that  highlighted  the  burden  of 
drawing  up  such  lists,  with  in  particular  the  difficulty  to  collect  personal  data.  This 
feedback,  confirmed  by  the  analysis  of  the  TESG,  justifies  to  look  at  ways  to  simplify 
this requirement. A possibility could be to extend to all issuers the approach of the SME 
Listing  Act  whereby  issuers  also  on  regulated  markets  and  MTFs  would  only  have  to 
draw  up  permanent  insider  lists,  limiting  the  costs  for  issuers  who  would  only  have  to 
include  in  the  lists  those  persons  with  regular  access  to  inside  information.  By  way  of 
derogation,  and  where  justified  by  specific  national  market  integrity  concerns,  this 
amendment  could  also  provide  Member  States  with  an  option  to  require  issuers  on 
regulated  markets  and  MTFs  to  include  any  persons528  having  access  to  insider 
information, but imposing in this case a less burdensome format with a limited number of 
information.  This  approach  reconciles  the  need  to  keep  the  insider  list  for  enforcement 
purposes,  while  in  the  meantime  ensuring  a  proportionate  approach  for  issuers  when 
drawing up such lists.  

2.  Other prospectus measures 

The  following  are  additional  areas  of  more  limited  intervention  (i.e.  not  to  be  impact 
assessed) that will be explored as part of this initiative. 

A)  Simplify and alleviate the universal registration document (URD) regime. 

According  to  the  key  findings  of  the  evaluation  of  the  key  measures  of  the  Prospectus 
Regulation conducted in Annex 6529, the current framework relating to the URD could be 
improved in order to make the ‘shelf-filing’ system more efficient and effective. Possible 
measures would be to streamline the content of the URD, allow to draw up the document 
in  English  and considering whether  grant  the status  of frequent  issuer after one  year of 
approval. Furthermore, as the URD is built on the registration document which is part of 
the  standard  prospectus  for  equity  securities,  by  streamlining  the  latter  the  URD  will 
automatically become a more efficient document as well.  

Data  from  2021  show  that  35  URDs  have  been  approved  by  NCAs530  (and  56  URDs 
were approved in 2020531). The Commission Services expect that more URDs could be 
approved  or  filed  after  the  introduction  of  the  improvements  to  the  URD  framework. 
More  issuers  could  benefit  from  the  ‘fast-track’  approval  time.  In  the  long  term,  this 
could lead to a steady increase in URD approvals. However, this process is expected to 
take time as so far the use of URDs is mainly concentrated in one jurisdiction (France) 
where, before the introduction of the URD, issuers were used to using a similar type of 
document532.  This  suggests  that  a  cultural  change  may  also  be  needed  in  other 
jurisdictions  before  issuers  start  adopting  the  URD.  Furthermore,  as  highlighted  in 
section  4.1  of  Annex  6,  issuers  who  issue  non-equity  securities  in  a  continuous  or 
repeated manner or as part of an offering programme tend to prefer the base prospectus, 
which is a more flexible document (i.e. within the validity of the base prospectus, issuers 
only  have  to  file  final  terms  with  the  NCA  for  any  issuance  of  non-equity  securities). 

528 All the persons that are referred to in Article 18(1)(a) of MAR 
529 See section 4.5 of Annex 6. 
530 See section 4.5. of Annex 6. Data from ESMA do not include the number or URDs that are filed every year. The number of new 
approvals is higher relative to the number of URDs which are eligible for filing only.  
531 ESMA report on EEA prospectus activity in 2020. 
532 See section 4.5 of Annex 6. 

240 

 
 
 
                                                           
Furthermore, the URD is built on the registration document for equity securities, which is 
more  onerous  than  the  registration  document  for  non-equity,  which  is  mainly  used  in 
base prospectuses. Therefore, in the short term, improvements in the URD framework are 
expected to only marginally improve the take up of URDs.  

B)  Harmonise the upper prospectus exemption threshold for small offers of securities to 

the public (no national discretion) and remove lower threshold. 
According  to  the  key  findings  in  Annex  6533,  the  dual  threshold  regime  for  exempting 
small  offer  of  securities  to  the  public  could  be  improved.  According  to  the  feedback 
received  by  stakeholders  a  possible  measure  would  be  to  set  out  a  unique  threshold 
harmonized  at  EU  level,  taking  as  reference  the  average  threshold  proposed  by 
stakeholders  (EUR  12  million),  also  considering  that  about  half  of  the  EEA  Member 
States are  already aligned to  the current  upper threshold (EUR  8 million) and about  an 
additional  quarter  set  out  a  threshold  at  EUR  5  million.  Furthermore,  rules  on  how  the 
threshold  applies  should  be  clarified,  also  taking  into  account  the  explanation  provided 
by ESMA in its response to the targeted consultation. In that regard, the lack of clarity of 
the  current  provision  resulted  in  some  Member  States  exempting  every  single  offer  of 
securities  that  an  issuer  makes  below  the  applicable  threshold.  It  should  therefore  be 
clarified  that  the  new  harmonised  exemption  threshold  refers  to  the  total  aggregated 
consideration  of  all  offers  of  securities  to  the  public  that  an  issuer  has  made  in  the  12 
months preceding the start  date of a new offer.  In the MS that are  currently  exempting 
any issuer’s offer below the applicable threshold, this clarification is expected to reduce 
the overall number of offers exempted, even if the harmonised threshold is increased. 

Having  the  same  rules  in  place  across  the  EU  concerning  the  threshold  for  exempting 
small  offers  of  securities  to  the  public  would  contribute  to  the  Capital  Markets  Union 
project,  as  the  current  system  based  on  a  dual  threshold  is  fragmented  and  extremely 
confusing, as reported by several stakeholders. Furthermore, 47% of Member States have 
already  adopted  the  maximum  threshold  of  EUR  8  million  and  27%  of  Member  States 
the second highest threshold of EUR 5 million534. Most Member States tend to favour the 
upper threshold  range.  It is  not  possible to  quantify how many offers to  the public and 
their total consideration are being exempted below the various thresholds set out by the 
Member States, as the ESMA’s prospectus register only gathers data relating to offers for 
which  a  prospectus  was  approved.  However,  it  is  considered  that  aligning  the  lower 
threshold  to  the  upper  one  would  not  have  an  impact  to  large  issuers  who  do  not 
generally offer securities on such a small scale. On the contrary, small issuers, including 
SMEs, could benefit from substantial lower regulatory costs. Based on ESMA’s data for 
2021  on  the  considerations  of  offers  of  both  equity  and  non-equity  securities  with  an 
approved  prospectus,  and  limiting  the  analysis  to  Member  States  that  have  set  an 
exemption threshold below EUR 8 million, it emerges that the number of cases where the 
average consideration of offers reported as a single value535 for each currency is less than 
EUR  8  million536  is  very  marginal  compared  to  the  total  number  of  offers  approved  in 
those Member States. This is in line with the analysis that was carried out in the IA for 
the proposal for a Prospectus Regulation537, which indicated that at least 3% of approved 

533 See section 4.6 of Annex 6. 
534 See section 4.5 of Annex 6. 
535 Not as a maximum value or as a range. 
536 Values in currencies other than euro were converted in Euros and subject to fluctuations linked to the evolving exchange rate 
537 SWD(2015) 255 final (pages 21 and 45), available at: EUR-Lex - 52015SC0255 - EN - EUR-Lex (europa.eu) 

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prospectuses in 2013-2014 would have fallen out of scope with an exemption threshold 
set at EUR 10 million, percentage that would increase to at least 6% with a threshold set 
at  EUR  20  million.  Therefore,  aligning  the  existing  lower  threshold  to  the  upper 
threshold is considered to strike the right balance between reducing burden and excessive 
costs for issuers while preserving investor protection. 

