What changed between the draft committee report and the plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

7 unchanged paragraphs

on the proposal for a regulation of the European Parliament and of the Council amending Regulations (EU) 2017/1129, (EU) No 596/2014 and (EU) No 600/2014 to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises

(COM(2022)0762 – C90417/2022 – 2022/0411(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2022)0762),

– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C9 0417/2022),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

Added:– having regard to the opinion of the European Economic and Social Committee of 23 March 2023,

– having regard to Rule 59 of its Rules of Procedure,

Changed:– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0000/2023),(A9-0302/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

Removed:Recital 1: (1) By developing Union capital markets and decreasing their fragmentation along national borders, the Capital Markets Union42 project aims to enable companies to access funding sources other than bank lending and to adapt their financing structure when maturing and growing in size. More diversified financing in the form of debt and equity will decrease risks for individual companies and the overall economy as well as help Union companies, including small and mid-sized enterprises (SMEs), realise their growth potential. It is acknowledged that the capital markets union is being realised too slowly at a time when investment funds being mobilised are falling well short of the levels made necessary by the Union’s policy priorities related to environmental protection, digitilisation and strategic autonomy. Moving forward on the area of listing is a necessary step for the capital markets union, especially in the short term, but as a stand-alone measure it remains far from beingsufficient.

Added:AMENDMENTS BY THE EUROPEAN PARLIAMENT*

Removed:Recital 2: (2) The Capital Markets Union requires an efficient and effective regulatory framework that supports access to public equity funding for companies, including SMEs. Directive 2014/65/EU of the European Parliament and of the Council43 created a new type of trading venue, the SME growth market, to facilitate access to capital specifically for SMEs. Recital 132 of Directive 2014/65/EU also expressed the need to monitor how future regulation should further foster and promote the use of SME growth markets, and provide further incentives for SMEs to access capital markets through SME growth markets. Such measures need to ensure not only that SME growth markets provide an increasingly attractive opportunity for SMEs to raise funds but also that, with time and success, SMEs can eventually access other capital markets, should they choose to do so.

Added:to the Commission proposal

Removed:Recital 4: (4) Building on a Commission’s initiative within its post-Covid-19 recovery strategy, i.e. the Capital Markets Recovery Package, targeted amendments have been introduced into Regulation (EU) 2017/1129 of the European Parliament and of the Council47, Regulation (EU) 2017/2402 of the European Parliament and of the Council48 , Directive 2014/65/EU and Directive 2004/109/EC of the European Parliament and of the Council49 to make it easier for companies affected by the economic crisis caused by the pandemic to raise equity capital on public markets, facilitate investments in the real economy, allow for the rapid re-capitalisation of businesses, and increase banks’ capacity to finance the recovery. Overall, however, and for a number of reasons, those measures have had an extremely limited impact.

Added:---------------------------------------------------------

Removed:Recital 7: (7) For small offers of securities to the public, the costs of producing a prospectus could be disproportionate in relation to the total consideration of the offer. Regulation (EU) 2017/1129 does not apply to offers of securities to the public with a total consideration in the Union of less than EUR 1 000 000. In addition, in view of the varying sizes of financial markets across the Union, Member States may exempt offers of securities to the public from the obligation to publish a prospectus where such offer stays below a certain threshold, which Member States may set between EUR 1 000 000 and EUR 8 000 000. Certain Member States have used that possibility, which has led to different exemption thresholds.

Added:2022/0411 (COD)

Removed:Recital 8: (8) To adapt to the different national stock market conditions within the Union, Member States may exempt offers of securities to the public from the obligation to publish a prospectus where the total aggregated consideration in the Union for the securities offered is less than EUR 5 000 000 per issuer or offeror, calculated over a period of 12 months, up to a threshold of EUR 12 000 000. In the case of such an exemption, however, Member States should be able to require other disclosure requirements at national level to the extent that such requirements do not constitute a disproportionate or unnecessary burden. Member States should also strive to bring their different national requirements closer to each other.

Added:Proposal for a

Removed:Recital 10: (10) Regulation (EU) 2017/1129 contains several provisions that refer to the total consideration of ongoing offers and offers of securities to the public to be calculated over a period of 12 months. To provide clarity to issuers, investors and competent authorities and to avoid divergent approaches across the Union, it is necessary to specify how a the total consideration of those offers of securities to the public should be calculated over a period of 12 months.

Added:REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

Removed:Recital 11: (11) Article 1(5), point (a), of Regulation (EU) 2017/1129 contains an exemption from the obligation to publish a prospectus for the admission to trading on a regulated market of securities fungible with securities already admitted to trading on the same regulated market, provided that the newly admitted securities represent over a period of 12 months less than 20 % of the number of securities already admitted to trading to the same regulated market and provided such admission is not combined with an offer of securities to the public. To reduce complexity and to limit unnecessary costs and burdens, that exemption should apply to both the offer to the public and the admission to trading on a regulated market of the concerned securities and the percentage threshold that determines the eligibility for that exemption should be increased to 30%. For the same reason, that modified exemption should also encompass an offer to the public of securities fungible with securities already admitted to trading on an SME growth market.

