Article 1 Subject matter
This Regulation establishes a common regulatory framework on insider dealing, the unlawful disclosure of inside information and market manipulation (market abuse) as well as measures to prevent market abuse to ensure the integrity of financial markets in the Union and to enhance investor protection and confidence in those markets.
Article 2 Scope
1. This Regulation applies to the following: (a) financial instruments admitted to trading on a regulated market or for which a request for admission to trading on a regulated market has been made; (b) financial instruments traded on an MTF, admitted to trading on an MTF or for which a request for admission to trading on an MTF has been made; (c) financial instruments traded on an OTF; (d) financial instruments not covered by point (a), (b) or (c), the price or value of which depends on or has an effect on the price or value of a financial instrument referred to in those points, including, but not limited to, credit default swaps and contracts for difference. This Regulation also applies to behaviour or transactions, including bids, relating to the auctioning on an auction platform authorised as a regulated market of emission allowances or other auctioned products based thereon, including when auctioned products are not financial instruments, pursuant to Regulation (EU) No 1031/2010. Without prejudice to any specific provisions referring to bids submitted in the context of an auction, any requirements and prohibitions in this Regulation referring to orders to trade shall apply to such bids. 2. Articles 12 and 15 also apply to: (a) spot commodity contracts, which are not wholesale energy products, where the transaction, order or behaviour has or is likely or intended to have an effect on the price or value of a financial instrument referred to in paragraph 1; (b) types of financial instruments, including derivative contracts or derivative instruments for the transfer of credit risk, where the transaction, order, bid or behaviour has or is likely to have an effect on the price or value of a spot commodity contract where the price or value depends on the price or value of those financial instruments; and (c) behaviour in relation to benchmarks. 3. This Regulation applies to any transaction, order or behaviour concerning any financial instrument as referred to in paragraphs 1 and 2, irrespective of whether or not such transaction, order or behaviour takes place on a trading venue. 4. The prohibitions and requirements in this Regulation shall apply to actions and omissions, in the Union and in a third country, concerning the instruments referred to in paragraphs 1 and 2.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Political context This proposal is part of the Listing Act package, a set of measures to make public markets more attractive for EU companies and facilitate access to capital for small and medium-sized companies (SMEs). It is in line with the Capital Markets Union (CMU) core aim to improve access to market-based sources of financing for EU companies at each stage of their development, including for smaller companies. L isted companies , including recently listed ones, often outpace privately owned companies in terms of annual revenue growth and job creation 1 . By listing on public markets, companies can diversify their investor base, reduce their dependency on bank financing, gain easier and cheaper access to additional equity capital and debt finance (through secondary offers), raise their public profile and increase brand recognition . Since the publication of the first CMU Action Plan in 2015, progress has been made to make it easier and cheaper for companies, in particular SMEs, to access public markets. In January 2018, the Directive 2014/65/EU of the European Parliament and of the Council ( the Markets in Financial Instruments Directive, or ‘ MiFID II ’ ) 2 introduced a new category of Multilateral Trading Facilities (MTFs), the SME growth markets , 3 to incenti vise SMEs access to capital markets. In 2019, new EU rules were put forward by Regulation (EU) 2019/2115 of the European Parliament and of the Council 4 (SME Listing Act) to cut red tape and reduce regulatory burden for companies listing on SME growth markets while preserving a high level of investor protection and market integrity . Nevertheless, despite this progress, stakeholders argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers. The new CMU Action Plan adopted in September 2020 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 2019 SME Listing Act, the Commission set up a Technical Expert Stakeholder Group (TESG) on SMEs which confirmed stakeholders’ concerns that further legislative action is needed to support listing of companies and especially of SMEs. In its final report of May 2021 5 , the TESG made 12 recommendations to amend the listing framework both on regulated markets, as well as on SME growth markets . On 15 September 2021 , President Von der Leyen announced in her letter of intent 6 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 programme 7 . A company’s decision to list is a complex one and is influenced by a multitude of factors, many of which are outside the reach of regulators and therefore cannot be addressed directly by a legislative intervention. For instance, the features of the ecosystem that determine the cost of listing services, and more broadly geopolitical instability, Brexit, Covid-19, and inflation, have all had (and will continue to have) an impact on the decision to list, on the timing of listing, and on whether to remain listed in the EU. Regulatory requirements and the associated costs and burden, however, are also an important factor in a company’s decision to list and remain listed. The Listing Act package represents a targeted set of measures aiming to reduce the regulatory burden where it is considered to be excessive (i.e., where regulation could ensure investor protection/market integrity in a more cost efficient manner for stakeholders) and to increase the flexibility accorded under company law to a company’s founder(s) or controlling shareholder(s) to choose how to distribute voting rights after the admission to trading of shares. The regulatory framework applying to the listing process is multifaceted. Companies must comply with regulatory requirements before, during and after the i nitial p ublic o ffering (IPO). This proposal focuses specifically on the regulatory burden that emerges at two moments: the IPO stage and the post-IPO stage. It addresses regulatory burden at the IPO stage by introducing targeted amendments to Regulation (EU) 2017/1129 of the European Parliament and of the Council 8 (the Prospectus Regulation ) and it addresses regulatory burden at the post-IPO stage by introducing targeted amendments to Regulation No 596/2014 of the European Parliament and of the Council 9 ( the Market Abuse Regulation or ‘ MAR ’ ). It also contains limited technical amendments to Regulation No 600/2014 of the European Parliament and of the Council ( the Markets in Financial Instruments Regulation or ‘ MiFIR ’ ) 10 . The proposed regulation is accompanied by two other legislative proposals: · a proposal for a d irective amending MiFID II and repealing Directive 2001/34/EC of the European Parliament and of the Council 11 ( the Listing Directive), which aims to both (i) streamline and clarify listing requirements and (ii) to increase the low level of investment research on SMEs; · a proposal for a new d irective on multiple-vote share structures, which aims to address the regulatory barriers that emerge at the pre-IPO phase and, in particular, the unequal opportunities faced by companies across the EU when choos ing the appropriate governance structures when they list . Reasons for the proposal 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 SMEs. The regulatory environment impacts all stages of the listing process and is among the driving forces of the high costs of listing and staying listed. Companies are required to comply with several disclosure and reporting requirements under EU law, especially the Prospectus Regulation and MAR. The aim of the Prospectus Regulation is to enhanc e the internal market for capital by ensur ing investor protection and market efficiency while helping companies, including SMEs, access different forms of finance in the EU 12 . The Prospectus Regulation lays down requirements for the drawing up, approval and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market . A prospectus is a document presenting information about a company and the securities that such company offers to the public or seeks to admit to trading on a regulated market. This information should be the basis on which investors can decide whether to invest in securities issued by that company. The Prospectus Regulation does not apply under certain circumstances, such as for non-equity securities issued by certain sovereign or supranational entities, or for offers of securities to the public with a total consideration in the Union below EUR 1 million over a period of 12 months. It also includes several exemptions from the obligation to publish a prospectus for offers of securities to the public or admission to trading on a regulated market. In particular, Member States may exempt from the obligation to publish a prospectus offers of securities to the public of up to EUR 8 million over a period of 12 months, provided that they do not require notification (a ‘passport’). For offers below EUR 1 million or the relevant threshold set at national level, Member States may require national disclosure documents, provided that they do not constitute a disproportionate or unnecessary burden. Hence, issuers willing to offer securities cross-border need to comply with the threshold and disclosure requirements set out by the concerned Member States, unless those issuers draw up a prospectus on a voluntary basis in order to benefit from the EU single passport. Under the CMU Action Plan, progress has already been made to make it easier and cheaper for co mpanies, in particular smaller ones, to draw-up a prospectus. The Prospectus Regulation 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. The Prospectus Regulation also introduced a simplified prospectus for companies whose securities are admitted to trading continuously and for at least the last 18 months on a regulated market or an SME growth market and wishing to issue additional shares or raise debt ( follow-on or secondary issuance s ). Issuers whose securities are admitted to trading on an SME growth market can also use this simplified prospectus to transfer subsequently to regulated markets. Finally, Regulation (EU) 2021/337 of the European Parliament and of the Council 13 introduced, as part of the Capital Markets Recovery Package (CMRP), a new type of short-form prospectus (the “EU Recovery prospectus”) . The EU Recovery prospectus is available to issuers that have shares already admitted to trading o n a regulated market or an SME g rowth market continuously for at least the last 18 months and that issue additional shares to overcome the negative impact of the COVID-19 crisis and contain excessive indebtedness. Th e EU Recovery prospectus regime will however expire on 31 December 2022. Despite the alleviations introduced, feedback from stakeholders indicated that the requirement to produce a prospectus remains overly burdensome. 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 of equity or non-equity securities. The current rules in particular contribute to overly lengthy prospectuses. 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). Feedback to the public consultation (echoed during the stakeholders’ meetings) confirmed the view that neither the standard prospectus nor the EU Growth prospectus strikes an appropriate balance between effective investor protection and the proportionate administrative burden for issuers, especially SMEs. In other cases, a prospectus is required when a lot of information is already available in the public domain (in particular, in the case of follow-on issuances). The excessive length of the prospectus can also discourage some, in particular smaller, investors from consulting it and translate into a higher cost of investing for larger investors. It also requires a longer period of time for the national competent authority (NCA) to scrutinise and approve the prospectus. The current rules also contribute to very divergent prospectuses across the EU. D ata reported by Oxera 14 and by the European Securities and Markets Authorities ( ES MA ) 15 shows a large discrepancy between Member States regarding the l ength of prospectuses, which is indicative of a lack of uniformity of prospectuses in the EU . This discrepancy stems also from the fact that the current rules do not sufficiently frame supervisory scrutiny by NCAs. Feedback from stakeholders highlighted that the EU regulatory framework places overly burdensome requirements also on already listed issuers, in particular under MAR. Since its entry into application on 1 July 2016, MAR has been extended to MTFs, including SME growth markets. MAR aims to increase market integrity and investor confidence. It prohibits from: (i) engaging or attempting to engage in insider dealing 16 ; (ii) recommending that another person engages in insider dealing or induces another person to engage in insider dealing; (iii) unlawfully disclosing inside information 17 ; or (iv) engaging in or attempting to engage in market manipulation. Issuers are also subject to several disclosure and record-keeping obligations under MAR. In particular, issuers are under a general obligation to disclose all inside information to the public as soon as possible 18 . Feedback from stakeholders indicated that some aspects of the MAR disclosure regime place a disproportionately high burden on issuers. In particular, stakeholders perceive as burdensome the obligation to disclose as soon as possible all inside information. This is due to the broadness of the notion of inside information (which gives rise to difficulties for issuers when delineating between what is and what is not inside information), as well as to the fact that the same notion applies both for the purpose of the prohibition of insider dealing and for the purpose of disclosure. 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. The notion of inside information covers not only events that have already occurred but also events which are “reasonably expected to occur” (i.e., for which there is a realistic prospect to occur) and, in the context of protracted processes (such as a merger), the intermediate steps which are connected with bringing about a future event. As a consequence, issuers incur high compliance costs to understand which steps of a protracted process may constitute inside information and when a certain piece of information is mature enough to be disclosed. At the same time, the effectiveness of disclosure in reducing information asymmetries between issuers and investors is limited if information is too preliminary, incomplete and still potentially subject to fundamental changes. Too early disclosure of information could 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), thus increasing the opportunity cost for investors. Furthermore, issuers face a lack of legal clarity around the conditions that need to be met to delay disclosure when immediate disclosure would be likely to prejudice the legitimate interests of the issuers (e.g., by jeopardising the successful conclusion of ongoing negotiations). A few additional reporting and disclosure requirements under MAR place a disproportionately high burden on issuers, such as the provisions on managers’ transactions, insider lists, and market sounding. Current MAR rules also create a disproportionate sanctioning regime for disclosure-related infringements, in particular for SMEs, which may potentially be sanctioned at the same level as large companies. Objectives of the proposal The overall objective of this initiative is to introduce technical adjustments to the EU rulebook in order to reduce regulatory and compliance costs for companies seeking to list or already listed with a view to streamlining the listing process and enhancing legal clarity, while ensuring an appropriate level of investor protection and market integrity. This, in turn, is expected to help diversify funding sources for companies in the EU and increase investments, economic growth, job creation and innovation in the EU. The proposed targeted amendments to the Prospectus Regulation aim in particular to make it easier and cheaper for issuers to draw up a prospectus, while enabling investors to make the right investment decision by providing comprehensible, easy to analyse and concise information. They also seek to introduce sizable simplifications to, or even exemptions from, the prospectus requirements in cases where the issuer is already known to investors and a lot of information is already publicly available (follow-on issuances). These amendments are accompanied by amendments aimed at fostering the convergence of and streamlining the scrutiny and approval process by NCAs (for example, by narrowly frame the ability of NCAs to request issuers to include additional information in the prospectus). In the case of an offer of securities to the public or the admission to trading on a regulated market, the proposal streamlines and further standardises the standard prospectus (referring to a non-alleviated prospectus type, irrespective of whether it relates to equity or non-equity securities, or whether is drawn up as a single document or consists of separate documents). The proposal aligns the level of disclosure of the standard prospectus to the level of disclosure currently required under the EU Growth prospectus regime, introduces a fixed order of disclosure and makes incorporation by reference a legal requirement. The proposal also introduces the possibility for issuers to draw up the prospectus in English only as the language customary in the sphere of international finance (except for the summary which in practice is the only document that most retail investors consult), and to publish it in an electronic format only (i.e., no paper copies on request). At the same time, only for shares or other transferable securities equivalent to shares in companies, a limit number of pages (300 pages) is introduced to avoid overly lengthy prospectuses for companies that do not have a complex financial history. Jointly, these amendments seek to provide a tangible cost and burden reduction for issuers, while ensuring that investors can take advantage of a document that is easier to read and navigate and more easily compare financial instruments and issuers. The proposal also seeks to make it easier for SMEs to raise funds on public markets, in particular on SME growth markets, by generating further cost savings for SMEs and better tailoring disclosure to the needs of investors. For companies offering securities to the public and listing on SME growth markets (as well as for offers of securities to the public by smaller companies), the EU Growth prospectus is replaced by a mandatory new short-form EU Growth issuance document. This document builds on the level of disclosure currently required under the EU Recovery prospectus regime and existing admission documents required by SME growth markets (where the obligation to publish a prospectus does not apply), follows a fixed order of disclosure and is subject, in the case of shares and other equivalent transferable securities, to a page limit. While the proposal exempts, under certain conditions, from the prospectus requirement offers of securities fungible with securities already admitted to trading (for which the publication of a summary document will suffice), it subjects follow-on issuances of non-fungible securities to the approval and publication of a new mandatory short-form EU Follow-on prospectus, largely building on the current EU Recovery prospectus regime. These amendments seek to ensure that companies can fully benefit from the advantages of accessing public capital markets, including easier and quicker access to additional equity capital and debt finance through follow-on offers. At the same time, they safeguard investor protection as these companies are already subject to periodic and ongoing disclosure and reporting requirements and, in addition, issuers will be required to publish the most relevant information for investors. Finally, the amendments to the Prospectus Regulation aim to foster cross-border offers by harmonising and increasing to EUR 12 million the threshold for exempting small offers of securities to the public from the obligation to publish a prospectus. This amendment also seeks to benefit smaller issuers, including SMEs, as in certain cases they will no longer have to produce a prospectus, lowering substantially their regulatory costs and incentivising them to access public capital markets. The proposal also introduces amendments to the rules on equivalence for third countries prospectuses to make them workable. The proposed targeted amendments to MAR aim to reduce legal uncertainty on what constitutes inside information for the purpose of disclosure as well as on the timing of disclosure. While the proposal maintains the current broad notion of inside information for the purposes of the insider dealing regulation, it narrows down the scope of the disclosure obligation. The proposal clarifies in particular that the obligation to disclose all inside information to the public does not cover the information relating to the intermediate steps of a protracted process, as this information is too preliminary and hence not mature enough for disclosure. At the same time, the proposal introduces an empowerment for the Commission to establish, by way of a delegated act a non-exhaustive list of the relevant information as well as, for each information, an indication of the timing when issuers are expected to disclose it. Jointly, these amendments seek to make the MAR disclosure regime less costly to comply with by issuers, more predictable from the investors’ point of view and more conducive to effective price formation. The amendments to the disclosure obligation are accompanied by improvements to the regime for the exchange of information among NCAs to enable them to better identify cases of market manipulation by setting up a cross market order book surveillance (CMOBS) mechanism , 19 thus increasing the integrity of EU markets and enhancing their appeal for investors. In the same vein, the proposal introduces a possibility for ESMA to establish collaboration platforms, in particular for the purpose of monitoring wholesale commodity markets, to address concerns about market integrity and the good functioning of financial and, in particular, spot markets . Finally, the proposal seeks to make the sanctioning regime for MAR disclosure-related infringements more proportionate for SMEs to avoid discouraging smaller issuers from listing or remaining listed. The proposal also aims at alleviating the regulatory hurdles resulting from the application of the managers’ transactions, insider list and market sounding regimes while ensuring that these alleviations do not impair investor protection and market integrity. The creation of a CMOBS mechanism requires also targeted amendments to the MiFIR framework to specify that a competent authority can request order book data on an ongoing basis to a trading venue under its supervision, and to confer to ESMA the role to harmonise the format of the template used to store such data. The proposed targeted amendments aim to build the necessary conditions for structural improvements in EU public capital markets 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 and upcoming 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.