C)  Reduce  the  current  minimum  six  day-period  between  the  publication  of  a  prospectus 

and the end of an offer of shares. 
According to the key findings in Annex 6538, and the recommendations of the CMU HLF, 
minimum six day-period between the publication of a prospectus and the end of an offer 
of  shares  could  be  reduced  to  three  days.  The  purpose  of  this  change  would  be  to 
facilitate  swift  book-building  processes,  especially  in  fast  moving  markets.  Several 
stakeholders that responded to the dedicated question on the targeted consultation argued 
that the current six day-period reduces flexibility for an IPO and might push some issuers 
to choose private placements and therefore exclude retail investors. Therefore, decreasing 
the six day-period to three days may increase the attractiveness of the inclusion of retail 
investors  in  the  IPOs.  While  it  is  not  possible  to  quantify  the  potential  increased  retail 
participation to IPOs, this change does not add costs or burden to issuers or other market 
participants  and  it  is  expected  to  contribute  to  facilitating  book  building  processes, 
reducing  execution  risk  for  many  issuers  particularly  under  volatile  market  conditions. 
Furthermore, this change is not expected to endanger investor protection, also in light of 
the  increasing  virtual  issuers’  interaction  with  investors  that  helps  taking  faster 
investment decisions.  

D)  Make the CMRP amendments to the supplement regime permanent. 

According  to  the  key  findings  in  Annex  6539,  the  temporary  measures  on  supplements 
introduced  by  the  CMRP  (namely  Articles  23(2a)  and  23(3a)  of  the  Prospectus 
Regulation)  should  be  made  permanent.  As  these  measures  are  already  in  place,  albeit 
being  temporary,  there  is  no  cost  associated  with  this  action.  The  amendment  will 
provide clarity  for investors and for financial intermediaries regarding the fulfilment of 
the obligation to make contact concerning a supplement to the prospectus. Furthermore, 
it  could  be  envisaged  to  consider  whether  further  clarify  the  obligation  for  financial 
intermediaries to contact investors when a supplement is published, taking into account 
the  feedback  from  the  targeted  consultation  of  both  stakeholders  and  ESMA,  including 
the  possibility  to  specify  that  financial  intermediaries  are  required  to  contact  investors, 
under  the  conditions  laid  down  in  Article  23(3a),  only  by  electronic  means  (given  the 
short timeline to do so).  

E)  Introduce  a  reference  to  environmental,  social  or  governance  (ESG)  matters  in  the 
empowerment for the Commission to adopt delegated acts to lay down the format and 
content of the prospectus. 
Taking  into  account  recital  7540  of  the  Regulation  (EU)  2021/337  of  the  European 
Parliament  and  of  the  Council  (CMRP  Regulation)  that  amended  the  Prospectus 

538 See section 4.1 of Annex 6. 
539 See section 4.8 of Annex 6. 
540 Information on environmental, social and governance (ESG) matters by companies has become increasingly relevant for investors 
in  order  to  measure  the  sustainability  impact  of  their  investments  and  to  integrate  sustainability  considerations  in  their  investment 
decision-making processes and risk management. Companies, as a result, face increasing pressure to respond to demands from both 
investors and credit institutions on ESG matters and are required to comply with multiple standards for ESG disclosures, which are 

242 

 
 
                                                           
 
Regulation,  a  reference  to  potential  ESG  features  could  be  introduced  in  the 
empowerment  for  the  Commission  to  adopt  delegated  acts  to  lay  down  the  format  and 
content of the prospectus, in particular in cases where such features are foregrounded and 
the  security  is  advertised  as  taking  into  account  the  ESG  factors  or  pursuing  the  ESG 
objectives.  This  would  provide  a  sound  legal  basis  for  the  Commission  to  develop  a 
Delegated Act amending Commission Delegated Regulation (EU) 2019/980 to set out a 
list  of  additional  information  (“a  building  block”)  to  be  included  in  the  prospectus  for 
securities that are advertised as taking into account the ESG factors or contributing to the 
ESG  objectives  (e.g.  requirement  to  disclose  in  the  use  of  proceeds  section  how  the 
proceeds are used to finance or re-finance, in part or in full, new or existing ESG-related 
assets or projects). The purpose of such disclosures, which should be targeted and light 
touch  to  avoid  creating  excessive  burden  to  issuers,  would  be  to  enhance  the 
comparability,  transparency  and  harmonization  of  information  provided  for  such 
instruments and to help fight greenwashing. Such additional disclosures are considered to 
be mainly suitable for non-equity securities (in particular structured products), while for 
equity securities it is considered sufficient to require the incorporation by reference of the 
sustainability-related  information  published,  where  applicable,  under  Articles  19a  and 
29a  of  Directive  2013/34/EU,  as  amended  by  the  upcoming  Corporate  Sustainability 
Reporting Directive (CSRD). This action would be in line with the announced action on 
prospectus disclosures541 within Action 1(e) of the Strategy for Financing the Transition 
to a Sustainable Economy542, published in July 2021. 

While at this stage it is not possible to quantify the additional costs stemming from the 
introduction  of  the  above-mentioned  additional  disclosures  for  non-equity  securities, 
which will have to be laid down in a future Delegated Act, with the possibility to request 
a  technical  advice  from  ESMA,  there  is  a  clear  objective  to  keep  additional  costs  for 
issuers  of  non-equity  securities  as  low  as  possible.  On  the  other  hand,  issuer  of  equity 
securities  will  only  be  required  to  incorporate  by  reference  information  that  they  have 
already  published  and  therefore  additional  costs  are  expected  to  be  minimal,  also 
compared  to  the  importance  of  such  information  for  investor  protection  and  to  fight 
against greenwashing. 

F)  Amend the currently unworkable equivalence regime. 