Revised version (Article 2 Scope):
This Regulation also applies to behaviour or transactions, including bids, relating to the auctioning on an auction platform authorised as a regulated market of emission allowances or other auctioned products based thereon, including when auctioned products are not financial instruments, pursuant to Regulation (EU) No 1031/2010. Without prejudice to any specific provisions referring to bids submitted in the context of an auction, any requirements and prohibitions in this Regulation referring to orders to trade shall apply to such bids. 3. This Regulation applies to any transaction, order or behaviour concerning any financial instrument as referred to in paragraphs 1 and 2, irrespective of whether or not such transaction, order or behaviour takes place on a trading venue. 4. The prohibitions and requirements in this Regulation shall apply to actions and omissions, in the Union and in a third country, concerning the instruments referred to in paragraphs 1 and 2.
Article 3 Definitions
1. For the purposes of this Regulation, the following definitions apply: (1) ‘financial instrument’ means a financial instrument as defined in point (15) of Article 4(1) of Directive 2014/65/EU; (2) ‘investment firm’ means an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU; (3) ‘credit institution’ means a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council ( 18 ) ; (4) ‘financial institution’ means a financial institution as defined in point (26) of Article 4(1) of Regulation (EU) No 575/2013; (5) ‘market operator’ means a market operator as defined in point (18) of Article 4(1) of Directive 2014/65/EU; (6) ‘regulated market’ means a regulated market as defined in point (21) of Article 4(1) of Directive 2014/65/EU; (7) ‘multilateral trading facility’ or ‘MTF’ means a multilateral system as defined in point (22) of Article 4(1) of Directive 2014/65/EU; (8) ‘organised trading facility’ or ‘OTF’ means a system or facility in the Union as defined in point (23) of Article 4(1) of Directive 2014/65/EU; (9) ‘accepted market practice’ means a specific market practice that is accepted by a competent authority in accordance with Article 13; (10) ‘trading venue’ means a trading venue as defined in point (24) of Article 4(1) of Directive 2014/65/EU; (11) ‘SME growth market’ means SME growth market as defined in point (12) of Article 4(1) of Directive 2014/65/EU; (12) ‘competent authority’ means an authority designated in accordance with Article 22, unless otherwise specified in this Regulation; (13) ‘person’ means a natural or legal person; (14) ‘commodity’ means a commodity as defined in point (1) of Article 2 of Commission Regulation (EC) No 1287/2006 ( 19 ) ; (15) ‘spot commodity contract’ means a contract for the supply of a commodity traded on a spot market which is promptly delivered when the transaction is settled, and a contract for the supply of a commodity that is not a financial instrument, including a physically settled forward contract; (16) ‘spot market’ means a commodity market in which commodities are sold for cash and promptly delivered when the transaction is settled, and other non-financial markets, such as forward markets for commodities; (17) ‘buy-back programme’ means trading in own shares in accordance with Articles 21 to 27 of Directive 2012/30/EU of the European Parliament and of the Council ( 20 ) ; (18) ‘algorithmic trading’ means algorithmic trading as defined in point (39) of Article 4(1) of Directive 2014/65/EU; (19) ‘emission allowance’ means emission allowance as described in point (11) of Section C of Annex I to Directive 2014/65/EU; (20) ‘emission allowance market participant’ means any person who enters into transactions, including the placing of orders to trade, in emission allowances, auctioned products based thereon, or derivatives thereof and who does not benefit from an exemption pursuant to the second subparagraph of Article 17(2); (21) ‘issuer’ means a legal entity governed by private or public law, which issues or proposes to issue financial instruments, the issuer being, in case of depository receipts representing financial instruments, the issuer of the financial instrument represented; (22) ‘wholesale energy product’ means wholesale energy product as defined in point (4) of Article 2 of Regulation (EU) No 1227/2011; (23) ‘national regulatory authority’ means national regulatory authority as defined in point (10) of Article 2 of Regulation (EU) No 1227/2011; (24) ‘commodity derivatives’ means commodity derivatives as defined in point (30) of Article 2(1) of Regulation (EU) No 600/2014 of the European Parliament and of the Council ( 21 ) ; (25) ‘person discharging managerial responsibilities’ means a person within an issuer, an emission allowance market participant or another entity referred to in Article 19(10), who is: (a) a member of the administrative, management or supervisory body of that entity; or (b) a senior executive who is not a member of the bodies referred to in point (a), who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity; (26) ‘person closely associated’ means: (a) a spouse, or a partner considered to be equivalent to a spouse in accordance with national law; (b) a dependent child, in accordance with national law; (c) a relative who has shared the same household for at least one year on the date of the transaction concerned; or (d) a legal person, trust or partnership, the managerial responsibilities of which are discharged by a person discharging managerial responsibilities or by a person referred to in point (a), (b) or (c), which is directly or indirectly controlled by such a person, which is set up for the benefit of such a person, or the economic interests of which are substantially equivalent to those of such a person; (27) ‘data traffic records’ means records of traffic data as defined in point (b) of the second paragraph of Article 2 of Directive 2002/58/EC of the European Parliament and the Council ( 22 ) ; (28) ‘person professionally arranging or executing transactions’ means a person professionally engaged in the reception and transmission of orders for, or in the execution of transactions in, financial instruments; (29) ‘benchmark’ means any rate, index or figure, made available to the public or published that is periodically or regularly determined by the application of a formula to, or on the basis of the value of one or more underlying assets or prices, including estimated prices, actual or estimated interest rates or other values, or surveys, and by reference to which the amount payable under a financial instrument or the value of a financial instrument is determined; (30) ‘market maker’ means a market maker as defined in point (7) of Article 4(1) of Directive 2014/65/EU; (31) ‘stake-building’ means an acquisition of securities in a company which does not trigger a legal or regulatory obligation to make an announcement of a takeover bid in relation to that company; (32) ‘disclosing market participant’ means a person who falls into any of the categories set out in points (a) to (d) of Article 11(1) or of Article 11(2), and discloses information in the course of a market sounding; (33) ‘high-frequency trading’ means high-frequency algorithmic trading technique as defined in point (40) of Article 4(1) of Directive 2014/65/EU; (34) ‘information recommending or suggesting an investment strategy’ means information: (i) produced by an independent analyst, an investment firm, a credit institution, any other person whose main business is to produce investment recommendations or a natural person working for them under a contract of employment or otherwise, which, directly or indirectly, expresses a particular investment proposal in respect of a financial instrument or an issuer; or (ii) produced by persons other than those referred to in point (i), which directly proposes a particular investment decision in respect of a financial instrument; (35) ‘investment recommendations’ means information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public. 2. For the purposes of Article 5, the following definitions apply: (a) ‘securities’ means: (i) shares and other securities equivalent to shares; (ii) bonds and other forms of securitised debt; or (iii) securitised debt convertible or exchangeable into shares or into other securities equivalent to shares. (b) ‘associated instruments’ means the following financial instruments, including those which are not admitted to trading or traded on a trading venue, or for which a request for admission to trading on a trading venue has not been made: (i) contracts or rights to subscribe for, acquire or dispose of securities; (ii) financial derivatives of securities; (iii) where the securities are convertible or exchangeable debt instruments, the securities into which such convertible or exchangeable debt instruments may be converted or exchanged; (iv) instruments which are issued or guaranteed by the issuer or guarantor of the securities and whose market price is likely to materially influence the price of the securities, or vice versa; (v) where the securities are securities equivalent to shares, the shares represented by those securities and any other securities equivalent to those shares; (c) ‘significant distribution’ means an initial or secondary offer of securities that is distinct from ordinary trading both in terms of the amount in value of the securities to be offered and the selling method to be employed; (d) ‘stabilisation’ means a purchase or offer to purchase securities, or a transaction in associated instruments equivalent thereto, which is undertaken by a credit institution or an investment firm in the context of a significant distribution of such securities exclusively for supporting the market price of those securities for a predetermined period of time, due to a selling pressure in such securities.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for the proposal Directive 2014/65/EU (‘MiFID’) together with Regulation (EU) No 600/2014 (‘MiFIR’) was adopted in the wake of the financial crisis. MiFID and MiFIR, collectively referred to as MiFID II, covers securities markets, investment intermediaries and trading venues. The new framework reinforces and replaces the current MiFID framework. MiFID II extends the number of financial instruments covered by trading rules and ensures that trading takes place on regulated platforms. It introduces rules on high frequency trading. It improves the transparency and oversight of financial markets – including derivatives markets - and addresses the issue of price volatility in commodity derivatives. The new framework improves conditions for competition in the trading and clearing of financial instruments. Building on the rules already in place, the revised MiFID rules also strengthen the protection of investors by introducing robust organisational and conduct of business requirements. The MiFID II package consists of a Directive and a Regulation. Member States need to transpose the Directive by 3 July 2016. Both MiFID and MiFIR are scheduled to apply as of 3 January 2017. The purpose of the draft proposal is to extend the entry into application of both instruments that are comprised in the MIFID II package as a result of the technical implementation challenges met by the European Securities and Markets Authority ('ESMA'), national competent authorities ('NCAs') and stakeholders. These challenges are of such magnitude that essential data infrastructures will not be in place in time for 3 January 2017. During the legislative process, the very high level of complexity of the MiFID II package and the need for a significant number of implementing measures were recognised. To this end, a period of 30 months was foreseen between the adoption and the entry into application, instead of the usual 18-24 months. Despite this unusually long period, ESMA has made clear to the Commission that the technical implementing challenges are of such magnitude that essential data infrastructures will not be in place in time for 3 January 2017. If the date of entry into application remains unchanged, this would mean, in practice, that neither competent authorities, nor market participants, would be in a position to apply the new rules on 3 January 2017. This would lead to legal uncertainty and potential market disruption. In light of these exceptional circumstances and the particular technical implementation challenges faced by ESMA and the competent authorities in this specific case, the Commission deems it necessary to extend the entry into application of both instruments that are comprised in MIFID II. Such extension shall be strictly limited to what is necessary to allow the technical implementation work to be finalised. 1.2 The 'data' challenge ESMA have informed the Commission that neither they nor the NCAs will be in a position to apply MiFID II as of 3 January 2017. This is as a result of significant challenges in collecting the data that is necessary for the operation of the MiFID II rules. In order to ensure legal certainty and avoid potential market disruption, urgent action is needed to adjust the date of entry into application for MiFID II. The reasons for the urgency are linked to the need to establish new and extensive electronic data collection networks between trading venues, national regulators and ESMA. The new framework requires trading venues and systematic internalisers to provide competent authorities with financial instrument reference data that describes in a uniform manner the characteristics of every financial instrument subject to the scope of MiFID II. Additional data are also used for other purposes, in particular for the calculation of various liquidity and transparency thresholds used for on-venue trading of all financial instruments covered by MiFID as well as for positions reporting of commodity derivatives. In order to collect data in an efficient and harmonised manner, a new data collection infrastructure must be developed. This obliges ESMA, in conjunction with competent national authorities, to establish a Financial Instruments Reference Data System ('FIRDS'). FIRDS will need to cover the entire range of financial instruments that are included in the increased scope of MiFID II. In accomplishing this task, FIRDS will necessitate linking of data feeds between ESMA, NCAs and around 300 trading venues across the European Union. The vast majority of the new IT-systems underpinning FIRDS will need to be built from the ground, based on new parameters. The Commission recognises that as a result of the size and complexity of the data needed to be collected and processed for MiFID II to become operational, in particular for transaction reporting, transparency calculations and reporting of positions in commodity derivatives, neither stakeholders, such as trading platforms, nor NCAs nor ESMA are in a position to ensure that the necessary data collection infrastructures would be in place and become operational by 3 January 2017. Therefore, on 2 October 2015 ESMA informed the Commission that a delay in the technical implementation of MiFID II was unavoidable. 1.3. The scope of the proposal The absence of data has ramifications across multiple areas of MIFID II. As regards market regulation, it is clear that without the foundation of reference data (instrument ID) and the additional data infrastructures for transparency calculations and position reporting in place, it will not be possible to apply the majority of the market rules. In particular:  Transaction reporting : without reference data, there will be challenges to determine what instruments are within the scope. In addition, the necessary infrastructure for market participants to report to their competent authorities will not be available.  Transparency framework : the trade transparency rules for all financial instruments (equity as well as non-equity) cannot be established and applied. In addition, the calculations and thresholds for the liquidity assessment, waivers, deferred publication and, in the equity area, the double volume cap (which limits dark trading) cannot be established.  Commodity derivatives : in the absence of position reporting for commodity derivatives it will be very difficult to enforce position limits on such commodity derivative contracts. With no position reporting, there is a limited ability to effectively detect breaches of positon limits.  Microstructural regulation: many of the requirements in relation to algorithmic trading/high frequency trading are by their nature dependent on data. In particular, the key provisions on tick-size regime and the obligations in relation to market making obligations and schemes are also tailored on there being a liquid market as determined under the transparency framework. The investor protection rules, the conduct of business rules and certain associated organisational requirements under MIFID II will not be directly affected by the lack of data. The important exception is the rules on best execution , where the scope of the disclosure is designed by reference to there being a liquid market and other transparency concepts. For other investor protection rules, aside from issues relating to the definition of financial instruments or the scope of the legislation, data inter-linkages generally do not exist, as these rules directly concern distribution and not trading. It is, therefore, recognised that an alternative approach would be to extend the date of entry into application only for the parts of the legislation directly relating to data collection. However, after a careful analysis of that option, it appears that an extension for the whole package, including investor protection rules, as opposed to a staggered approach is preferable:  It avoids the risk of causing confusion and unnecessary costs that stakeholders would incur through a staggered implementation. Building various infrastructures simultaneously – as opposed to doing so in stages - would make the process more cost effective. For example, it avoids situations, where investment firms, involved in execution of orders, would have to set up organisational requirements/conduct rules in stages, which would be complicated, expensive and costly;  It avoids having to delineate between the areas that can be immediately implemented and those that cannot be, and, therefore, avoids the risk of causing unintended consequences which may not have been foreseen or sufficiently considered; and  It avoids the need for transitional rules, which by themselves would create new issues and divert resources of ESMA, NCAs and stakeholders from building the permanent framework. On the basis of the above considerations, extending the entry into application for the entire MiFID II rulebook is therefore necessary and justified. Changing the date of applicability of MiFID II does however have consequences for the applicability of other legislation, in particular Regulation (EU) 596/2014 ('MAR') and Regulation (EU) 909/2014 ('CSDR'). The market abuse framework will apply to certain definitions and concepts of MiFID II. As MAR is set to enter into application on 3 July 2016, there is already a provision in it, which ensures that before the originally foreseen date of entry into application of MiFID II, concepts and rules of MiFID I will apply. In order to ensure legal certainty for the period between the originally foreseen date of entry into application and the new date of entry into application, it is necessary to clarify in MAR that the concepts and rules as set out in MiFID I should be used until the new date of entry into application of MiFID II. MAR also refers to concepts that will be introduced by MiFID II, such as organised trading facilities ('OTFs'), small and medium-sized enterprises ('SME') growth markets, emission allowances or auctioned products based thereon. MAR sets out that its provisions shall not apply to these concepts until the originally foreseen entry into application of MiFID II. It is therefore also necessary to clarify in MAR that provisions referring to OTFs, SME growth markets, emission allowances or auctioned products based thereon shall not apply until the new date of entry into application of MiFID II. The consequences for the CSDR are twofold. First, there are consequences for the application of the rules on settlement discipline to multilateral trading facilities ('MTFs') applying for registration as SME growth markets in accordance with Directive 2014/65/EU. Specifically, these rules allow MTFs meeting the criteria for an SME growth market under MiFID II to apply a longer extension period for the settlement of transactions whilst their registration as an SME growth market under MiFID II is still ongoing. Second, in order to have a clear and coherent legislative framework for trading and settlement, CSDR relies on many of the definitions and concepts of MiFID II. In order to ensure legal certainty for the period between the previous date of entry into application and the new date of entry into application, it is necessary to clarify that until the new date of entry into application, the rules set out in MiFID I should be used. 1.4. Length of the extension An extension of one year should provide sufficient and reasonable time for ESMA, NCAs and operators to put in place the infrastructure for data collection, reporting and the transparency threshold calculations. There are five steps in the implementation process: (1) business requirements (which in this case are the necessary regulatory technical standards/implementing technical standards), (2) specifications, (3) development (4) testing and (5) deployment. ESMA estimates that it should complete these steps in relation to the reference data, transparency calculations and position reporting systems by January 2018. This assumes that there is sufficient legal clarity on the final requirements under the relevant regulatory technical standards by mid-2016. On this basis, the draft proposal therefore extends the entry into application of the whole framework until 3 January 2018 by one year. The extension of entry into application of Regulation (EU) No 600/2014 should not impact adoption of delegated acts and technical standards under Regulation (EU) No 600/2014. The Commission should adopt these measures in accordance with the procedure envisaged in order to allow the industry to set up and adjust internal systems to ensure compliance with new requirements on the date of entry into application of Regulation (EU) No 600/2014 .
Revised version (Article 3 Definitions):
1. For the purposes of this Regulation, the following definitions apply: (1) ‘financial instrument’ means a financial instrument as defined in point (15) of Article 4(1) of Directive 2014/65/EU; (2) ‘investment firm’ means an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU; (3) ‘credit institution’ means a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council ( 1 ); (4) ‘financial institution’ means a financial institution as defined in point (26) of Article 4(1) of Regulation (EU) No 575/2013; (5) ‘market operator’ means a market operator as defined in point (18) of Article 4(1) of Directive 2014/65/EU; (6) ‘regulated market’ means a regulated market as defined in point (21) of Article 4(1) of Directive 2014/65/EU; (7) ‘multilateral trading facility’ or ‘MTF’ means a multilateral system as defined in point (22) of Article 4(1) of Directive 2014/65/EU; (8) ‘organised trading facility’ or ‘OTF’ means a system or facility in the Union as defined in point (23) of Article 4(1) of Directive 2014/65/EU; (9) ‘accepted market practice’ means a specific market practice that is accepted by a competent authority in accordance with Article 13; (10) ‘trading venue’ means a trading venue as defined in point (24) of Article 4(1) of Directive 2014/65/EU; (11) ‘SME growth market’ means SME growth market as defined in point (12) of Article 4(1) of Directive 2014/65/EU; (12) ‘competent authority’ means an authority designated in accordance with Article 22, unless otherwise specified in this Regulation; (13) ‘person’ means a natural or legal person; (14) ‘commodity’ means a commodity as defined in point (1) of Article 2 of Commission Regulation (EC) No 1287/2006 ( 2 ); (15) ‘spot commodity contract’ means a contract for the supply of a commodity traded on a spot market which is promptly delivered when the transaction is settled, and a contract for the supply of a commodity that is not a financial instrument, including a physically settled forward contract; (16) ‘spot market’ means a commodity market in which commodities are sold for cash and promptly delivered when the transaction is settled, and other non-financial markets, such as forward markets for commodities; (17) ‘buy-back programme’ means trading in own shares in accordance with Articles 21 to 27 of Directive 2012/30/EU of the European Parliament and of the Council ( 3 ); (18) ‘algorithmic trading’ means algorithmic trading as defined in point (39) of Article 4(1) of Directive 2014/65/EU; (19) ‘emission allowance’ means emission allowance as described in point (11) of Section C of Annex I to Directive 2014/65/EU; (20) ‘emission allowance market participant’ means any person who enters into transactions, including the placing of orders to trade, in emission allowances, auctioned products based thereon, or derivatives thereof and who does not benefit from an exemption pursuant to the second subparagraph of Article 17(2); (21) ‘issuer’ means a legal entity governed by private or public law, which issues or proposes to issue financial instruments, the issuer being, in case of depository receipts representing financial instruments, the issuer of the financial instrument represented; (22) ‘wholesale energy product’ means wholesale energy product as defined in point (4) of Article 2 of Regulation (EU) No 1227/2011; (23) ‘national regulatory authority’ means national regulatory authority as defined in point (10) of Article 2 of Regulation (EU) No 1227/2011; (24) ‘commodity derivatives’ means commodity derivatives as defined in point (30) of Article 2(1) of Regulation (EU) No 600/2014 of the European Parliament and of the Council ( 4 ); (25) ‘person discharging managerial responsibilities’ means a person within an issuer, an emission allowance market participant or another entity referred to in Article 19(10), who is: (a) a member of the administrative, management or supervisory body of that entity; or (b) a senior executive who is not a member of the bodies referred to in point (a), who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity; (25) ‘person discharging managerial responsibilities’ means a person within an issuer, an emission allowance market participant or another entity referred to in Article 19(10), who is: (a) a member of the administrative, management or supervisory body of that entity; or (b) a senior executive who is not a member of the bodies referred to in point (a), who has regular access to inside information relating directly or indirectly to that entity and power to take managerial decisions affecting the future developments and business prospects of that entity; (26) ‘person closely associated’ means: (a) a spouse, or a partner considered to be equivalent to a spouse in accordance with national law; (b) a dependent child, in accordance with national law; (c) a relative who has shared the same household for at least one year on the date of the transaction concerned; or (d) a legal person, trust or partnership, the managerial responsibilities of which are discharged by a person discharging managerial responsibilities or by a person referred to in point (a), (b) or (c), or which is directly or indirectly controlled by such a person, or which is set up for the benefit of such a person, or the economic interests of which are substantially equivalent to those of such a person; (26) ‘person closely associated’ means: (a) a spouse, or a partner considered to be equivalent to a spouse in accordance with national law; (b) a dependent child, in accordance with national law; (c) a relative who has shared the same household for at least one year on the date of the transaction concerned; or (d) a legal person, trust or partnership, the managerial responsibilities of which are discharged by a person discharging managerial responsibilities or by a person referred to in point (a), (b) or (c), or which is directly or indirectly controlled by such a person, or which is set up for the benefit of such a person, or the economic interests of which are substantially equivalent to those of such a person; (27) ‘data traffic records’ means records of traffic data as defined in point (b) of the second paragraph of Article 2 of Directive 2002/58/EC of the European Parliament and the Council ( 5 ); (28) ‘person professionally arranging or executing transactions’ means a person professionally engaged in the reception and transmission of orders for, or in the execution of transactions in, financial instruments; (29) ‘benchmark’ means any rate, index or figure, made available to the public or published that is periodically or regularly determined by the application of a formula to, or on the basis of the value of one or more underlying assets or prices, including estimated prices, actual or estimated interest rates or other values, or surveys, and by reference to which the amount payable under a financial instrument or the value of a financial instrument is determined; (30) ‘market maker’ means a market maker as defined in point (7) of Article 4(1) of Directive 2014/65/EU; (31) ‘stake-building’ means an acquisition of securities in a company which does not trigger a legal or regulatory obligation to make an announcement of a takeover bid in relation to that company; (32) ‘disclosing market participant’ means a person who falls into any of the categories set out in points (a) to (d) of Article 11(1) or of Article 11(2), and discloses information in the course of a market sounding; (33) ‘high-frequency trading’ means high-frequency algorithmic trading technique as defined in point (40) of Article 4(1) of Directive 2014/65/EU; (34) ‘information recommending or suggesting an investment strategy’ means information: (i) produced by an independent analyst, an investment firm, a credit institution, any other person whose main business is to produce investment recommendations or a natural person working for them under a contract of employment or otherwise, which, directly or indirectly, expresses a particular investment proposal in respect of a financial instrument or an issuer; or (ii) produced by persons other than those referred to in point (i), which directly proposes a particular investment decision in respect of a financial instrument; (34) ‘information recommending or suggesting an investment strategy’ means information: (i) produced by an independent analyst, an investment firm, a credit institution, any other person whose main business is to produce investment recommendations or a natural person working for them under a contract of employment or otherwise, which, directly or indirectly, expresses a particular investment proposal in respect of a financial instrument or an issuer; or (ii) produced by persons other than those referred to in point (i), which directly proposes a particular investment decision in respect of a financial instrument; (35) ‘investment recommendations’ means information recommending or suggesting an investment strategy, explicitly or implicitly, concerning one or several financial instruments or the issuers, including any opinion as to the present or future value or price of such instruments, intended for distribution channels or for the public. 2. For the purposes of Article 5, the following definitions apply: (a) ‘securities’ means: (i) shares and other securities equivalent to shares; (ii) bonds and other forms of securitised debt; or (iii) securitised debt convertible or exchangeable into shares or into other securities equivalent to shares. (a) ‘securities’ means: (i) shares and other securities equivalent to shares; (ii) bonds and other forms of securitised debt; or (iii) securitised debt convertible or exchangeable into shares or into other securities equivalent to shares. (b) ‘associated instruments’ means the following financial instruments, including those which are not admitted to trading or traded on a trading venue, or for which a request for admission to trading on a trading venue has not been made: (i) contracts or rights to subscribe for, acquire or dispose of securities; (ii) financial derivatives of securities; (iii) where the securities are convertible or exchangeable debt instruments, the securities into which such convertible or exchangeable debt instruments may be converted or exchanged; (iv) instruments which are issued or guaranteed by the issuer or guarantor of the securities and whose market price is likely to materially influence the price of the securities, or vice versa; (v) where the securities are securities equivalent to shares, the shares represented by those securities and any other securities equivalent to those shares; (b) ‘associated instruments’ means the following financial instruments, including those which are not admitted to trading or traded on a trading venue, or for which a request for admission to trading on a trading venue has not been made: (i) contracts or rights to subscribe for, acquire or dispose of securities; (ii) financial derivatives of securities; (iii) where the securities are convertible or exchangeable debt instruments, the securities into which such convertible or exchangeable debt instruments may be converted or exchanged; (iv) instruments which are issued or guaranteed by the issuer or guarantor of the securities and whose market price is likely to materially influence the price of the securities, or vice versa; (v) where the securities are securities equivalent to shares, the shares represented by those securities and any other securities equivalent to those shares; (c) ‘significant distribution’ means an initial or secondary offer of securities that is distinct from ordinary trading both in terms of the amount in value of the securities to be offered and the selling method to be employed; (d) ‘stabilisation’ means a purchase or offer to purchase securities, or a transaction in associated instruments equivalent thereto, which is undertaken by a credit institution or an investment firm in the context of a significant distribution of such securities exclusively for supporting the market price of those securities for a predetermined period of time, due to a selling pressure in such securities.