It would be considered whether, in accordance with the key findings in Annex 6543, the 
current  equivalence  framework  laid  down  in  Article  29  of  the  Prospectus  Regulation 
should be amended, for example by adjusting equivalence criteria. Furthermore, it could 
be  reflected  on  whether  the  equivalence  regime  should  be  made  more  efficient  by 
allowing  third  country  issuers,  in  presence  of  an  equivalence  decision,  to  only  file  a 
prospectus  approved  by  a  third  country  authority  with  the  relevant  EU  national 
competent  authority.  This  would  allow  third  country  issuers  to  achieve  significant  cost 

often  fragmented  and  inconsistent.  Therefore,  for  the  purpose  of  improving  companies’  disclosure  of  sustainability-related 
information and harmonising the requirements for such disclosure provided for in Regulation (EU) 2017/1129, while also taking into 
account  other  Union  financial  services  law,  the  Commission  should,  in  the  context  of  the  review  of  Regulation  (EU)  2017/1129, 
assess whether it is appropriate to integrate sustainability-related information in Regulation (EU) 2017/1129 and assess whether it is 
appropriate  to  make  a  legislative  proposal  in  order  to  ensure  coherence  with  sustainability  objectives  and  the  comparability  of 
sustainability-related information across Union financial services law. 
541  “Within  the framework  of  the  Prospectus  Regulation  and  over  the  course  of  2022,  the  Commission  will  introduce  targeted 
prospectus disclosures  for  green,  social  and  sustainable  securities to  enhance the comparability,  transparency  and harmonization  of 
information provided for such instruments and to help fight greenwashing.” 
542 SWD(2021) 180 final. See: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52021DC0390  
543 See section 4.9 of Annex 6. 

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savings by filing with the relevant EU NCA an already approved and valid prospectus for 
offering securities in the EU or seeking admission to trading on an EU regulated market, 
(e.g. dual listed issuers). An increased presence of third country issuers on EU markets 
might render them more attractive for investors. Furthermore, in the event of reciprocity 
of an equivalence decision, EU issuers could also more easily offer securities or dual list 
on a third country market by using an approved and valid EU prospectus. 

The  impact  of  a  workable  equivalence  regime  cannot  be  estimated,  however  it  is 
considered to be rather marginal. This consideration is based on the fact that Article 28 of 
the Prospectus  Regulation already allows third country issuers to  offer securities to  the 
public in the EU or seek admission to trading of securities on EU regulated markets by 
drawing  up  a  prospectus  in  accordance  with  the  Prospectus  Regulation  and  request  its 
approval by the relevant EU NCA544. Consequently, there might be limited appetite from 
third countries to go through the process to request an equivalence decision, especially in 
case 
than  EU  rules. 
Nevertheless,  there  is  merit  in  making  the  equivalence  regime  workable  in  order  to 
provide  the  Commission  with  the  possibility  to  take  an  equivalence  decision,  which  is 
currently impossible due  to  several  shortcomings affecting Article 29 of the Prospectus 
Regulation.  

third  country  prospectus  rules  are  significantly  different 

3.  Clarify dual listing 

The rules on dual listing in MiFID  II are currently unclear and not  fully understood by 
issuers. In their final report the TESG recommended to provide legal clarity on the issue 
of  dual  listing  by  amending  Article  33(7)  of  MiFID  II  to  make  it  explicit  that  issuers 
admitted to trading on an SME growth market  may on their own request demand to be 
admitted  to  trading  on  another  SME  growth  market.  Furthermore,  in  the  public 
consultation, a large majority (60%) of respondents stated that Article 33(7) of MiFID II 
would benefit from further clarification in level 1 to ensure an interpretation whereby the 
issuers themselves can request a dual listing. A clarification to Article 33(7) of MiFID II 
may therefore be considered to increase the legal clarity regarding dual listing for issuers. 

544 See section 4.9 of Annex 6. 

244 

 
 
 
 
                                                           
ANNEX 11: ACCOMPANYING MEASURES ON MARKET INTEGRITY 
– CROSS-MARKET SURVEILLANCE OF ORDERBOOK DATA 

1.  Introduction  

While not narrowly related to regulatory impediments for issuers on capital markets, the 
targeted measures proposed in this annex nonetheless directly contribute to improving the 
integrity  of  capital  markets  in  the  EU  by  improving  the  level  of  cross  border  market 
surveillance  and  therefore  increasing  the  trust  in  EU  market  and,  ultimately,  their 
attractiveness for investors.  

Increasingly,  enforcement  cases  by  national  competent  authorities  show  that  market 
manipulation  schemes  are  no  longer  limited  to  the  reference  market  of  financial 
instruments.  It  appears,  therefore,  appropriate  for  competent  authorities  to  be  in  a 
position to actively monitor behaviours on financial instruments under their jurisdiction 
regardless  the  location  of  the  trading  platform  across  Europe  on  which  the  activity  is 
conducted. This in turn makes the EU a more attractive listing market. Trends in trading 
patterns clearly show that cross-market  activity  will continue to  increase in  the coming 
years.  Without  order  book  information  from  platforms  located  in  other  jurisdictions,  it 
would  be  virtually  impossible  to  tackle  cross-border  cross-market  manipulation. 
Manipulation can increasingly take place via several instruments (cross product) and via 
platforms (cross market) located in several countries (cross border). 

Under  Article  38  of  MAR,  the  Commission  was  specifically  required  to  assess  the 
possibility of establishing a Union framework for cross-market order book surveillance in 
relation to market abuse. To support the Commission’s assessment, ESMA has provided 
an analysis of possible policy actions in its report on the review of MAR545. Building on 
that  input,  the  Commission  has  conducted  further  analysis  on  the  subject  matter  and 
conducted a series of interviews with stakeholders relevant for this initiative. 

To better understand the issue of cross-border sharing of data, it is useful to have a good 
overview  of the current  state of play  – how order book data is  currently  handled intra-
jurisdiction, and how it is exchanged cross-jurisdictionally. This is provided in Annex 6, 
section  2.4,  of  the  evaluation.  In  a  nutshell,  under  the  current  regulatory  framework, 
order  book  data  is  stored  by  trading  venues  and  can  be  requested  by  their  NCAs. 
However, order book data is only standardised in terms of content and not format, which 
is  neither  effective  nor  efficient  for  supervisory  purposes.  This  was  confirmed  by 
interviews with several NCAs. 

In  line  with  its  mandate  to  explore  the  establishment  of  cross-market  order  book 
surveillance framework, having received advice on the subject matter from ESMA546, the 
Commission is considering to propose the measures set out below, with the reasoning as 
follows.  The  proposed  framework,  by  strengthening  the  integrity  of  European  financial 
markets, can make a positive contribution to the objectives of the Listing Act initiative. 

2.   Standardisation of orderbook data formats 

This measure would go beyond the current requirement to standardize of the content of 
orderbook data by also mandating that trading venues share such data with NCAs in an 

545 ESMA Report on the MAR review, 23 September 2020, ESMA70-156-2391, p 128 et seq 
546 ESMA Report on the MAR review, 23 September 2020, ESMA70-156-2391, see in particular p 128 et seq 

245 

 
 
                                                           
electronic  and  machine-readable  form,  using  a  prescribed  format  (to  be  specified  in  a 
delegated act). Concretely, standardization would be achieved by broadening the current 
mandate  for  RTS  24,  stipulating  that  in  addition  to  the  details  of  order  data  to  be 
maintained by trading venues, ESMA should now also specify the format that should be 
used for sharing such data. 