Article 4 Notifications and list of financial instruments
1. Market operators of regulated markets and investment firms and market operators operating an MTF or an OTF shall, without delay, notify the competent authority of the trading venue of any financial instrument for which a request for admission to trading on their trading venue is made, which is admitted to trading, or which is traded for the first time. They shall also notify the competent authority of the trading venue when a financial instrument ceases to be traded or to be admitted to trading, unless the date on which the financial instrument ceases to be traded or to be admitted to trading is known and was referred to in the notification made in accordance with the first subparagraph. Notifications referred to in this paragraph shall include, as appropriate, the names and identifiers of the financial instruments concerned, and the date and time of the request for admission to trading, admission to trading, and the date and time of the first trade. Market operators and investment firms shall also transmit to the competent authority of the trading venue the information set out in the third subparagraph with regard to financial instruments that were the subject of a request for admission to trading or that were admitted to trading before 2 July 2014, and that are still admitted to trading or traded on that date. 2. Competent authorities of the trading venue shall transmit notifications that they receive pursuant to paragraph 1 to ESMA without delay. ESMA shall publish those notifications on in its website in the form of a list immediately on receipt. ESMA shall update that list immediately on receipt of a notification by a competent authority of the trading venue. The list shall not limit the scope of this Regulation. 3. The list shall contain the following information: (a) the names and identifiers of financial instruments which are the subject of a request for admission to trading, admitted to trading or traded for the first time, on regulated markets, MTFs and OTFs; (b) the dates and times of the requests for admission to trading, of the admissions to trading, or of the first trades; (c) details of the trading venues on which the financial instruments are the subject of a request for admission to trading, admitted to trading or traded for the first time; and (d) the date and time at which the financial instruments cease to be traded or to be admitted to trading. 4. In order to ensure consistent harmonisation of this Article, ESMA shall develop draft regulatory technical standards to lay down: (a) the content of the notifications referred to in paragraph 1; and (b) the manner and conditions of the compilation, publication and maintenance of the list referred to in paragraph 3. ESMA shall submit those draft regulatory technical standards to the Commission by 3 July 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council ( 23 ) . 5. In order to ensure uniform conditions of application of this Article, ESMA shall develop draft implementing technical standards to lay down the timing, format and template of the submission of notifications under paragraphs 1 and 2. ESMA shall submit those draft implementing technical standards to the Commission by 3 July 2015. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Political context This proposal is part of the Listing Act package, a set of measures to make public markets more attractive for EU companies and facilitate access to capital for small and medium-sized companies (SMEs). It is in line with the Capital Markets Union (CMU) core aim to improve access to market-based sources of financing for EU companies at each stage of their development, including for smaller companies. L isted companies , including recently listed ones, often outpace privately owned companies in terms of annual revenue growth and job creation 1 . By listing on public markets, companies can diversify their investor base, reduce their dependency on bank financing, gain easier and cheaper access to additional equity capital and debt finance (through secondary offers), raise their public profile and increase brand recognition . Since the publication of the first CMU Action Plan in 2015, progress has been made to make it easier and cheaper for companies, in particular SMEs, to access public markets. In January 2018, the Directive 2014/65/EU of the European Parliament and of the Council ( the Markets in Financial Instruments Directive, or ‘ MiFID II ’ ) 2 introduced a new category of Multilateral Trading Facilities (MTFs), the SME growth markets , 3 to incenti vise SMEs access to capital markets. In 2019, new EU rules were put forward by Regulation (EU) 2019/2115 of the European Parliament and of the Council 4 (SME Listing Act) to cut red tape and reduce regulatory burden for companies listing on SME growth markets while preserving a high level of investor protection and market integrity . Nevertheless, despite this progress, stakeholders argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers. The new CMU Action Plan adopted in September 2020 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 2019 SME Listing Act, the Commission set up a Technical Expert Stakeholder Group (TESG) on SMEs which confirmed stakeholders’ concerns that further legislative action is needed to support listing of companies and especially of SMEs. In its final report of May 2021 5 , the TESG made 12 recommendations to amend the listing framework both on regulated markets, as well as on SME growth markets . On 15 September 2021 , President Von der Leyen announced in her letter of intent 6 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 programme 7 . A company’s decision to list is a complex one and is influenced by a multitude of factors, many of which are outside the reach of regulators and therefore cannot be addressed directly by a legislative intervention. For instance, the features of the ecosystem that determine the cost of listing services, and more broadly geopolitical instability, Brexit, Covid-19, and inflation, have all had (and will continue to have) an impact on the decision to list, on the timing of listing, and on whether to remain listed in the EU. Regulatory requirements and the associated costs and burden, however, are also an important factor in a company’s decision to list and remain listed. The Listing Act package represents a targeted set of measures aiming to reduce the regulatory burden where it is considered to be excessive (i.e., where regulation could ensure investor protection/market integrity in a more cost efficient manner for stakeholders) and to increase the flexibility accorded under company law to a company’s founder(s) or controlling shareholder(s) to choose how to distribute voting rights after the admission to trading of shares. The regulatory framework applying to the listing process is multifaceted. Companies must comply with regulatory requirements before, during and after the i nitial p ublic o ffering (IPO). This proposal focuses specifically on the regulatory burden that emerges at two moments: the IPO stage and the post-IPO stage. It addresses regulatory burden at the IPO stage by introducing targeted amendments to Regulation (EU) 2017/1129 of the European Parliament and of the Council 8 (the Prospectus Regulation ) and it addresses regulatory burden at the post-IPO stage by introducing targeted amendments to Regulation No 596/2014 of the European Parliament and of the Council 9 ( the Market Abuse Regulation or ‘ MAR ’ ). It also contains limited technical amendments to Regulation No 600/2014 of the European Parliament and of the Council ( the Markets in Financial Instruments Regulation or ‘ MiFIR ’ ) 10 . The proposed regulation is accompanied by two other legislative proposals: · a proposal for a d irective amending MiFID II and repealing Directive 2001/34/EC of the European Parliament and of the Council 11 ( the Listing Directive), which aims to both (i) streamline and clarify listing requirements and (ii) to increase the low level of investment research on SMEs; · a proposal for a new d irective on multiple-vote share structures, which aims to address the regulatory barriers that emerge at the pre-IPO phase and, in particular, the unequal opportunities faced by companies across the EU when choos ing the appropriate governance structures when they list . Reasons for the proposal 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 SMEs. The regulatory environment impacts all stages of the listing process and is among the driving forces of the high costs of listing and staying listed. Companies are required to comply with several disclosure and reporting requirements under EU law, especially the Prospectus Regulation and MAR. The aim of the Prospectus Regulation is to enhanc e the internal market for capital by ensur ing investor protection and market efficiency while helping companies, including SMEs, access different forms of finance in the EU 12 . The Prospectus Regulation lays down requirements for the drawing up, approval and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market . A prospectus is a document presenting information about a company and the securities that such company offers to the public or seeks to admit to trading on a regulated market. This information should be the basis on which investors can decide whether to invest in securities issued by that company. The Prospectus Regulation does not apply under certain circumstances, such as for non-equity securities issued by certain sovereign or supranational entities, or for offers of securities to the public with a total consideration in the Union below EUR 1 million over a period of 12 months. It also includes several exemptions from the obligation to publish a prospectus for offers of securities to the public or admission to trading on a regulated market. In particular, Member States may exempt from the obligation to publish a prospectus offers of securities to the public of up to EUR 8 million over a period of 12 months, provided that they do not require notification (a ‘passport’). For offers below EUR 1 million or the relevant threshold set at national level, Member States may require national disclosure documents, provided that they do not constitute a disproportionate or unnecessary burden. Hence, issuers willing to offer securities cross-border need to comply with the threshold and disclosure requirements set out by the concerned Member States, unless those issuers draw up a prospectus on a voluntary basis in order to benefit from the EU single passport. Under the CMU Action Plan, progress has already been made to make it easier and cheaper for co mpanies, in particular smaller ones, to draw-up a prospectus. The Prospectus Regulation 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. The Prospectus Regulation also introduced a simplified prospectus for companies whose securities are admitted to trading continuously and for at least the last 18 months on a regulated market or an SME growth market and wishing to issue additional shares or raise debt ( follow-on or secondary issuance s ). Issuers whose securities are admitted to trading on an SME growth market can also use this simplified prospectus to transfer subsequently to regulated markets. Finally, Regulation (EU) 2021/337 of the European Parliament and of the Council 13 introduced, as part of the Capital Markets Recovery Package (CMRP), a new type of short-form prospectus (the “EU Recovery prospectus”) . The EU Recovery prospectus is available to issuers that have shares already admitted to trading o n a regulated market or an SME g rowth market continuously for at least the last 18 months and that issue additional shares to overcome the negative impact of the COVID-19 crisis and contain excessive indebtedness. Th e EU Recovery prospectus regime will however expire on 31 December 2022. Despite the alleviations introduced, feedback from stakeholders indicated that the requirement to produce a prospectus remains overly burdensome. 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 of equity or non-equity securities. The current rules in particular contribute to overly lengthy prospectuses. 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). Feedback to the public consultation (echoed during the stakeholders’ meetings) confirmed the view that neither the standard prospectus nor the EU Growth prospectus strikes an appropriate balance between effective investor protection and the proportionate administrative burden for issuers, especially SMEs. In other cases, a prospectus is required when a lot of information is already available in the public domain (in particular, in the case of follow-on issuances). The excessive length of the prospectus can also discourage some, in particular smaller, investors from consulting it and translate into a higher cost of investing for larger investors. It also requires a longer period of time for the national competent authority (NCA) to scrutinise and approve the prospectus. The current rules also contribute to very divergent prospectuses across the EU. D ata reported by Oxera 14 and by the European Securities and Markets Authorities ( ES MA ) 15 shows a large discrepancy between Member States regarding the l ength of prospectuses, which is indicative of a lack of uniformity of prospectuses in the EU . This discrepancy stems also from the fact that the current rules do not sufficiently frame supervisory scrutiny by NCAs. Feedback from stakeholders highlighted that the EU regulatory framework places overly burdensome requirements also on already listed issuers, in particular under MAR. Since its entry into application on 1 July 2016, MAR has been extended to MTFs, including SME growth markets. MAR aims to increase market integrity and investor confidence. It prohibits from: (i) engaging or attempting to engage in insider dealing 16 ; (ii) recommending that another person engages in insider dealing or induces another person to engage in insider dealing; (iii) unlawfully disclosing inside information 17 ; or (iv) engaging in or attempting to engage in market manipulation. Issuers are also subject to several disclosure and record-keeping obligations under MAR. In particular, issuers are under a general obligation to disclose all inside information to the public as soon as possible 18 . Feedback from stakeholders indicated that some aspects of the MAR disclosure regime place a disproportionately high burden on issuers. In particular, stakeholders perceive as burdensome the obligation to disclose as soon as possible all inside information. This is due to the broadness of the notion of inside information (which gives rise to difficulties for issuers when delineating between what is and what is not inside information), as well as to the fact that the same notion applies both for the purpose of the prohibition of insider dealing and for the purpose of disclosure. 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. The notion of inside information covers not only events that have already occurred but also events which are “reasonably expected to occur” (i.e., for which there is a realistic prospect to occur) and, in the context of protracted processes (such as a merger), the intermediate steps which are connected with bringing about a future event. As a consequence, issuers incur high compliance costs to understand which steps of a protracted process may constitute inside information and when a certain piece of information is mature enough to be disclosed. At the same time, the effectiveness of disclosure in reducing information asymmetries between issuers and investors is limited if information is too preliminary, incomplete and still potentially subject to fundamental changes. Too early disclosure of information could 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), thus increasing the opportunity cost for investors. Furthermore, issuers face a lack of legal clarity around the conditions that need to be met to delay disclosure when immediate disclosure would be likely to prejudice the legitimate interests of the issuers (e.g., by jeopardising the successful conclusion of ongoing negotiations). A few additional reporting and disclosure requirements under MAR place a disproportionately high burden on issuers, such as the provisions on managers’ transactions, insider lists, and market sounding. Current MAR rules also create a disproportionate sanctioning regime for disclosure-related infringements, in particular for SMEs, which may potentially be sanctioned at the same level as large companies. Objectives of the proposal The overall objective of this initiative is to introduce technical adjustments to the EU rulebook in order to reduce regulatory and compliance costs for companies seeking to list or already listed with a view to streamlining the listing process and enhancing legal clarity, while ensuring an appropriate level of investor protection and market integrity. This, in turn, is expected to help diversify funding sources for companies in the EU and increase investments, economic growth, job creation and innovation in the EU. The proposed targeted amendments to the Prospectus Regulation aim in particular to make it easier and cheaper for issuers to draw up a prospectus, while enabling investors to make the right investment decision by providing comprehensible, easy to analyse and concise information. They also seek to introduce sizable simplifications to, or even exemptions from, the prospectus requirements in cases where the issuer is already known to investors and a lot of information is already publicly available (follow-on issuances). These amendments are accompanied by amendments aimed at fostering the convergence of and streamlining the scrutiny and approval process by NCAs (for example, by narrowly frame the ability of NCAs to request issuers to include additional information in the prospectus). In the case of an offer of securities to the public or the admission to trading on a regulated market, the proposal streamlines and further standardises the standard prospectus (referring to a non-alleviated prospectus type, irrespective of whether it relates to equity or non-equity securities, or whether is drawn up as a single document or consists of separate documents). The proposal aligns the level of disclosure of the standard prospectus to the level of disclosure currently required under the EU Growth prospectus regime, introduces a fixed order of disclosure and makes incorporation by reference a legal requirement. The proposal also introduces the possibility for issuers to draw up the prospectus in English only as the language customary in the sphere of international finance (except for the summary which in practice is the only document that most retail investors consult), and to publish it in an electronic format only (i.e., no paper copies on request). At the same time, only for shares or other transferable securities equivalent to shares in companies, a limit number of pages (300 pages) is introduced to avoid overly lengthy prospectuses for companies that do not have a complex financial history. Jointly, these amendments seek to provide a tangible cost and burden reduction for issuers, while ensuring that investors can take advantage of a document that is easier to read and navigate and more easily compare financial instruments and issuers. The proposal also seeks to make it easier for SMEs to raise funds on public markets, in particular on SME growth markets, by generating further cost savings for SMEs and better tailoring disclosure to the needs of investors. For companies offering securities to the public and listing on SME growth markets (as well as for offers of securities to the public by smaller companies), the EU Growth prospectus is replaced by a mandatory new short-form EU Growth issuance document. This document builds on the level of disclosure currently required under the EU Recovery prospectus regime and existing admission documents required by SME growth markets (where the obligation to publish a prospectus does not apply), follows a fixed order of disclosure and is subject, in the case of shares and other equivalent transferable securities, to a page limit. While the proposal exempts, under certain conditions, from the prospectus requirement offers of securities fungible with securities already admitted to trading (for which the publication of a summary document will suffice), it subjects follow-on issuances of non-fungible securities to the approval and publication of a new mandatory short-form EU Follow-on prospectus, largely building on the current EU Recovery prospectus regime. These amendments seek to ensure that companies can fully benefit from the advantages of accessing public capital markets, including easier and quicker access to additional equity capital and debt finance through follow-on offers. At the same time, they safeguard investor protection as these companies are already subject to periodic and ongoing disclosure and reporting requirements and, in addition, issuers will be required to publish the most relevant information for investors. Finally, the amendments to the Prospectus Regulation aim to foster cross-border offers by harmonising and increasing to EUR 12 million the threshold for exempting small offers of securities to the public from the obligation to publish a prospectus. This amendment also seeks to benefit smaller issuers, including SMEs, as in certain cases they will no longer have to produce a prospectus, lowering substantially their regulatory costs and incentivising them to access public capital markets. The proposal also introduces amendments to the rules on equivalence for third countries prospectuses to make them workable. The proposed targeted amendments to MAR aim to reduce legal uncertainty on what constitutes inside information for the purpose of disclosure as well as on the timing of disclosure. While the proposal maintains the current broad notion of inside information for the purposes of the insider dealing regulation, it narrows down the scope of the disclosure obligation. The proposal clarifies in particular that the obligation to disclose all inside information to the public does not cover the information relating to the intermediate steps of a protracted process, as this information is too preliminary and hence not mature enough for disclosure. At the same time, the proposal introduces an empowerment for the Commission to establish, by way of a delegated act a non-exhaustive list of the relevant information as well as, for each information, an indication of the timing when issuers are expected to disclose it. Jointly, these amendments seek to make the MAR disclosure regime less costly to comply with by issuers, more predictable from the investors’ point of view and more conducive to effective price formation. The amendments to the disclosure obligation are accompanied by improvements to the regime for the exchange of information among NCAs to enable them to better identify cases of market manipulation by setting up a cross market order book surveillance (CMOBS) mechanism , 19 thus increasing the integrity of EU markets and enhancing their appeal for investors. In the same vein, the proposal introduces a possibility for ESMA to establish collaboration platforms, in particular for the purpose of monitoring wholesale commodity markets, to address concerns about market integrity and the good functioning of financial and, in particular, spot markets . Finally, the proposal seeks to make the sanctioning regime for MAR disclosure-related infringements more proportionate for SMEs to avoid discouraging smaller issuers from listing or remaining listed. The proposal also aims at alleviating the regulatory hurdles resulting from the application of the managers’ transactions, insider list and market sounding regimes while ensuring that these alleviations do not impair investor protection and market integrity. The creation of a CMOBS mechanism requires also targeted amendments to the MiFIR framework to specify that a competent authority can request order book data on an ongoing basis to a trading venue under its supervision, and to confer to ESMA the role to harmonise the format of the template used to store such data. The proposed targeted amendments aim to build the necessary conditions for structural improvements in EU public capital markets 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 and upcoming 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.