The  standardization  of  the  format  has  been  unequivocally  recommended  by  ESMA, 
which  deemed  it  a  necessary  first  step  for  any  future  initiatives  relating  to  mandatory 
reporting of orderbook data. As such it is an essential element of any framework for an 
efficient  cross  border  exchange  of  that  data.  ESMA  noted  that  standardization  of  data 
format would make it easier for NCAs to analyse order data requested from non-domestic 
NCAs and has already started work in this field. And while trading venues would have to 
invest  human  and  technological  resources  to  establish  process  for  complying  with 
mandated data formats, standardization would have the positive effect of allowing them 
to use uniform recording and reporting systems with any NCA in the EU, thus avoiding 
having  to  comply  with  divergent  national  practices  across  the  EU.  The  impact  of  the 
adaptation of the current reporting systems cannot be precisely estimated. 

3.  Mandatory exchange of orderbook data for markets with a cross-border dimension 

Level 1 would need to be amended to lay down mandatory sharing of order data between 
those  NCAs  whose  markets  in  specific  financial  instruments  are  interconnected  (and 
therefore more prone to  cross-market manipulation). The financial instruments in scope 
of such mandatory sharing scheme could be initially limited to only those for which there 
is more interconnections (e.g. shares, bonds and futures). Level 2 would have to set out 
the criteria for establishing that specific markets are demonstrably linked, and potentially 
further specify the exact scope of the instruments covered. ESMA could be mandated to 
make  the  assessment  of  which  markets  are  demonstrably  linked.  NCAs  supervising 
interconnected markets would have to establish arrangements to share order data between 
them. This could be paired with a possibility for NCAs that might receive data to opt out 
from the mandatory data sharing scheme, where they provide a reasonable justification to 
do  so.  ESMA  could  be  attributed  the  role  of  facilitating  and  coordinating  exchange  of 
order data, which will arguably become more important in view of the expected uptick in 
sharing order data cross border.  

This  approach  would  imply  moving  away  from  the  current  model  of  exchange  of 
information under Article 25(2) of MIFIR547 and Article 25 of MAR548. In practice, this 
framework  has  resulted  in  a  system  whereby  NCAs  typically  exchange  information  on 
orderbooks on an ad hoc basis when such data is related to a specific investigation into a 
suspected market abuse case. The Commission Services have conducted interviews with 
several  NCAs549  and  concluded  that  this  mechanism  is  not  without  frictions,  with 
anecdotal  evidence  showing  that  requests  often  need  to  be  related  to  and  justified  by  a 
specific  investigation  –  whereas  NCAs  need  this  data  precisely  to  be  able  to  detect 
indicative signs of market abuse that will form a basis for a more in-depth investigation 
into potential market abuse.  

547 Specifies ESMA’s coordination role in cross-border sharing of orderbook data.  
548 Establishing a general framework for cooperation between NCAs for the purpose of market abuse surveillance. 
549 These NCAs were from Member States with larger capital markets. They were selected because due to the size of their markets and 
the economy, the instruments issued in those countries or related instruments (derivatives) are more likely to be also traded on non-
domestic markets. These NCAs are therefore more likely to request non-domestic data for market surveillance purposes. 

246 

 
 
                                                           
Consequently, the Commission Services is of the opinion that adjustments to the current 
mechanism for exchange of information between NCAs are needed to allow those NCAs 
that wish to analyse such data systematically can obtain it more easily – without needing 
to justify such data requests with an ongoing investigation. The Commission Services are 
also  mindful  that  different  NCAs  employ  diverging  market  surveillance  processes  and 
that not all of them have the capacities or the need to systematically analyse order data. 
On the other hand, a number of NCAs have bilaterally signalled that regularly receiving 
both  domestic  and  related  cross-border  order  data  would  help  them  in  carrying  out  a 
more robust supervision of their markets. In its report on the review of MAR550, ESMA 
itself highlighted that a reinforced cooperation framework to facilitate exchange of order 
book data between NCAs whose markets are more interconnected would be appropriate, 
recognizing  the  importance  of  facilitating  these  data  flows  cross-border  to  improve  the 
level of market surveillance in the EU. At the time the report was issued, in 2020, ESMA 
stopped short of recommending mandatory reporting of data. However, the Commission 
Services  are  of  the  opinion  that  two  years  after,  and  in  the  context  of  increased 
digitalization of the economy spurred by the COVID pandemic, the time is ripe to take a 
meaningful step forward stepping up the level of cross market order data surveillance. In 
a world where an increasing number of NCAs is using automated surveillance tools, it is 
important to equip them with the necessary data to perform their mandate. Several NCAs 
with  experience  in  orderbook  data  surveillance  have  bilaterally  flagged  that  granting 
them a more regular access to order data on fungible or related instruments551 which are 
traded  in  multiple  markets  and  jurisdictions  would  be  an  important  tool  to  detect  cross 
border manipulative behaviour. Therefore, the proposed regime would require NCAs to 
establish  arrangements  to  exchange  order  data  for  markets  in  financial  instruments  that 
are  demonstrably  linked.  Level  2  legislation  should  further  specify  what  type  of 
correlations  between  markets  in  specific  products  should  exist  to  show  demonstrable 
link, focusing in particular on same securities (notably shares, bonds and futures) traded 
across different jurisdictions or situations where derivatives are traded in one jurisdiction 
and their underlying in  another. Level 1 legislation could further ensure proportionality 
by  specifying  that  data  should  be  exchanged  only  with  regards  to  a  limited  set  of 
instruments – focusing on most liquid ones, which can be gradually expanded over time, 
as  NCAs  gain  more  experience  and  ameliorate  processes  for  data  sharing  and  analysis, 
and for those markets that have a cross-border dimension.  

While it is difficult to measure is the impact of the creation of such framework, though 
the expected costs seem reasonable.552It seems important to note also that within ESMA 
a pilot project is already being established on this topic, and that a majority of authorities 
have expressed interest and support for such a development. 

550 ESMA Report on the MAR review, 23 September 2020, ESMA70-156-2391, paragraph 569.  
551 For example, the price of a share traded in one jurisdiction can be manipulated to affect the price of the same share traded  on a 
different  trading  venue  in  another  jurisdiction.  In  the  same  vein,  bad  actors  can  manipulate  price  the  price  of  a  security  with  the 
specific  goal  of  affecting  the  price  of  its  derivative  instrument,  traded  in  a  different  jurisdiction.  Being  able  to  detect  patterns  in 
orderbook activity on both markets can therefore be essential in identifying market abuse. 
552 According to an NCA, the order of magnitude of development of such a system could be, between 75k€-200k€. Then storage costs 
are no longer a substantial cost at the time of Big Data (<20 k€). There are also "on the run" operating costs (operational monitoring 
of files, IT problems) but not major either (<20k€). 

247 

 
 
 
                                                           
 
ANNEX 12: OUT-OF-SCOPE DRIVERS 

1.  Tax treatment  

The TESG noted that it is up to national governments to put in place tax incentives that 
could  favour  the  development  of  capital  markets,  as  they  are  deemed  essential  for  the 
growth of the companies that drive the EU economy. Many studies553 echoed the TESG’s 
conclusions and the Commission recognises their potential benefits for the attractiveness 
of public markets for companies.  
Furthermore,  the  Commission  recognised554  in  its  2020  CMU  Action  Plan555  that  a 
significant burden ascribed to taxation is caused by divergent, burdensome, lengthy and 
fraud-prone refund procedures for tax withheld in cases of cross-border investment and 
proposed, subject to a positive impact assessment, to address the problem by introducing 
a  common,  standardised,  EU-wide  system  for  withholding  tax  relief  at  source.  This 
action, if and when taken, should contribute to more cross-border investment in the EU 
and a wider investor base for listed companies, positively affecting companies’ liquidity 
on EU public markets. 

2.  Debt/equity bias 

Equity  is  particularly  important  for  fast-growing  innovative  companies  in  their  early 
stages  and scale-ups willing to  compete  globally. The debt  bias in  taxation needs to  be 
addressed  to  remove  undue  fiscal  incentives  for  debt  financing.  The  asymmetric  tax 
treatment  of  financing  costs  induces  a  bias  in  investment  decisions  towards  debt 
financing  which  can  contribute  to  an  excessive  accumulation  of  debt  for  non-financial 
corporations. Data shows that in 2019556, total indebtedness of non-financial corporations 
represented 99.8% of the EU-27 GDP. Over-indebtedness could threaten the stability of 
the financial system and increase the risk of bankruptcies, which would in turn increase 
unemployment. 

The CMU HLF highlighted that as long as debt continues to be subject to preferential tax 
treatment,  all  other  conditions  being  equal,  market  operators  would  continue  to  favour 
debt  over  equity.  Following  an  unsuccessful  attempt  to  address  the  issue  as  part  of  a 
bigger  package  of  measures  in  the  CCCTB  proposal557  back  in  2016,  in  May  2022  the 
Commission  tabled  a  new  proposal  to  introduce  deductibility  of  equity  allowance  from 
taxable  profits.  If  (unanimously)  agreed  by  Member  States,  the  proposal  would 
considerably lower the debt-equity  bias and make equity  financing  –  including through 
public listing – more attractive for companies. Over time, this should translate into more 
listings in the EU. 

3.  Access to company information 

Fragmented  access  to  scattered  company  information  dissuade  cross-border  and  global 
investment  and  puts  in  particular  smaller  national  capital  markets  at  a  disadvantage.  In 

553  Oxera  study,  5417__How_to_make_Stock_Markets_more_attractive_for_companies_  (bolsasymercados.es),  European-IPO-
Report-2020.pdf (fese.eu) 
554 Similarly, the Oxera study notes that inconsistent and complex national rules and procedures in applying the withholding tax  can 
be burdensome for investors wishing to engage in cross-border securities transactions. 
555 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and 
the Committee of the Regions - A Capital Markets Union for people and businesses-new action plan, COM(2020) 590 final 
556 the_debra_initiative_dg_taxud.pptx (live.com)  
557  Proposal  for  a  Council  Directive  on  a  Common  Consolidated  Corporate  Tax  Base  (CCCTB),  COM(2016)  683  final  2016/0336 
(CNS) 

248 

 
 
                                                           
the ESAP Impact assessment558, published together with a proposal to create the ESAP, 
the  stakeholders  consulted  (preparer-users,  users,  regulators  and  other  stakeholders) 
reported that they  experienced difficulties in  accessing information  of relevance for the 
financial  services  and  capital  markets,  including  information  which  market  participants 
and other entities must publish pursuant to EU law. Furthermore, the Business Registers 
Interconnection System  (BRIS), set  up by the Company  Law Directive,  is  a mandatory 
interconnection  of  the  EU  business  registers  that  allows  EU  business  registers  to 
exchange information on cross-border company events. It allows citizens, entrepreneurs 
and  entities  to  obtain  company  information  on  more  than  20  million  limited  liability 
entities, including a set of information free of charge, in all EU languages. 
The  CMU  HLF559  noted  that  the  lack  of  easily  accessible,  reliable,  understandable  and 
comparable  public  information  is  one  of  the  reasons  why  companies,  in  particular  in 
smaller Member states, struggle to attract investors. Furthermore, in the Oxera study560, 
visibility  of  companies  associated  with  being  a  public  company  was  recognised  as  a 
potential benefit of listing.  

Once agreed on by the co-legislators, the proposal on ESAP (Action 1 of the 2020 CMU 
Action Plan), together with BRIS, should contribute to a better access to company data, 
including on SMEs, for investors, allowing for more and more cross-border investment in 
the  EU  and  underpinning  stronger  liquidity  in  publicly  traded  securities  of  EU 
companies. 

4.  Lack of retail investor participation 

Level  of  retail  investor  participation  in  capital  markets  remains  very  low  compared  to 
other  economies,  which,  in  turn,  deprives  EU  companies  of  much  needed  long-term 
investment.  The  lack  of  retail  investor  participation  is  linked  to  the  insufficiently 
developed  risk  culture  among  EU  citizens  who  are  known  to  be  more  risk-averse  than 
citizens in some other jurisdictions are.  
The  TESG561  emphasised  that  the  EU  legislators  should  give  priority  to  measures 
incentivising  savers  to  turn  into  investors,  supporting  the  emergence  of  an  investment 
culture, and  giving access to  segments of capital  markets  currently hardly accessible to 
retail  investors.  The  Commission’s  ongoing  efforts  to  increase  the  level  of  financial 
education in the EU, including by developing an EU financial competence framework for 
adults,  should  foster  EU  citizens’  better  understanding  and  hence  higher  trust  in  EU 
capital  markets  (Action  7  of  the  2020  CMU  Action  Plan).  Furthermore,  the  upcoming 
Retail Investment Strategy, scheduled for adoption in 2023, would aim to  adapt the EU 
retail  investment  rules,  for  example,  to  enable  these  investors  to  make  better-informed 
investment  decisions,  have  access  to  more  suitable  products  and  benefit  from  a  higher 
quality  of  advice  (Action  8  of  the  2020  CMU  Action  Plan).  Jointly,  these  measures 
should increase retail participation and strengthen the investor base for companies listed 
on EU public markets. 