Revised version (Article 4 Notifications and list of financial instruments):
1. Market operators of regulated markets and investment firms and market operators operating an MTF or an OTF shall, without delay, notify the competent authority of the trading venue of any financial instrument for which a request for admission to trading on their trading venue is made, which is admitted to trading, or which is traded for the first time. They shall also notify the competent authority of the trading venue when a financial instrument ceases to be traded or to be admitted to trading, unless the date on which the financial instrument ceases to be traded or to be admitted to trading is known and was referred to in the notification made in accordance with the first subparagraph. Notifications referred to in this paragraph shall include, as appropriate, the names and identifiers of the financial instruments concerned, and the date and time of the request for admission to trading, admission to trading, and the date and time of the first trade. Market operators and investment firms shall also transmit to the competent authority of the trading venue the information set out in the third subparagraph with regard to financial instruments that were the subject of a request for admission to trading or that were admitted to trading before 2 July 2014, and that are still admitted to trading or traded on that date. 2. Competent authorities of the trading venue shall transmit notifications that they receive pursuant to paragraph 1 to ESMA without delay. ESMA shall publish those notifications on in its website in the form of a list immediately on receipt. ESMA shall update that list immediately on receipt of a notification by a competent authority of the trading venue. The list shall not limit the scope of this Regulation. 4. In order to ensure consistent harmonisation of this Article, ESMA shall develop draft regulatory technical standards to lay down: (a) the content of the notifications referred to in paragraph 1; and (b) the manner and conditions of the compilation, publication and maintenance of the list referred to in paragraph 3. ESMA shall submit those draft regulatory technical standards to the Commission by 3 July 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council ( 6 ). 5. In order to ensure uniform conditions of application of this Article, ESMA shall develop draft implementing technical standards to lay down the timing, format and template of the submission of notifications under paragraphs 1 and 2. ESMA shall submit those draft implementing technical standards to the Commission by 3 July 2015. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Article 5 Exemption for buy-back programmes and stabilisation
1. The prohibitions in Articles 14 and 15 of this Regulation do not apply to trading in own shares in buy-back programmes where: (a) the full details of the programme are disclosed prior to the start of trading; (b) trades are reported as being part of the buy-back programme to the competent authority of the trading venue in accordance with paragraph 3 and subsequently disclosed to the public; (c) adequate limits with regard to price and volume are complied with; and (d) it is carried out in accordance with the objectives referred to in paragraph 2 and the conditions set out in this Article and in the regulatory technical standards referred to in paragraph 6. 2. In order to benefit from the exemption provided for in paragraph 1, a buy-back programme shall have as its sole purpose: (a) to reduce the capital of an issuer; (b) to meet obligations arising from debt financial instruments that are exchangeable into equity instruments; or (c) to meet obligations arising from share option programmes, or other allocations of shares, to employees or to members of the administrative, management or supervisory bodies of the issuer or of an associate company. 3. In order to benefit from the exemption provided for in paragraph 1, the issuer shall report to the competent authority of the trading venue on which the shares have been admitted to trading or are traded each transaction relating to the buy-back programme, including the information specified in Article 25(1) and (2) and Article 26(1), (2) and (3) of Regulation (EU) No 600/2014. 4. The prohibitions in Articles 14 and 15 of this Regulation do not apply to trading in securities or associated instruments for the stabilisation of securities where: (a) stabilisation is carried out for a limited period; (b) relevant information about the stabilisation is disclosed and notified to the competent authority of the trading venue in accordance with paragraph 5; (c) adequate limits with regard to price are complied with; and (d) such trading complies with the conditions for stabilisation laid down in the regulatory technical standards referred to in paragraph 6. 5. Without prejudice to Article 23(1), the details of all stabilisation transactions shall be notified by issuers, offerors, or entities undertaking the stabilisation, whether or not they act on behalf of such persons, to the competent authority of the trading venue no later than the end of the seventh daily market session following the date of execution of such transactions. 6. In order to ensure consistent harmonisation of this Article, ESMA shall develop draft regulatory technical standards to specify the conditions that buy-back programmes and stabilisation measures referred to in paragraphs 1 and 4 must meet, including conditions for trading, restrictions regarding time and volume, disclosure and reporting obligations, and price conditions. ESMA shall submit those draft regulatory technical standards to the Commission by 3 July 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Political context This proposal is part of the Listing Act package, a set of measures to make public markets more attractive for EU companies and facilitate access to capital for small and medium-sized companies (SMEs). It is in line with the Capital Markets Union (CMU) core aim to improve access to market-based sources of financing for EU companies at each stage of their development, including for smaller companies. L isted companies , including recently listed ones, often outpace privately owned companies in terms of annual revenue growth and job creation 1 . By listing on public markets, companies can diversify their investor base, reduce their dependency on bank financing, gain easier and cheaper access to additional equity capital and debt finance (through secondary offers), raise their public profile and increase brand recognition . Since the publication of the first CMU Action Plan in 2015, progress has been made to make it easier and cheaper for companies, in particular SMEs, to access public markets. In January 2018, the Directive 2014/65/EU of the European Parliament and of the Council ( the Markets in Financial Instruments Directive, or ‘ MiFID II ’ ) 2 introduced a new category of Multilateral Trading Facilities (MTFs), the SME growth markets , 3 to incenti vise SMEs access to capital markets. In 2019, new EU rules were put forward by Regulation (EU) 2019/2115 of the European Parliament and of the Council 4 (SME Listing Act) to cut red tape and reduce regulatory burden for companies listing on SME growth markets while preserving a high level of investor protection and market integrity . Nevertheless, despite this progress, stakeholders argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers. The new CMU Action Plan adopted in September 2020 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 2019 SME Listing Act, the Commission set up a Technical Expert Stakeholder Group (TESG) on SMEs which confirmed stakeholders’ concerns that further legislative action is needed to support listing of companies and especially of SMEs. In its final report of May 2021 5 , the TESG made 12 recommendations to amend the listing framework both on regulated markets, as well as on SME growth markets . On 15 September 2021 , President Von der Leyen announced in her letter of intent 6 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 programme 7 . A company’s decision to list is a complex one and is influenced by a multitude of factors, many of which are outside the reach of regulators and therefore cannot be addressed directly by a legislative intervention. For instance, the features of the ecosystem that determine the cost of listing services, and more broadly geopolitical instability, Brexit, Covid-19, and inflation, have all had (and will continue to have) an impact on the decision to list, on the timing of listing, and on whether to remain listed in the EU. Regulatory requirements and the associated costs and burden, however, are also an important factor in a company’s decision to list and remain listed. The Listing Act package represents a targeted set of measures aiming to reduce the regulatory burden where it is considered to be excessive (i.e., where regulation could ensure investor protection/market integrity in a more cost efficient manner for stakeholders) and to increase the flexibility accorded under company law to a company’s founder(s) or controlling shareholder(s) to choose how to distribute voting rights after the admission to trading of shares. The regulatory framework applying to the listing process is multifaceted. Companies must comply with regulatory requirements before, during and after the i nitial p ublic o ffering (IPO). This proposal focuses specifically on the regulatory burden that emerges at two moments: the IPO stage and the post-IPO stage. It addresses regulatory burden at the IPO stage by introducing targeted amendments to Regulation (EU) 2017/1129 of the European Parliament and of the Council 8 (the Prospectus Regulation ) and it addresses regulatory burden at the post-IPO stage by introducing targeted amendments to Regulation No 596/2014 of the European Parliament and of the Council 9 ( the Market Abuse Regulation or ‘ MAR ’ ). It also contains limited technical amendments to Regulation No 600/2014 of the European Parliament and of the Council ( the Markets in Financial Instruments Regulation or ‘ MiFIR ’ ) 10 . The proposed regulation is accompanied by two other legislative proposals: · a proposal for a d irective amending MiFID II and repealing Directive 2001/34/EC of the European Parliament and of the Council 11 ( the Listing Directive), which aims to both (i) streamline and clarify listing requirements and (ii) to increase the low level of investment research on SMEs; · a proposal for a new d irective on multiple-vote share structures, which aims to address the regulatory barriers that emerge at the pre-IPO phase and, in particular, the unequal opportunities faced by companies across the EU when choos ing the appropriate governance structures when they list . Reasons for the proposal 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 SMEs. The regulatory environment impacts all stages of the listing process and is among the driving forces of the high costs of listing and staying listed. Companies are required to comply with several disclosure and reporting requirements under EU law, especially the Prospectus Regulation and MAR. The aim of the Prospectus Regulation is to enhanc e the internal market for capital by ensur ing investor protection and market efficiency while helping companies, including SMEs, access different forms of finance in the EU 12 . The Prospectus Regulation lays down requirements for the drawing up, approval and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market . A prospectus is a document presenting information about a company and the securities that such company offers to the public or seeks to admit to trading on a regulated market. This information should be the basis on which investors can decide whether to invest in securities issued by that company. The Prospectus Regulation does not apply under certain circumstances, such as for non-equity securities issued by certain sovereign or supranational entities, or for offers of securities to the public with a total consideration in the Union below EUR 1 million over a period of 12 months. It also includes several exemptions from the obligation to publish a prospectus for offers of securities to the public or admission to trading on a regulated market. In particular, Member States may exempt from the obligation to publish a prospectus offers of securities to the public of up to EUR 8 million over a period of 12 months, provided that they do not require notification (a ‘passport’). For offers below EUR 1 million or the relevant threshold set at national level, Member States may require national disclosure documents, provided that they do not constitute a disproportionate or unnecessary burden. Hence, issuers willing to offer securities cross-border need to comply with the threshold and disclosure requirements set out by the concerned Member States, unless those issuers draw up a prospectus on a voluntary basis in order to benefit from the EU single passport. Under the CMU Action Plan, progress has already been made to make it easier and cheaper for co mpanies, in particular smaller ones, to draw-up a prospectus. The Prospectus Regulation 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. The Prospectus Regulation also introduced a simplified prospectus for companies whose securities are admitted to trading continuously and for at least the last 18 months on a regulated market or an SME growth market and wishing to issue additional shares or raise debt ( follow-on or secondary issuance s ). Issuers whose securities are admitted to trading on an SME growth market can also use this simplified prospectus to transfer subsequently to regulated markets. Finally, Regulation (EU) 2021/337 of the European Parliament and of the Council 13 introduced, as part of the Capital Markets Recovery Package (CMRP), a new type of short-form prospectus (the “EU Recovery prospectus”) . The EU Recovery prospectus is available to issuers that have shares already admitted to trading o n a regulated market or an SME g rowth market continuously for at least the last 18 months and that issue additional shares to overcome the negative impact of the COVID-19 crisis and contain excessive indebtedness. Th e EU Recovery prospectus regime will however expire on 31 December 2022. Despite the alleviations introduced, feedback from stakeholders indicated that the requirement to produce a prospectus remains overly burdensome. 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 of equity or non-equity securities. The current rules in particular contribute to overly lengthy prospectuses. 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). Feedback to the public consultation (echoed during the stakeholders’ meetings) confirmed the view that neither the standard prospectus nor the EU Growth prospectus strikes an appropriate balance between effective investor protection and the proportionate administrative burden for issuers, especially SMEs. In other cases, a prospectus is required when a lot of information is already available in the public domain (in particular, in the case of follow-on issuances). The excessive length of the prospectus can also discourage some, in particular smaller, investors from consulting it and translate into a higher cost of investing for larger investors. It also requires a longer period of time for the national competent authority (NCA) to scrutinise and approve the prospectus. The current rules also contribute to very divergent prospectuses across the EU. D ata reported by Oxera 14 and by the European Securities and Markets Authorities ( ES MA ) 15 shows a large discrepancy between Member States regarding the l ength of prospectuses, which is indicative of a lack of uniformity of prospectuses in the EU . This discrepancy stems also from the fact that the current rules do not sufficiently frame supervisory scrutiny by NCAs. Feedback from stakeholders highlighted that the EU regulatory framework places overly burdensome requirements also on already listed issuers, in particular under MAR. Since its entry into application on 1 July 2016, MAR has been extended to MTFs, including SME growth markets. MAR aims to increase market integrity and investor confidence. It prohibits from: (i) engaging or attempting to engage in insider dealing 16 ; (ii) recommending that another person engages in insider dealing or induces another person to engage in insider dealing; (iii) unlawfully disclosing inside information 17 ; or (iv) engaging in or attempting to engage in market manipulation. Issuers are also subject to several disclosure and record-keeping obligations under MAR. In particular, issuers are under a general obligation to disclose all inside information to the public as soon as possible 18 . Feedback from stakeholders indicated that some aspects of the MAR disclosure regime place a disproportionately high burden on issuers. In particular, stakeholders perceive as burdensome the obligation to disclose as soon as possible all inside information. This is due to the broadness of the notion of inside information (which gives rise to difficulties for issuers when delineating between what is and what is not inside information), as well as to the fact that the same notion applies both for the purpose of the prohibition of insider dealing and for the purpose of disclosure. 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. The notion of inside information covers not only events that have already occurred but also events which are “reasonably expected to occur” (i.e., for which there is a realistic prospect to occur) and, in the context of protracted processes (such as a merger), the intermediate steps which are connected with bringing about a future event. As a consequence, issuers incur high compliance costs to understand which steps of a protracted process may constitute inside information and when a certain piece of information is mature enough to be disclosed. At the same time, the effectiveness of disclosure in reducing information asymmetries between issuers and investors is limited if information is too preliminary, incomplete and still potentially subject to fundamental changes. Too early disclosure of information could 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), thus increasing the opportunity cost for investors. Furthermore, issuers face a lack of legal clarity around the conditions that need to be met to delay disclosure when immediate disclosure would be likely to prejudice the legitimate interests of the issuers (e.g., by jeopardising the successful conclusion of ongoing negotiations). A few additional reporting and disclosure requirements under MAR place a disproportionately high burden on issuers, such as the provisions on managers’ transactions, insider lists, and market sounding. Current MAR rules also create a disproportionate sanctioning regime for disclosure-related infringements, in particular for SMEs, which may potentially be sanctioned at the same level as large companies. Objectives of the proposal The overall objective of this initiative is to introduce technical adjustments to the EU rulebook in order to reduce regulatory and compliance costs for companies seeking to list or already listed with a view to streamlining the listing process and enhancing legal clarity, while ensuring an appropriate level of investor protection and market integrity. This, in turn, is expected to help diversify funding sources for companies in the EU and increase investments, economic growth, job creation and innovation in the EU. The proposed targeted amendments to the Prospectus Regulation aim in particular to make it easier and cheaper for issuers to draw up a prospectus, while enabling investors to make the right investment decision by providing comprehensible, easy to analyse and concise information. They also seek to introduce sizable simplifications to, or even exemptions from, the prospectus requirements in cases where the issuer is already known to investors and a lot of information is already publicly available (follow-on issuances). These amendments are accompanied by amendments aimed at fostering the convergence of and streamlining the scrutiny and approval process by NCAs (for example, by narrowly frame the ability of NCAs to request issuers to include additional information in the prospectus). In the case of an offer of securities to the public or the admission to trading on a regulated market, the proposal streamlines and further standardises the standard prospectus (referring to a non-alleviated prospectus type, irrespective of whether it relates to equity or non-equity securities, or whether is drawn up as a single document or consists of separate documents). The proposal aligns the level of disclosure of the standard prospectus to the level of disclosure currently required under the EU Growth prospectus regime, introduces a fixed order of disclosure and makes incorporation by reference a legal requirement. The proposal also introduces the possibility for issuers to draw up the prospectus in English only as the language customary in the sphere of international finance (except for the summary which in practice is the only document that most retail investors consult), and to publish it in an electronic format only (i.e., no paper copies on request). At the same time, only for shares or other transferable securities equivalent to shares in companies, a limit number of pages (300 pages) is introduced to avoid overly lengthy prospectuses for companies that do not have a complex financial history. Jointly, these amendments seek to provide a tangible cost and burden reduction for issuers, while ensuring that investors can take advantage of a document that is easier to read and navigate and more easily compare financial instruments and issuers. The proposal also seeks to make it easier for SMEs to raise funds on public markets, in particular on SME growth markets, by generating further cost savings for SMEs and better tailoring disclosure to the needs of investors. For companies offering securities to the public and listing on SME growth markets (as well as for offers of securities to the public by smaller companies), the EU Growth prospectus is replaced by a mandatory new short-form EU Growth issuance document. This document builds on the level of disclosure currently required under the EU Recovery prospectus regime and existing admission documents required by SME growth markets (where the obligation to publish a prospectus does not apply), follows a fixed order of disclosure and is subject, in the case of shares and other equivalent transferable securities, to a page limit. While the proposal exempts, under certain conditions, from the prospectus requirement offers of securities fungible with securities already admitted to trading (for which the publication of a summary document will suffice), it subjects follow-on issuances of non-fungible securities to the approval and publication of a new mandatory short-form EU Follow-on prospectus, largely building on the current EU Recovery prospectus regime. These amendments seek to ensure that companies can fully benefit from the advantages of accessing public capital markets, including easier and quicker access to additional equity capital and debt finance through follow-on offers. At the same time, they safeguard investor protection as these companies are already subject to periodic and ongoing disclosure and reporting requirements and, in addition, issuers will be required to publish the most relevant information for investors. Finally, the amendments to the Prospectus Regulation aim to foster cross-border offers by harmonising and increasing to EUR 12 million the threshold for exempting small offers of securities to the public from the obligation to publish a prospectus. This amendment also seeks to benefit smaller issuers, including SMEs, as in certain cases they will no longer have to produce a prospectus, lowering substantially their regulatory costs and incentivising them to access public capital markets. The proposal also introduces amendments to the rules on equivalence for third countries prospectuses to make them workable. The proposed targeted amendments to MAR aim to reduce legal uncertainty on what constitutes inside information for the purpose of disclosure as well as on the timing of disclosure. While the proposal maintains the current broad notion of inside information for the purposes of the insider dealing regulation, it narrows down the scope of the disclosure obligation. The proposal clarifies in particular that the obligation to disclose all inside information to the public does not cover the information relating to the intermediate steps of a protracted process, as this information is too preliminary and hence not mature enough for disclosure. At the same time, the proposal introduces an empowerment for the Commission to establish, by way of a delegated act a non-exhaustive list of the relevant information as well as, for each information, an indication of the timing when issuers are expected to disclose it. Jointly, these amendments seek to make the MAR disclosure regime less costly to comply with by issuers, more predictable from the investors’ point of view and more conducive to effective price formation. The amendments to the disclosure obligation are accompanied by improvements to the regime for the exchange of information among NCAs to enable them to better identify cases of market manipulation by setting up a cross market order book surveillance (CMOBS) mechanism , 19 thus increasing the integrity of EU markets and enhancing their appeal for investors. In the same vein, the proposal introduces a possibility for ESMA to establish collaboration platforms, in particular for the purpose of monitoring wholesale commodity markets, to address concerns about market integrity and the good functioning of financial and, in particular, spot markets . Finally, the proposal seeks to make the sanctioning regime for MAR disclosure-related infringements more proportionate for SMEs to avoid discouraging smaller issuers from listing or remaining listed. The proposal also aims at alleviating the regulatory hurdles resulting from the application of the managers’ transactions, insider list and market sounding regimes while ensuring that these alleviations do not impair investor protection and market integrity. The creation of a CMOBS mechanism requires also targeted amendments to the MiFIR framework to specify that a competent authority can request order book data on an ongoing basis to a trading venue under its supervision, and to confer to ESMA the role to harmonise the format of the template used to store such data. The proposed targeted amendments aim to build the necessary conditions for structural improvements in EU public capital markets 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 and upcoming 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.
Revised version (Article 5 Exemption for buy-back programmes and stabilisation):
3. In order to benefit from the exemption laid down in paragraph 1, the issuer shall report all transactions relating to the buy-back programme to the competent authority of the most relevant market in terms of liquidity as referred to in Article 26(1) of Regulation (EU) No 600/2014. The receiving competent authority shall, upon request, forward the information to the competent authorities of the trading venue on which the shares have been admitted to trading and are traded. 5. Without prejudice to Article 23(1), the details of all stabilisation transactions shall be notified by issuers, offerors, or entities undertaking the stabilisation, whether or not they act on behalf of such persons, to the competent authority of the trading venue no later than the end of the seventh daily market session following the date of execution of such transactions. 6. In order to ensure consistent harmonisation of this Article, ESMA shall develop draft regulatory technical standards to specify the conditions that buy-back programmes and stabilisation measures referred to in paragraphs 1 and 4 must meet, including conditions for trading, restrictions regarding time and volume, disclosure and reporting obligations, and price conditions. ESMA shall submit those draft regulatory technical standards to the Commission by 3 July 2015. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 6 Exemption for monetary and public debt management activities and climate policy activities
1. This Regulation does not apply to transactions, orders or behaviour, in pursuit of monetary, exchange rate or public debt management policy by: (a) a Member State; (b) the members of the ESCB; (c) a ministry, agency or special purpose vehicle of one or several Member States, or by a person acting on its behalf; (d) in the case of a Member State that is a federal state, a member making up the federation. 2. This Regulation does not apply to transactions, orders or behaviour carried out by the Commission or any other officially designated body or by any person acting on its behalf, in pursuit of public debt management policy. This Regulation does not apply to such transactions, orders or behaviour carried out by: (a) the Union; (b) a special purpose vehicle of one or several Member States; (c) the European Investment Bank; (d) the European Financial Stability Facility; (e) the European Stability Mechanism; (f) an international financial institution established by two or more Member States which has the purpose to mobilise funding and provide financial assistance to the benefit of its members that are experiencing or threatened by severe financing problems. 3. This Regulation does not apply to the activity of a Member State, the Commission or any other officially designated body, or of any person acting on their behalf, which concerns emission allowances and which is undertaken in pursuit of the Union’s climate policy in accordance with Directive 2003/87/EC. 4. This Regulation does not apply to the activities of a Member State, the Commission or any other officially designated body, or of any person acting on their behalf, that are undertaken in pursuit of the Union’s Common Agricultural Policy or of the Union’s Common Fisheries Policy in accordance with acts adopted or with international agreements concluded under the TFEU. 5. The Commission shall be empowered to adopt delegated acts in accordance with Article 35 to extend the exemption referred to in paragraph 1 to certain public bodies and central banks of third countries. To that end, the Commission shall, by 3 January 2016, prepare and present to the European Parliament and to the Council a report assessing the international treatment of public bodies charged with, or intervening in, public debt management and of central banks in third countries. The report shall include a comparative analysis of the treatment of those bodies and central banks within the legal framework of third countries, and the risk management standards applicable to the transactions entered into by those bodies and central banks in those jurisdictions. If the report concludes, in particular in regard to the comparative analysis, that the exemption of the monetary responsibilities of those third-country central banks from the obligations and prohibitions of this Regulation is necessary the Commission shall extend the exemption referred to in paragraph 1 also to the central banks of those third countries. 6. The Commission shall also be empowered to adopt delegated acts in accordance with Article 35 to extend the exemption set out in paragraph 3 to certain designated public bodies of third countries that have entered into an agreement with the Union pursuant to Article 25 of Directive 2003/87/EC. 7. This Article shall not apply to persons working under a contract of employment or otherwise for the entities referred to in this Article where those persons carry out transactions or orders, or engage in behaviour, directly or indirectly, on their own account.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Political context This proposal is part of the Listing Act package, a set of measures to make public markets more attractive for EU companies and facilitate access to capital for small and medium-sized companies (SMEs). It is in line with the Capital Markets Union (CMU) core aim to improve access to market-based sources of financing for EU companies at each stage of their development, including for smaller companies. L isted companies , including recently listed ones, often outpace privately owned companies in terms of annual revenue growth and job creation 1 . By listing on public markets, companies can diversify their investor base, reduce their dependency on bank financing, gain easier and cheaper access to additional equity capital and debt finance (through secondary offers), raise their public profile and increase brand recognition . Since the publication of the first CMU Action Plan in 2015, progress has been made to make it easier and cheaper for companies, in particular SMEs, to access public markets. In January 2018, the Directive 2014/65/EU of the European Parliament and of the Council ( the Markets in Financial Instruments Directive, or ‘ MiFID II ’ ) 2 introduced a new category of Multilateral Trading Facilities (MTFs), the SME growth markets , 3 to incenti vise SMEs access to capital markets. In 2019, new EU rules were put forward by Regulation (EU) 2019/2115 of the European Parliament and of the Council 4 (SME Listing Act) to cut red tape and reduce regulatory burden for companies listing on SME growth markets while preserving a high level of investor protection and market integrity . Nevertheless, despite this progress, stakeholders argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers. The new CMU Action Plan adopted in September 2020 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 2019 SME Listing Act, the Commission set up a Technical Expert Stakeholder Group (TESG) on SMEs which confirmed stakeholders’ concerns that further legislative action is needed to support listing of companies and especially of SMEs. In its final report of May 2021 5 , the TESG made 12 recommendations to amend the listing framework both on regulated markets, as well as on SME growth markets . On 15 September 2021 , President Von der Leyen announced in her letter of intent 6 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 programme 7 . A company’s decision to list is a complex one and is influenced by a multitude of factors, many of which are outside the reach of regulators and therefore cannot be addressed directly by a legislative intervention. For instance, the features of the ecosystem that determine the cost of listing services, and more broadly geopolitical instability, Brexit, Covid-19, and inflation, have all had (and will continue to have) an impact on the decision to list, on the timing of listing, and on whether to remain listed in the EU. Regulatory requirements and the associated costs and burden, however, are also an important factor in a company’s decision to list and remain listed. The Listing Act package represents a targeted set of measures aiming to reduce the regulatory burden where it is considered to be excessive (i.e., where regulation could ensure investor protection/market integrity in a more cost efficient manner for stakeholders) and to increase the flexibility accorded under company law to a company’s founder(s) or controlling shareholder(s) to choose how to distribute voting rights after the admission to trading of shares. The regulatory framework applying to the listing process is multifaceted. Companies must comply with regulatory requirements before, during and after the i nitial p ublic o ffering (IPO). This proposal focuses specifically on the regulatory burden that emerges at two moments: the IPO stage and the post-IPO stage. It addresses regulatory burden at the IPO stage by introducing targeted amendments to Regulation (EU) 2017/1129 of the European Parliament and of the Council 8 (the Prospectus Regulation ) and it addresses regulatory burden at the post-IPO stage by introducing targeted amendments to Regulation No 596/2014 of the European Parliament and of the Council 9 ( the Market Abuse Regulation or ‘ MAR ’ ). It also contains limited technical amendments to Regulation No 600/2014 of the European Parliament and of the Council ( the Markets in Financial Instruments Regulation or ‘ MiFIR ’ ) 10 . The proposed regulation is accompanied by two other legislative proposals: · a proposal for a d irective amending MiFID II and repealing Directive 2001/34/EC of the European Parliament and of the Council 11 ( the Listing Directive), which aims to both (i) streamline and clarify listing requirements and (ii) to increase the low level of investment research on SMEs; · a proposal for a new d irective on multiple-vote share structures, which aims to address the regulatory barriers that emerge at the pre-IPO phase and, in particular, the unequal opportunities faced by companies across the EU when choos ing the appropriate governance structures when they list . Reasons for the proposal 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 SMEs. The regulatory environment impacts all stages of the listing process and is among the driving forces of the high costs of listing and staying listed. Companies are required to comply with several disclosure and reporting requirements under EU law, especially the Prospectus Regulation and MAR. The aim of the Prospectus Regulation is to enhanc e the internal market for capital by ensur ing investor protection and market efficiency while helping companies, including