558 EUR-Lex - 52021SC0344 - EN - EUR-Lex (europa.eu) 
559 200610-cmu-high-level-forum-final-report_en.pdf (europa.eu) 
560 Oxera-study-Primary-and-Secondary-Markets-in-the-EU-Final-Report-EN-1.pdf  
561 Final report of the Technical Expert Stakeholder Group (TESG) on SMEs - Empowering eu capital markets - Making listing cool 
again (europa.eu) 

249 

 
 
                                                           
5.  Narrower institutional investor base compared to other developed markets 

A number of studies and stakeholders562 point to a sub-optimal investment situation for 
SME  IPOs.  In  the  Commission  public  consultation  accompanying  the  SME  growth 
markets proposal563, a large majority of respondents already identified the lack of retail 
and institutional investors as an important or very important factor when trying to explain 
the  weakness  of  the  SME  IPO  stage.  A  study564  found  that  a  further  constraint  is  that 
SME IPOs on many markets are ‘below the radar’ for many large institutional investors, 
i.e. the risk-reward ratio and the costs of research to identify and screen investments in 
smaller firms may not be justified by the likely returns.  
The set-up of the SME IPO fund565, under the InvestEU programme, aims at anchoring 
institutional investment in SME IPO in the EU and should underpin stronger investors’ 
interest in small-cap listings. 

Furthermore,  the  relative  lack  of  size  of  institutional  investors  in  the  EU,  including 
pension  funds  and  investment  funds,  when  compared  to  other  jurisdictions,  also 
represents an issue. For example, pension assets in the EU27 are a third as big relative to 
GDP as in the UK and one fifth as large as in the US.566 

6.  Re-equitisation of funding structures 

The CMU Action Plan noted that the strength of the post-COVID-19 economic recovery 
will  crucially  depend  on  the  availability  of  sufficient  funding  for  EU  companies.  The 
IMF  and  ECMI  estimated  that  Europe  has  an  equity  deficit  of  €600  billion,  which  is 
significant compared to other jurisdictions, notably the US.567  

The corporate sector will enter the recovery with higher debt levels and will need more 
equity  investment.  A  re-equitisation  of  Europe’s  companies  and  financial  landscape  is 
one of the immediate priorities, especially in the face of the Covid-19 crisis.568 It would 
ensure EU firms are put on a structurally sound footing  and help avoid overreliance on 
debt,  which  could  cause  financing  issues  for  companies  in  the  future.  Incentivising 
institutional investors to make more long-term investments is instrumental to supporting 
re-equitisation in the corporate sector.  
The Commission’s amendments to CRD/CRR569 and Solvency II570 put forward last year, 
among others, aim to encourage more long-term and equity financing from institutional 
investors in line with the objectives of the 2020 CMU Action Plan (Action 4). 

562 See for instance: Kraemer-Eis, Helmut; Lang, Frank (2017): Access to Funds: How Could CMU Support SME Financing?; FESE 
Blueprint, Capital markets Union by 2024 – A vision for Europe (2019); European IPO Report 2020 European-IPO-Report-2020.pdf 
(fese.eu); Bruegel EU support for SME IPOs should be part of a broader package that unlocks equity finance  EU support for SME 
IPOs should be part of a broader package that unlocks equity finance | Bruegel  
563 Public consultation on building a proportionate regulatory environment to support SME listing | European Commission (europa.eu) 
564 Microsoft Word - DG ECFIN Revised final report_EC template (CSES 23 Nov 2020) updated.docx (europa.eu) 
565 annex-iv-ipo-addendum-termsheet.pdf (eif.org). 
566 Asimakopoulos P, Hamre E.& Wright W, a new vision for eu capital markets. 
567 cmu-implementation_the-eurofi-high-level-seminar_paris_february-2022.pdf. 
568 Time to deliver on the Capital Markets Union | AFME. 
569 Banking package | European Commission (europa.eu). 
570 Insurance rules’ review: encouraging solid and reliable insurers to invest in Europe’s recovery | European Commission (europa.eu). 

250 

 
 
 
                                                           
ANNEX 13: OTHER ONGOING INITIATIVES CONTRIBUTING TO IMPROVING PUBLIC MARKETS’ ECOSYSTEM 

Previous attempts  to  address  the regulatory impediments  that hold back companies’ access  to  public markets  were either limited in  scope or aimed at 
providing  companies  with  a  temporary  relief  in  the  Covid-19  context.  The  2019  SME  Listing  Act  was  strictly  confined  to  SME  growth  markets  to 
respond to  the MiFID  II objective of ‘facilitating access  to  capital  for smaller and medium-sized  companies’ through SME growth  market.  The SME 
Listing Act therefore only introduced technical amendments to ensure that the ‘SME growth market’ label is used by multilateral trading facilities with a 
focus on SMEs across the EU. For this reason, the review carried out in 2019 did not consider regulatory conditions for all SMEs or other companies 
listed  on  regulated  markets.  It  thus  did  not  include  a  comprehensive  assessment  of  the  legislation  applicable  to  regulated  markets.  Later,  the  CMRP 
introduced  targeted  amendments  to  encourage  investments  and  facilitate  a  more  rapid  re-capitalisation  of  companies,  however  only  in  the  Covid-19 
context. Given the strong recovery focus of the package, in some cases, the amended rules apply only for a limited period of time. Moreover, given its 
urgency, the CMRP was not accompanied by a full-fledged Impact Assessment.  

Therefore, there is  still  a need for legislative intervention that has been outlined in  the main body of the  IA. However, the identified preferred policy 
options cannot fully revive public capital markets in the EU on their own. They should be considered only one part of a broader package of measures 
outlined in the CMU Action Plan and put forward in recent months with a view to contributing to improving public markets’ ecosystem. Any changes 
proposed as a result of this analysis should therefore be understood as a step in the right direction, and not as a single remedy in itself. 

Out of scope 
driver 

Ongoing initiative 

Description571 

571 The table aims to show how the ongoing measures would address the out of scope drivers and help increase the attractiveness of public markets. It also explains how the ongoing measures contribute in solving the problem of 
low attractiveness of public markets.  

251 

 
 
 
 
                                                           
Debt/equity 
tax bias 

The Debt Equity Bias 
Reduction Allowance 
(DEBRA) 

DEBRA aims to mitigate the tax induced debt-equity bias in corporate investment decisions. The initiative 
will introduce an allowance for equity-financed new investment, to mitigate debt bias. The whole scheme will 
incorporate a number of robust anti-tax avoidance rules to ensure tax fairness. This would further incentivise 
investment in equity instrument as opposed to debt, which would, in turn, bring more liquidity to public 
markets.  