SMEs, access different forms of finance in the EU 12 . The Prospectus Regulation lays down requirements for the drawing up, approval and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market . A prospectus is a document presenting information about a company and the securities that such company offers to the public or seeks to admit to trading on a regulated market. This information should be the basis on which investors can decide whether to invest in securities issued by that company. The Prospectus Regulation does not apply under certain circumstances, such as for non-equity securities issued by certain sovereign or supranational entities, or for offers of securities to the public with a total consideration in the Union below EUR 1 million over a period of 12 months. It also includes several exemptions from the obligation to publish a prospectus for offers of securities to the public or admission to trading on a regulated market. In particular, Member States may exempt from the obligation to publish a prospectus offers of securities to the public of up to EUR 8 million over a period of 12 months, provided that they do not require notification (a ‘passport’). For offers below EUR 1 million or the relevant threshold set at national level, Member States may require national disclosure documents, provided that they do not constitute a disproportionate or unnecessary burden. Hence, issuers willing to offer securities cross-border need to comply with the threshold and disclosure requirements set out by the concerned Member States, unless those issuers draw up a prospectus on a voluntary basis in order to benefit from the EU single passport. Under the CMU Action Plan, progress has already been made to make it easier and cheaper for co mpanies, in particular smaller ones, to draw-up a prospectus. The Prospectus Regulation 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. The Prospectus Regulation also introduced a simplified prospectus for companies whose securities are admitted to trading continuously and for at least the last 18 months on a regulated market or an SME growth market and wishing to issue additional shares or raise debt ( follow-on or secondary issuance s ). Issuers whose securities are admitted to trading on an SME growth market can also use this simplified prospectus to transfer subsequently to regulated markets. Finally, Regulation (EU) 2021/337 of the European Parliament and of the Council 13 introduced, as part of the Capital Markets Recovery Package (CMRP), a new type of short-form prospectus (the “EU Recovery prospectus”) . The EU Recovery prospectus is available to issuers that have shares already admitted to trading o n a regulated market or an SME g rowth market continuously for at least the last 18 months and that issue additional shares to overcome the negative impact of the COVID-19 crisis and contain excessive indebtedness. Th e EU Recovery prospectus regime will however expire on 31 December 2022. Despite the alleviations introduced, feedback from stakeholders indicated that the requirement to produce a prospectus remains overly burdensome. 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 of equity or non-equity securities. The current rules in particular contribute to overly lengthy prospectuses. 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). Feedback to the public consultation (echoed during the stakeholders’ meetings) confirmed the view that neither the standard prospectus nor the EU Growth prospectus strikes an appropriate balance between effective investor protection and the proportionate administrative burden for issuers, especially SMEs. In other cases, a prospectus is required when a lot of information is already available in the public domain (in particular, in the case of follow-on issuances). The excessive length of the prospectus can also discourage some, in particular smaller, investors from consulting it and translate into a higher cost of investing for larger investors. It also requires a longer period of time for the national competent authority (NCA) to scrutinise and approve the prospectus. The current rules also contribute to very divergent prospectuses across the EU. D ata reported by Oxera 14 and by the European Securities and Markets Authorities ( ES MA ) 15 shows a large discrepancy between Member States regarding the l ength of prospectuses, which is indicative of a lack of uniformity of prospectuses in the EU . This discrepancy stems also from the fact that the current rules do not sufficiently frame supervisory scrutiny by NCAs. Feedback from stakeholders highlighted that the EU regulatory framework places overly burdensome requirements also on already listed issuers, in particular under MAR. Since its entry into application on 1 July 2016, MAR has been extended to MTFs, including SME growth markets. MAR aims to increase market integrity and investor confidence. It prohibits from: (i) engaging or attempting to engage in insider dealing 16 ; (ii) recommending that another person engages in insider dealing or induces another person to engage in insider dealing; (iii) unlawfully disclosing inside information 17 ; or (iv) engaging in or attempting to engage in market manipulation. Issuers are also subject to several disclosure and record-keeping obligations under MAR. In particular, issuers are under a general obligation to disclose all inside information to the public as soon as possible 18 . Feedback from stakeholders indicated that some aspects of the MAR disclosure regime place a disproportionately high burden on issuers. In particular, stakeholders perceive as burdensome the obligation to disclose as soon as possible all inside information. This is due to the broadness of the notion of inside information (which gives rise to difficulties for issuers when delineating between what is and what is not inside information), as well as to the fact that the same notion applies both for the purpose of the prohibition of insider dealing and for the purpose of disclosure. 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. The notion of inside information covers not only events that have already occurred but also events which are “reasonably expected to occur” (i.e., for which there is a realistic prospect to occur) and, in the context of protracted processes (such as a merger), the intermediate steps which are connected with bringing about a future event. As a consequence, issuers incur high compliance costs to understand which steps of a protracted process may constitute inside information and when a certain piece of information is mature enough to be disclosed. At the same time, the effectiveness of disclosure in reducing information asymmetries between issuers and investors is limited if information is too preliminary, incomplete and still potentially subject to fundamental changes. Too early disclosure of information could 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), thus increasing the opportunity cost for investors. Furthermore, issuers face a lack of legal clarity around the conditions that need to be met to delay disclosure when immediate disclosure would be likely to prejudice the legitimate interests of the issuers (e.g., by jeopardising the successful conclusion of ongoing negotiations). A few additional reporting and disclosure requirements under MAR place a disproportionately high burden on issuers, such as the provisions on managers’ transactions, insider lists, and market sounding. Current MAR rules also create a disproportionate sanctioning regime for disclosure-related infringements, in particular for SMEs, which may potentially be sanctioned at the same level as large companies. Objectives of the proposal The overall objective of this initiative is to introduce technical adjustments to the EU rulebook in order to reduce regulatory and compliance costs for companies seeking to list or already listed with a view to streamlining the listing process and enhancing legal clarity, while ensuring an appropriate level of investor protection and market integrity. This, in turn, is expected to help diversify funding sources for companies in the EU and increase investments, economic growth, job creation and innovation in the EU. The proposed targeted amendments to the Prospectus Regulation aim in particular to make it easier and cheaper for issuers to draw up a prospectus, while enabling investors to make the right investment decision by providing comprehensible, easy to analyse and concise information. They also seek to introduce sizable simplifications to, or even exemptions from, the prospectus requirements in cases where the issuer is already known to investors and a lot of information is already publicly available (follow-on issuances). These amendments are accompanied by amendments aimed at fostering the convergence of and streamlining the scrutiny and approval process by NCAs (for example, by narrowly frame the ability of NCAs to request issuers to include additional information in the prospectus). In the case of an offer of securities to the public or the admission to trading on a regulated market, the proposal streamlines and further standardises the standard prospectus (referring to a non-alleviated prospectus type, irrespective of whether it relates to equity or non-equity securities, or whether is drawn up as a single document or consists of separate documents). The proposal aligns the level of disclosure of the standard prospectus to the level of disclosure currently required under the EU Growth prospectus regime, introduces a fixed order of disclosure and makes incorporation by reference a legal requirement. The proposal also introduces the possibility for issuers to draw up the prospectus in English only as the language customary in the sphere of international finance (except for the summary which in practice is the only document that most retail investors consult), and to publish it in an electronic format only (i.e., no paper copies on request). At the same time, only for shares or other transferable securities equivalent to shares in companies, a limit number of pages (300 pages) is introduced to avoid overly lengthy prospectuses for companies that do not have a complex financial history. Jointly, these amendments seek to provide a tangible cost and burden reduction for issuers, while ensuring that investors can take advantage of a document that is easier to read and navigate and more easily compare financial instruments and issuers. The proposal also seeks to make it easier for SMEs to raise funds on public markets, in particular on SME growth markets, by generating further cost savings for SMEs and better tailoring disclosure to the needs of investors. For companies offering securities to the public and listing on SME growth markets (as well as for offers of securities to the public by smaller companies), the EU Growth prospectus is replaced by a mandatory new short-form EU Growth issuance document. This document builds on the level of disclosure currently required under the EU Recovery prospectus regime and existing admission documents required by SME growth markets (where the obligation to publish a prospectus does not apply), follows a fixed order of disclosure and is subject, in the case of shares and other equivalent transferable securities, to a page limit. While the proposal exempts, under certain conditions, from the prospectus requirement offers of securities fungible with securities already admitted to trading (for which the publication of a summary document will suffice), it subjects follow-on issuances of non-fungible securities to the approval and publication of a new mandatory short-form EU Follow-on prospectus, largely building on the current EU Recovery prospectus regime. These amendments seek to ensure that companies can fully benefit from the advantages of accessing public capital markets, including easier and quicker access to additional equity capital and debt finance through follow-on offers. At the same time, they safeguard investor protection as these companies are already subject to periodic and ongoing disclosure and reporting requirements and, in addition, issuers will be required to publish the most relevant information for investors. Finally, the amendments to the Prospectus Regulation aim to foster cross-border offers by harmonising and increasing to EUR 12 million the threshold for exempting small offers of securities to the public from the obligation to publish a prospectus. This amendment also seeks to benefit smaller issuers, including SMEs, as in certain cases they will no longer have to produce a prospectus, lowering substantially their regulatory costs and incentivising them to access public capital markets. The proposal also introduces amendments to the rules on equivalence for third countries prospectuses to make them workable. The proposed targeted amendments to MAR aim to reduce legal uncertainty on what constitutes inside information for the purpose of disclosure as well as on the timing of disclosure. While the proposal maintains the current broad notion of inside information for the purposes of the insider dealing regulation, it narrows down the scope of the disclosure obligation. The proposal clarifies in particular that the obligation to disclose all inside information to the public does not cover the information relating to the intermediate steps of a protracted process, as this information is too preliminary and hence not mature enough for disclosure. At the same time, the proposal introduces an empowerment for the Commission to establish, by way of a delegated act a non-exhaustive list of the relevant information as well as, for each information, an indication of the timing when issuers are expected to disclose it. Jointly, these amendments seek to make the MAR disclosure regime less costly to comply with by issuers, more predictable from the investors’ point of view and more conducive to effective price formation. The amendments to the disclosure obligation are accompanied by improvements to the regime for the exchange of information among NCAs to enable them to better identify cases of market manipulation by setting up a cross market order book surveillance (CMOBS) mechanism , 19 thus increasing the integrity of EU markets and enhancing their appeal for investors. In the same vein, the proposal introduces a possibility for ESMA to establish collaboration platforms, in particular for the purpose of monitoring wholesale commodity markets, to address concerns about market integrity and the good functioning of financial and, in particular, spot markets . Finally, the proposal seeks to make the sanctioning regime for MAR disclosure-related infringements more proportionate for SMEs to avoid discouraging smaller issuers from listing or remaining listed. The proposal also aims at alleviating the regulatory hurdles resulting from the application of the managers’ transactions, insider list and market sounding regimes while ensuring that these alleviations do not impair investor protection and market integrity. The creation of a CMOBS mechanism requires also targeted amendments to the MiFIR framework to specify that a competent authority can request order book data on an ongoing basis to a trading venue under its supervision, and to confer to ESMA the role to harmonise the format of the template used to store such data. The proposed targeted amendments aim to build the necessary conditions for structural improvements in EU public capital markets 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 and upcoming 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.
Revised version (Article 6 Exemption for monetary and public debt management activities and climate policy activities):
2. This Regulation does not apply to transactions, orders or behaviour carried out by the Commission or any other officially designated body or by any person acting on its behalf, in pursuit of public debt management policy. This Regulation does not apply to such transactions, orders or behaviour carried out by: (a) the Union; (b) a special purpose vehicle of one or several Member States; (c) the European Investment Bank; (d) the European Financial Stability Facility; (e) the European Stability Mechanism; (f) an international financial institution established by two or more Member States which has the purpose to mobilise funding and provide financial assistance to the benefit of its members that are experiencing or threatened by severe financing problems. 3. This Regulation does not apply to the activity of a Member State, the Commission or any other officially designated body, or of any person acting on their behalf, which concerns emission allowances and which is undertaken in pursuit of the Union’s climate policy in accordance with Directive 2003/87/EC. 4. This Regulation does not apply to the activities of a Member State, the Commission or any other officially designated body, or of any person acting on their behalf, that are undertaken in pursuit of the Union’s Common Agricultural Policy or of the Union’s Common Fisheries Policy in accordance with acts adopted or with international agreements concluded under the TFEU. 5. The Commission shall be empowered to adopt delegated acts in accordance with Article 35 to extend the exemption referred to in paragraph 1 to certain public bodies and central banks of third countries. To that end, the Commission shall, by 3 January 2016, prepare and present to the European Parliament and to the Council a report assessing the international treatment of public bodies charged with, or intervening in, public debt management and of central banks in third countries. The report shall include a comparative analysis of the treatment of those bodies and central banks within the legal framework of third countries, and the risk management standards applicable to the transactions entered into by those bodies and central banks in those jurisdictions. If the report concludes, in particular in regard to the comparative analysis, that the exemption of the monetary responsibilities of those third-country central banks from the obligations and prohibitions of this Regulation is necessary the Commission shall extend the exemption referred to in paragraph 1 also to the central banks of those third countries. 6. The Commission shall also be empowered to adopt delegated acts in accordance with Article 35 to extend the exemption set out in paragraph 3 to certain designated public bodies of third countries that have entered into an agreement with the Union pursuant to Article 25 of Directive 2003/87/EC. 7. This Article shall not apply to persons working under a contract of employment or otherwise for the entities referred to in this Article where those persons carry out transactions or orders, or engage in behaviour, directly or indirectly, on their own account.