Access to 
company 
information 

European Single 
Access Point (ESAP) 

Low level of 
retail investor 
participation 

The retail investment 
strategy for the EU 

ESAP aims to tackle the lack of accessible and comparable data for investors, which would make companies 
more visible. Seamless, EU-wide access to company data in comparable digital formats aims to reduce 
information search costs for cross-border investors and aims to widen the investor base for companies. This 
would enhance companies’ visibility towards investors. 
The retail investment strategy for the EU will focus on ensuring a coherent regulatory framework to empower 
consumers to take financial decisions and benefit from the internal market. It aims to address the challenge of 
low capital market participation rates in the EU. The strategy aims to assess the entire retail investor journey 
and will put the investor at the heart of EU policies in the spirit of “an economy that works for the people”. 
This would in turn ensure that retail investors are equipped to access capital markets.  

Narrower 
institutional 
investor base 
compared to 
other 
developed 
markets 

The EU SME IPO 
Fund 

The EU SME IPO Fund would help address a number of issues identified, such as lack of investors and 
liquidity in SMEs’ public equity and the reluctance of institutional investors to invest in IPOs that are under a 
certain level of market capitalisation. The added liquidity in small tickets could address another challenge, 
namely the limited involvement of retail investors and pension funds in SME IPOs.  

CRR/CRD 

Solvency II 

The role of banks as institutional investors can be further increased by facilitating their investment and 
enhancing their ability to build on their large customer bases. Allowing for a more adequate interpretation of 
the Basel III definition of ‘speculative unlisted equity exposures’ would ensure banks’ ability to invest in 
long-term equity on terms which are economically efficient and prudentially appropriate. 

The participation of insurers in long-term investments, in particular equity, can be supported by ensuring that 
the prudential framework appropriately reflects the long-term nature of the insurance business and mitigates 
the impact of short-term market turmoil on insurers’ solvency. Lowering equity capital charges under 
Solvency II should remove one important bias against equity investment and ensure institutional investors can 

252 

 
 
invest in equity. 

Tax treatment  Withholding tax 

The objective is to make a standardised relief at source system the principal mechanism for withholding tax 
relief. Where relief at source is not impossible, withholding tax reclaim procedures will be further 
standardised and simplified to facilitate reclaim. In addition to becoming more efficient, the improved and 
streamlined procedures should also enable national tax authorities to better fight tax avoidance and tax fraud. 

253 

 
 
 
ANNEX 14: PAST INITIATIVES 

In  order  to  support  jobs  and  growth  in  the  EU,  facilitating  access  to  finance  for 
companies, especially SMEs, has been a key goal of the Capital Markets Union (CMU) 
from the outset. Since the publication of the CMU Action Plan in 2015572, some targeted 
actions  were  taken  to  develop  adequate  sources  of  funding  for  SMEs  through  all  their 
stages of development. In its Mid-term Review of the CMU Action Plan573 published in 
June 2017, the Commission chose to raise its level of ambition and strengthened its focus 
on  SME  access  to  public  markets.  Importantly,  the  Commission  also  recognised  that 
there was no  'silver bullet'  to  restore the markets of SME initial  public offerings  (IPO) 
across the EU. The Commission has 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' 
which constituted the regulatory framework for the SME listing package. In May 2018, 
the Commission published a proposal574 aiming to reduce the administrative burden and 
the  high  compliance  costs  faced  by  SME  growth  market  issuers  while  ensuring  a  high 
level  of  market  integrity  and  investor  protection;  foster  the  liquidity  of  publicly  listed 
SME  shares  to  make  these  markets  more  attractive  for  investors,  issuers  and 
intermediaries;  and  facilitate  the  registration  of  multilateral  trading  facilities  as  SME 
growth markets. The package was adopted in November 2019.  

The legislative proposal  “SME listing package”  mandates the Commission to  set  up an 
expert stakeholder group to monitor the functioning and success of SME growth markets. 
In May 2021, the Technical Expert Stakeholder Group on SMEs (TESG) published their 
final  report575  with  twelve  concrete  recommendations  to  the  Commission  and  Member 
States  to  help  foster  SMEs’  access  to  public  markets.  It  builds  on  the  work  already 
undertaken  by  the  CMU  High  Level  Forum  (HLF)576,  the  Oxera  study  on  Primary  and 
Secondary Equity Markets in the EU577, as well as ESMA’s MiFID II review report on 
the functioning of the regime for SME growth markets578. It is also worth noting that the 
UK has identified similar issues and a need for action in the UK Listing Review579, led 
by Lord Hill and published in 2021. 

572 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and 
the Committee of the Regions, Action Plan on Building a Capital Markets Union COM(2015) 468 final 
573 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) 
https://ec.europa.eu/info/sites/info/files/communication-cmu-mid-term-review-june2017_en.pdf 
574  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 COM(2018) 331 final  
575 Final report of the Technical Expert Stakeholder Group (TESG) on SMEs - Empowering eu capital markets - Making listing cool 
again (europa.eu)  
576 200610-cmu-high-level-forum-final-report_en.pdf (europa.eu) 
577 Oxera-study-Primary-and-Secondary-Markets-in-the-EU-Final-Report-EN-1.pdf 
578 ESMA publishes Final Report on SME Growth Markets (europa.eu)  
579 UK Listings Review - GOV.UK (www.gov.uk) 

254 

 
 
 
 
                                                           
In the meantime, progress has also been made in the context of CMU to make it easier 
and cheaper for smaller companies to access public markets, notably with the creation of 
the alleviated 'EU Growth Prospectus' through the revised Prospectus Regulation580.  

Furthermore,  following  the  COVID-19  crisis,  the  Commission  published  the  Capital 
Markets  Recovery  Package  (CMRP)581,  which  comprised  of  targeted  amendments  to 
capital  markets  and  bank  regulation,  with  the  overarching  aim  to  make  it  easier  for 
capital  markets  to  support  European  businesses  to  recover  from  the  COVID-19  crisis. 
The  suggested  changes  to  the  capital  market  rules  also  aimed  at  alleviating  regulatory 
burden  and  complexity  for  investment  firms  and  issuers.  To  facilitate  capital  raising, 
issuers and investors were equipped with the right tools to easily raise new capital on the 
one  hand  (achieved  through  the  implementation  of  a  new  and  shorter  EU  Recovery 
Prospectus)  and  easily  get  access  to  an  increased  investor  base  on  the  other  hand 
(achieved through targeted changes to MiFID II). 

Nevertheless,  stakeholders  expressed  through  various  dialogues  and  previous  public 
consultations582 that more needed to be done on the regulatory side to ensure that SMEs 
could reap the full benefits of public markets.  

In  this  context,  the  Listing  Act  should  not  be  understood  as  a  standalone  measure  that 
seeks  by  itself  to  make  EU  public  capital  markets  more  attractive.  It  should  rather  be 
analysed  in  conjunction  with  other  existing  and  proposed  initiatives  (see  Annex  13  for 
more details). 

580 EUR-Lex - 02017R1129-20211110 - EN - EUR-Lex (europa.eu) 
581  Capital  markets  union:  Commission  adopts  package  to  ensure  better  data  access  and  revamped  investment  rules  |  European 
Commission (europa.eu) 
582 Bilateral meetings with AFME, FESE, EuropeanIssuers, ICMA, SMEUnited, ICI Global, InvestEurope; TESG, CMU HLF, public 
consultations on the listing act, stakeholder workshops with issuers investors and exchanges.  

255 

 
 
 
 
 
 
 
                                                           
ANNEX 15: ANALYSIS OF SPACS 

As part of this initiative, it was considered whether the Prospectus Regulation should be 
supplemented with additional disclosure requirements for SPAC issuers and with product 
governance  rules  for  the  sale  of  the  SPAC  securities  to  retail  investors.  Thanks  to  its 
distinctive features, mainly the need for to-be-merged companies not to comply with the 
full burden of an IPO listing process, SPACs could potentially be a means to foster better 
and quicker  access  to  capital  for  companies  with  a  growing potential, including SMEs, 
start-ups and scale-ups.  

While  in  principle  EU  rules’  harmonisation  could  foster  more  certainty  for  investors 
which would in turn improve the uptake of SPACs, this option was discarded at an early 
stage for the following reasons: 

1.  If  globally  the  SPAC  phenomenon  has  developed  rapidly  against  the  backdrop  of 
declining  small  company  IPO  levels,  its  size  remained  fairly  subdued  in  the  EU.  The 
number  of  SPAC  IPOs  have  been  steadily  declining  over  the  last  decade  in  the  EU, 
despite  hikes  in  more  recent  years.  In  particular,  2021  saw  a  considerable  (relative) 
increase in SPAC IPOs to 39 from 4 the year before583 (with an issuance totalled around 
8.56 billion USD in 2021 as opposed to 496.05 million USD in 2020584). However, this 
trend  already  came  to  a  halt  in  the  first  half  of  2022.  It  could  be  argued  that  market 
interest in SPACs has receded mainly because of deluded investors’ expectations on non-
realised  acquisitions,  fees,  share  dilution,  too  overstated  financial  promises  and  some 
scandals in the US585.  

  The EU SPAC IPO market is dwarfed by the size of the US SPAC IPO market that saw a 
total  of  613  SPAC  IPO  listings  in  2021,  raising  a  total  of  145  billion  USD586.  At  this 
juncture, there are no indications that the EU market is likely to grow rapidly in the near 
future.  It  would thus  appear disproportionate to  put  forward additional requirements on 
disclosures  (and  other  investor  protection  measures),  where  SPAC  securities  concern 
only a limited number of investors and lacking clear evidence that the current EU SPAC 
disclosure  in  prospectuses  falls  short  to  sufficiently  cater  for  their  needs.  Such  an 
approach  would  also  be  contrary  to  the  purpose  of  the  proposed  changes  in  the  listing 
rules, which are aimed at reducing burden for issuers. Imposing new requirements would 
lead to an extra burden for SPAC issuers (with an unclear benefit to investors) and may 
ultimately stifle the prospect of any future growth of SPAC IPOs in the EU. On the other 
hand,  a  further  relaxation  of  rules  for  sponsor  companies  does  not  seem  to  be  aligned 
with  the  current  trends  in  international  markets  where  e.g.  in  the  US  the  SEC  is 
considering stricter rules for sponsors587. 

583 https://www.whitecase.com/publications/insight/european-spacs-data-hub.  
584 Ibid. 
585 Spac boom is creating ‘castles in the sky’, Jim Chanos warns | Financial Times (ft.com) – June 2021 
586 https://www.statista.com/statistics/1178249/spac-ipo-usa/ 
587 E.g. by suggesting to give SPACs an 18-month deadline to find a target and two years to close the deal.  

256 

 
 
 
 
                                                           
ii)  The  option  not  to  intervene  should  be  further  seen  against  the  background  of  the 
recent ESMA’s action in this area. In 2021, considering the temporary rise in SPAC IPOs 
at the time, ESMA took the initiative to release a statement588 reminding the obligations 
of SPACs to satisfy the relevant existing regulatory requirements. ESMA’s statement did 
not  only  aim  to  encourage  coordinated  action  by  NCAs  regarding  the  scrutiny  of  the 
disclosure  included  in  the  SPAC  prospectus,  but  also  drew  attention  to  the  need  to 
properly comply with the existing product governance requirements set out in MiFID II 
for manufacturers and distributors of SPAC shares and warrants.  

In its statement, ESMA listed the relevant disclosure requirements under the Prospectus 
Regulation that a SPAC issuer would have to comply with. The statement further added 
four disclosure requirements arguably necessary to allow investors to make an informed 
assessment of the issuer and the securities and to ensure compliance with the Prospectus 
Regulation.  It  encouraged  NCAs  to  focus  their  scrutiny  on  those  requirements  e.g.  on 
alerting investors about possible risks linked to investing in SPACs (conflicts of interest; 
governance and possible dilution; shares, warrants and shareholder rights; information on 
the proceeds of the offer, on remuneration of the sponsors etc.). 

  ESMA concluded the statement by noting that both ESMA and NCAs would continue to 
monitor the SPAC activity in the EU to determine if additional initiatives were necessary 
to promote coordinated supervisory action aimed at preserving investor protection. Since 
the  adoption  of  the  statement  back,  however,  no  material  issues  related  to  investor 
protection have emerged, triggering no further action from ESMA or NCAs. Introducing 
additional disclosure in the Prospectus Regulation without clear evidence of any material 
issues  or  risk  of  a  material  nature  related  to  SPACs  in  the  EU  would  thus  appear 
premature  and  disproportionate.  Nevertheless,  it  would  be  important  for  ESMA  and 
NCAs  to  continue  monitoring  SPAC  activity  in  the  EU  to  ensure  that  the  current  rules 
and guidelines remain appropriate. 

2.  The answers to the public consultation on the Listing Act show that, if a large majority of 
respondents  consider that  SPACs are an effective and efficient  alternative to  traditional 
IPOs, there are mixed views on whether additional measures should be taken, especially 
in  the  area  of  investor  protection.  While  SPACs  may  potentially  present  some  risks, 
especially for retail clients, these have not  yet materialized. Some respondents stated in 
their responses that investment firms are already required under MiFID II to ensure that 
SPACs  are  not  distributed  to  those  investors  for  whom  this  product  is  not  suitable.  It 
would be important, however, that ESMA and NCAs keep on monitoring closely the sale 
and marketing of SPAC securities to ensure that investment firms rigorously comply with 
the current product  governance rules and supervisory guidelines, and to properly  detect 
any possible issues that would need further intervention. 

On the basis of these considerations, the Commission decided not to take action in this 
field  as  it  considers  that,  in  the  current  environment,  the  existing  approach  on  SPACs 

588 ESMA statement on SPACs: prospectus disclosure and investor protection considerations. 15 July 2021 

257 

 
 
 
 
 
                                                           
strikes 
issuers/sponsors.  

the  right  balance  between 

investor  protection  while  not  discouraging 

258