Article 7 Inside information
1. For the purposes of this Regulation, inside information shall comprise the following types of information: (a) information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments; (b) in relation to commodity derivatives, information of a precise nature, which has not been made public, relating, directly or indirectly to one or more such derivatives or relating directly to the related spot commodity contract, and which, if it were made public, would be likely to have a significant effect on the prices of such derivatives or related spot commodity contracts, and where this is information which is reasonably expected to be disclosed or is required to be disclosed in accordance with legal or regulatory provisions at the Union or national level, market rules, contract, practice or custom, on the relevant commodity derivatives markets or spot markets; (c) in relation to emission allowances or auctioned products based thereon, information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more such instruments, and which, if it were made public, would be likely to have a significant effect on the prices of such instruments or on the prices of related derivative financial instruments; (d) for persons charged with the execution of orders concerning financial instruments, it also means information conveyed by a client and relating to the client’s pending orders in financial instruments, which is of a precise nature, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments, the price of related spot commodity contracts, or on the price of related derivative financial instruments. 2. For the purposes of paragraph 1, information shall be deemed to be 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 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. In this respect 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. 3. 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. 4. For the purposes of paragraph 1, information which, if it were made public, would be likely to have a significant effect on the prices of financial instruments, derivative financial instruments, related spot commodity contracts, or auctioned products based on emission allowances shall mean information a reasonable investor would be likely to use as part of the basis of his or her investment decisions. In the case of participants in the emission allowance market with aggregate emissions or rated thermal input at or below the threshold set in accordance with the second subparagraph of Article 17(2), information about their physical operations shall be deemed not to have a significant effect on the price of emission allowances, of auctioned products based thereon, or of derivative financial instruments. 5. ESMA shall issue guidelines to establish a non-exhaustive indicative list of information which is reasonably expected or is required to be disclosed in accordance with legal or regulatory provisions in Union or national law, market rules, contract, practice or custom, on the relevant commodity derivatives markets or spot markets as referred to in point (b) of paragraph 1. ESMA shall duly take into account specificities of those markets.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Political context This proposal is part of the Listing Act package, a set of measures to make public markets more attractive for EU companies and facilitate access to capital for small and medium-sized companies (SMEs). It is in line with the Capital Markets Union (CMU) core aim to improve access to market-based sources of financing for EU companies at each stage of their development, including for smaller companies. L isted companies , including recently listed ones, often outpace privately owned companies in terms of annual revenue growth and job creation 1 . By listing on public markets, companies can diversify their investor base, reduce their dependency on bank financing, gain easier and cheaper access to additional equity capital and debt finance (through secondary offers), raise their public profile and increase brand recognition . Since the publication of the first CMU Action Plan in 2015, progress has been made to make it easier and cheaper for companies, in particular SMEs, to access public markets. In January 2018, the Directive 2014/65/EU of the European Parliament and of the Council ( the Markets in Financial Instruments Directive, or ‘ MiFID II ’ ) 2 introduced a new category of Multilateral Trading Facilities (MTFs), the SME growth markets , 3 to incenti vise SMEs access to capital markets. In 2019, new EU rules were put forward by Regulation (EU) 2019/2115 of the European Parliament and of the Council 4 (SME Listing Act) to cut red tape and reduce regulatory burden for companies listing on SME growth markets while preserving a high level of investor protection and market integrity . Nevertheless, despite this progress, stakeholders argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers. The new CMU Action Plan adopted in September 2020 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 2019 SME Listing Act, the Commission set up a Technical Expert Stakeholder Group (TESG) on SMEs which confirmed stakeholders’ concerns that further legislative action is needed to support listing of companies and especially of SMEs. In its final report of May 2021 5 , the TESG made 12 recommendations to amend the listing framework both on regulated markets, as well as on SME growth markets . On 15 September 2021 , President Von der Leyen announced in her letter of intent 6 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 programme 7 . A company’s decision to list is a complex one and is influenced by a multitude of factors, many of which are outside the reach of regulators and therefore cannot be addressed directly by a legislative intervention. For instance, the features of the ecosystem that determine the cost of listing services, and more broadly geopolitical instability, Brexit, Covid-19, and inflation, have all had (and will continue to have) an impact on the decision to list, on the timing of listing, and on whether to remain listed in the EU. Regulatory requirements and the associated costs and burden, however, are also an important factor in a company’s decision to list and remain listed. The Listing Act package represents a targeted set of measures aiming to reduce the regulatory burden where it is considered to be excessive (i.e., where regulation could ensure investor protection/market integrity in a more cost efficient manner for stakeholders) and to increase the flexibility accorded under company law to a company’s founder(s) or controlling shareholder(s) to choose how to distribute voting rights after the admission to trading of shares. The regulatory framework applying to the listing process is multifaceted. Companies must comply with regulatory requirements before, during and after the i nitial p ublic o ffering (IPO). This proposal focuses specifically on the regulatory burden that emerges at two moments: the IPO stage and the post-IPO stage. It addresses regulatory burden at the IPO stage by introducing targeted amendments to Regulation (EU) 2017/1129 of the European Parliament and of the Council 8 (the Prospectus Regulation ) and it addresses regulatory burden at the post-IPO stage by introducing targeted amendments to Regulation No 596/2014 of the European Parliament and of the Council 9 ( the Market Abuse Regulation or ‘ MAR ’ ). It also contains limited technical amendments to Regulation No 600/2014 of the European Parliament and of the Council ( the Markets in Financial Instruments Regulation or ‘ MiFIR ’ ) 10 . The proposed regulation is accompanied by two other legislative proposals: · a proposal for a d irective amending MiFID II and repealing Directive 2001/34/EC of the European Parliament and of the Council 11 ( the Listing Directive), which aims to both (i) streamline and clarify listing requirements and (ii) to increase the low level of investment research on SMEs; · a proposal for a new d irective on multiple-vote share structures, which aims to address the regulatory barriers that emerge at the pre-IPO phase and, in particular, the unequal opportunities faced by companies across the EU when choos ing the appropriate governance structures when they list . Reasons for the proposal 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 SMEs. The regulatory environment impacts all stages of the listing process and is among the driving forces of the high costs of listing and staying listed. Companies are required to comply with several disclosure and reporting requirements under EU law, especially the Prospectus Regulation and MAR. The aim of the Prospectus Regulation is to enhanc e the internal market for capital by ensur ing investor protection and market efficiency while helping companies, including SMEs, access different forms of finance in the EU 12 . The Prospectus Regulation lays down requirements for the drawing up, approval and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market . A prospectus is a document presenting information about a company and the securities that such company offers to the public or seeks to admit to trading on a regulated market. This information should be the basis on which investors can decide whether to invest in securities issued by that company. The Prospectus Regulation does not apply under certain circumstances, such as for non-equity securities issued by certain sovereign or supranational entities, or for offers of securities to the public with a total consideration in the Union below EUR 1 million over a period of 12 months. It also includes several exemptions from the obligation to publish a prospectus for offers of securities to the public or admission to trading on a regulated market. In particular, Member States may exempt from the obligation to publish a prospectus offers of securities to the public of up to EUR 8 million over a period of 12 months, provided that they do not require notification (a ‘passport’). For offers below EUR 1 million or the relevant threshold set at national level, Member States may require national disclosure documents, provided that they do not constitute a disproportionate or unnecessary burden. Hence, issuers willing to offer securities cross-border need to comply with the threshold and disclosure requirements set out by the concerned Member States, unless those issuers draw up a prospectus on a voluntary basis in order to benefit from the EU single passport. Under the CMU Action Plan, progress has already been made to make it easier and cheaper for co mpanies, in particular smaller ones, to draw-up a prospectus. The Prospectus Regulation 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. The Prospectus Regulation also introduced a simplified prospectus for companies whose securities are admitted to trading continuously and for at least the last 18 months on a regulated market or an SME growth market and wishing to issue additional shares or raise debt ( follow-on or secondary issuance s ). Issuers whose securities are admitted to trading on an SME growth market can also use this simplified prospectus to transfer subsequently to regulated markets. Finally, Regulation (EU) 2021/337 of the European Parliament and of the Council 13 introduced, as part of the Capital Markets Recovery Package (CMRP), a new type of short-form prospectus (the “EU Recovery prospectus”) . The EU Recovery prospectus is available to issuers that have shares already admitted to trading o n a regulated market or an SME g rowth market continuously for at least the last 18 months and that issue additional shares to overcome the negative impact of the COVID-19 crisis and contain excessive indebtedness. Th e EU Recovery prospectus regime will however expire on 31 December 2022. Despite the alleviations introduced, feedback from stakeholders indicated that the requirement to produce a prospectus remains overly burdensome. 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 of equity or non-equity securities. The current rules in particular contribute to overly lengthy prospectuses. 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). Feedback to the public consultation (echoed during the stakeholders’ meetings) confirmed the view that neither the standard prospectus nor the EU Growth prospectus strikes an appropriate balance between effective investor protection and the proportionate administrative burden for issuers, especially SMEs. In other cases, a prospectus is required when a lot of information is already available in the public domain (in particular, in the case of follow-on issuances). The excessive length of the prospectus can also discourage some, in particular smaller, investors from consulting it and translate into a higher cost of investing for larger investors. It also requires a longer period of time for the national competent authority (NCA) to scrutinise and approve the prospectus. The current rules also contribute to very divergent prospectuses across the EU. D ata reported by Oxera 14 and by the European Securities and Markets Authorities ( ES MA ) 15 shows a large discrepancy between Member States regarding the l ength of prospectuses, which is indicative of a lack of uniformity of prospectuses in the EU . This discrepancy stems also from the fact that the current rules do not sufficiently frame supervisory scrutiny by NCAs. Feedback from stakeholders highlighted that the EU regulatory framework places overly burdensome requirements also on already listed issuers, in particular under MAR. Since its entry into application on 1 July 2016, MAR has been extended to MTFs, including SME growth markets. MAR aims to increase market integrity and investor confidence. It prohibits from: (i) engaging or attempting to engage in insider dealing 16 ; (ii) recommending that another person engages in insider dealing or induces another person to engage in insider dealing; (iii) unlawfully disclosing inside information 17 ; or (iv) engaging in or attempting to engage in market manipulation. Issuers are also subject to several disclosure and record-keeping obligations under MAR. In particular, issuers are under a general obligation to disclose all inside information to the public as soon as possible 18 . Feedback from stakeholders indicated that some aspects of the MAR disclosure regime place a disproportionately high burden on issuers. In particular, stakeholders perceive as burdensome the obligation to disclose as soon as possible all inside information. This is due to the broadness of the notion of inside information (which gives rise to difficulties for issuers when delineating between what is and what is not inside information), as well as to the fact that the same notion applies both for the purpose of the prohibition of insider dealing and for the purpose of disclosure. 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. The notion of inside information covers not only events that have already occurred but also events which are “reasonably expected to occur” (i.e., for which there is a realistic prospect to occur) and, in the context of protracted processes (such as a merger), the intermediate steps which are connected with bringing about a future event. As a consequence, issuers incur high compliance costs to understand which steps of a protracted process may constitute inside information and when a certain piece of information is mature enough to be disclosed. At the same time, the effectiveness of disclosure in reducing information asymmetries between issuers and investors is limited if information is too preliminary, incomplete and still potentially subject to fundamental changes. Too early disclosure of information could 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), thus increasing the opportunity cost for investors. Furthermore, issuers face a lack of legal clarity around the conditions that need to be met to delay disclosure when immediate disclosure would be likely to prejudice the legitimate interests of the issuers (e.g., by jeopardising the successful conclusion of ongoing negotiations). A few additional reporting and disclosure requirements under MAR place a disproportionately high burden on issuers, such as the provisions on managers’ transactions, insider lists, and market sounding. Current MAR rules also create a disproportionate sanctioning regime for disclosure-related infringements, in particular for SMEs, which may potentially be sanctioned at the same level as large companies. Objectives of the proposal The overall objective of this initiative is to introduce technical adjustments to the EU rulebook in order to reduce regulatory and compliance costs for companies seeking to list or already listed with a view to streamlining the listing process and enhancing legal clarity, while ensuring an appropriate level of investor protection and market integrity. This, in turn, is expected to help diversify funding sources for companies in the EU and increase investments, economic growth, job creation and innovation in the EU. The proposed targeted amendments to the Prospectus Regulation aim in particular to make it easier and cheaper for issuers to draw up a prospectus, while enabling investors to make the right investment decision by providing comprehensible, easy to analyse and concise information. They also seek to introduce sizable simplifications to, or even exemptions from, the prospectus requirements in cases where the issuer is already known to investors and a lot of information is already publicly available (follow-on issuances). These amendments are accompanied by amendments aimed at fostering the convergence of and streamlining the scrutiny and approval process by NCAs (for example, by narrowly frame the ability of NCAs to request issuers to include additional information in the prospectus). In the case of an offer of securities to the public or the admission to trading on a regulated market, the proposal streamlines and further standardises the standard prospectus (referring to a non-alleviated prospectus type, irrespective of whether it relates to equity or non-equity securities, or whether is drawn up as a single document or consists of separate documents). The proposal aligns the level of disclosure of the standard prospectus to the level of disclosure currently required under the EU Growth prospectus regime, introduces a fixed order of disclosure and makes incorporation by reference a legal requirement. The proposal also introduces the possibility for issuers to draw up the prospectus in English only as the language customary in the sphere of international finance (except for the summary which in practice is the only document that most retail investors consult), and to publish it in an electronic format only (i.e., no paper copies on request). At the same time, only for shares or other transferable securities equivalent to shares in companies, a limit number of pages (300 pages) is introduced to avoid overly lengthy prospectuses for companies that do not have a complex financial history. Jointly, these amendments seek to provide a tangible cost and burden reduction for issuers, while ensuring that investors can take advantage of a document that is easier to read and navigate and more easily compare financial instruments and issuers. The proposal also seeks to make it easier for SMEs to raise funds on public markets, in particular on SME growth markets, by generating further cost savings for SMEs and better tailoring disclosure to the needs of investors. For companies offering securities to the public and listing on SME growth markets (as well as for offers of securities to the public by smaller companies), the EU Growth prospectus is replaced by a mandatory new short-form EU Growth issuance document. This document builds on the level of disclosure currently required under the EU Recovery prospectus regime and existing admission documents required by SME growth markets (where the obligation to publish a prospectus does not apply), follows a fixed order of disclosure and is subject, in the case of shares and other equivalent transferable securities, to a page limit. While the proposal exempts, under certain conditions, from the prospectus requirement offers of securities fungible with securities already admitted to trading (for which the publication of a summary document will suffice), it subjects follow-on issuances of non-fungible securities to the approval and publication of a new mandatory short-form EU Follow-on prospectus, largely building on the current EU Recovery prospectus regime. These amendments seek to ensure that companies can fully benefit from the advantages of accessing public capital markets, including easier and quicker access to additional equity capital and debt finance through follow-on offers. At the same time, they safeguard investor protection as these companies are already subject to periodic and ongoing disclosure and reporting requirements and, in addition, issuers will be required to publish the most relevant information for investors. Finally, the amendments to the Prospectus Regulation aim to foster cross-border offers by harmonising and increasing to EUR 12 million the threshold for exempting small offers of securities to the public from the obligation to publish a prospectus. This amendment also seeks to benefit smaller issuers, including SMEs, as in certain cases they will no longer have to produce a prospectus, lowering substantially their regulatory costs and incentivising them to access public capital markets. The proposal also introduces amendments to the rules on equivalence for third countries prospectuses to make them workable. The proposed targeted amendments to MAR aim to reduce legal uncertainty on what constitutes inside information for the purpose of disclosure as well as on the timing of disclosure. While the proposal maintains the current broad notion of inside information for the purposes of the insider dealing regulation, it narrows down the scope of the disclosure obligation. The proposal clarifies in particular that the obligation to disclose all inside information to the public does not cover the information relating to the intermediate steps of a protracted process, as this information is too preliminary and hence not mature enough for disclosure. At the same time, the proposal introduces an empowerment for the Commission to establish, by way of a delegated act a non-exhaustive list of the relevant information as well as, for each information, an indication of the timing when issuers are expected to disclose it. Jointly, these amendments seek to make the MAR disclosure regime less costly to comply with by issuers, more predictable from the investors’ point of view and more conducive to effective price formation. The amendments to the disclosure obligation are accompanied by improvements to the regime for the exchange of information among NCAs to enable them to better identify cases of market manipulation by setting up a cross market order book surveillance (CMOBS) mechanism , 19 thus increasing the integrity of EU markets and enhancing their appeal for investors. In the same vein, the proposal introduces a possibility for ESMA to establish collaboration platforms, in particular for the purpose of monitoring wholesale commodity markets, to address concerns about market integrity and the good functioning of financial and, in particular, spot markets . Finally, the proposal seeks to make the sanctioning regime for MAR disclosure-related infringements more proportionate for SMEs to avoid discouraging smaller issuers from listing or remaining listed. The proposal also aims at alleviating the regulatory hurdles resulting from the application of the managers’ transactions, insider list and market sounding regimes while ensuring that these alleviations do not impair investor protection and market integrity. The creation of a CMOBS mechanism requires also targeted amendments to the MiFIR framework to specify that a competent authority can request order book data on an ongoing basis to a trading venue under its supervision, and to confer to ESMA the role to harmonise the format of the template used to store such data. The proposed targeted amendments aim to build the necessary conditions for structural improvements in EU public capital markets 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 and upcoming 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.
Revised version (Article 7 Inside information):
2. For the purposes of paragraph 1, information shall be deemed to be 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 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. In this respect 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. 3. 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. 4. For the purposes of paragraph 1, information which, if it were made public, would be likely to have a significant effect on the prices of financial instruments, derivative financial instruments, related spot commodity contracts, or auctioned products based on emission allowances shall mean information a reasonable investor would be likely to use as part of the basis of his or her investment decisions. In the case of participants in the emission allowance market with aggregate emissions or rated thermal input at or below the threshold set in accordance with the second subparagraph of Article 17(2), information about their physical operations shall be deemed not to have a significant effect on the price of emission allowances, of auctioned products based thereon, or of derivative financial instruments. 5. ESMA shall issue guidelines to establish a non-exhaustive indicative list of information which is reasonably expected or is required to be disclosed in accordance with legal or regulatory provisions in Union or national law, market rules, contract, practice or custom, on the relevant commodity derivatives markets or spot markets as referred to in point (b) of paragraph 1. ESMA shall duly take into account specificities of those markets.