Added:amending Regulations (EU) 2017/1129, (EU) No 596/2014 and (EU) No 600/2014 to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises

Removed:Recital 15: (15) To reduce the complexity of the prospectus documentation, and to make the prospectus a more harmonised document to improve its readability for investors across the Union, irrespective of the jurisdiction where securities are offered to the public or admitted to trading on a regulated market, it is necessary to introduce a standardised format for the prospectus for both equity and non-equity securities and to require that the information included in the prospectus is disclosed in a standardised sequence while taking care not to overload the amount of information required for each sequence with redundant or marginally relevant information.

Added:(Text with EEA relevance)

Removed:Recital 16: (16) There has been much discussion about the length of the prospectus, in light of concerns that, in certain cases, the prospectus or its related documents may reach massive sizes, becoming unfit for investors to take an informed investment decision. To improve the readability of the prospectus and make it easier for investors to analyse it and navigate through it, it was considered necessary to set out a maximum page limit. Even so, there were concerns that a page limit would not be appropriate for equity securities other than shares or non-equity securities, which include a broad range of different instruments, including complex ones.

Added:THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Removed:Recital 16 a (new): (16a) However, most readers of prospectuses - up to about 95 % of the total - are professional managers acting on behalf of investment fund clients and therefore well able to deal with such documents. It seems that, for the most part, retail investors consult the summary of the prospectus, which is where more safeguards about the clarity and coherence of the documents supplied by issuers may need to be introduced, including the maintenance of a page limit. It would therefore be preferable for issuers to be allowed a certain freedom regarding the length of the prospectuses they publish. Issuers should be allowed to discover, based on experience, which is the best appropriate length of text while however maintaining a uniform page sequence.

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

Removed:Recital 17: (17) Against that background, the standardised format and the standardised sequence of the information to be disclosed in the prospectus should be a requirement, irrespective of whether a prospectus, or a base prospectus, is drawn up as a single document or is composed of separate documents. It is therefore necessary that Annexes I, II and III to Regulation (EU) 2017/1129 set out the standardised sequence of the sections for the information to be disclosed in the prospectus or, separately, in the registration document and in the securities note. Those Annexes should be the basis for the Commission to amend any delegated acts that impose a standardised format and sequence of sections of the prospectus, the base prospectus and the final terms, including on disclosure items within those sections. Furthermore, it is necessary to set out the standardised sequence of the information to be disclosed in the prospectus summary.

Added:Having regard to the proposal from the European Commission,

Removed:Recital 18: (18) The prospectus summary is a key and essential document that serves as a guidance to support investors in better understanding and navigating through the whole prospectus and thus to make informed investment decisions. To make the prospectus summary more easily readable and comprehensible for investors, it is necessary to allow issuers to present or summarise information in the prospectus summary in the form of charts, graphs or tables, with a page limit of seven sides of A4-sized paper, using characters of readable fonts and no smaller than a font size of 11.

Added:After transmission of the draft legislative act to the national parliaments,

Removed:Data repeatedly shows that retail investors do not read prospectuses.

Added:Having regard to the opinion of the European Economic and Social Committee,

Removed:Recital 23: (23) Due to the growing importance of sustainability considerations in investment decisions, investors are increasingly considering information on environmental, social and governance (ESG) matters when taking informed investment decisions. It is therefore necessary to prevent greenwashing, by establishing ESG-related information to be provided, where relevant, in the prospectus for equity or non-equity securities offered to the public or admitted to trading on a regulated market. That requirement should, however, not overlap with the requirement laid down in other Union law to provide that information. Companies that offer equity securities to the public or seek the admission to trading of equity securities on a regulated market should therefore incorporate by reference in the prospectus, for the periods covered by the historical financial information, the management and consolidated management reports, which include the sustainability reporting, as required by Directive 2013/34/EU of the European Parliament and of the Council54 . Moreover, the Commission should be empowered to set out a schedule specifying the ESG-related information to be included in prospectuses for non-equity securities that are advertised as taking into account ESG factors or pursuing ESG objectives. For bonds advertised as taking into account ESG factors or pursuing ESG objectives, the Commission should ensure consistency between the format of the sustainability disclosures under Directive 2013/34/EU a…

Added:Acting in accordance with the ordinary legislative procedure,

Removed:Recital 25: (25) The EU Recovery prospectus referred to in Article 14a of Regulation (EU) 2017/1129 of the European Parliament and of the Council may no longer be used after 31 December 2022. That EU Recovery prospectus had the advantage that is was composed of a single document that was limited in size, making it easy for issuers to draw it up and easy for investors to understand it. For those reasons, the EU Follow-on prospectus could follow a similar model, and should be subject to the same reduced scrutiny period as the EU Recovery prospectus. However, the requirements for the EU Follow-on prospectus should for obvious reasons not require Covid-19 crisis-related disclosures. As the EU Follow-on prospectus should replace both the simplified prospectus for secondary issuances and the EU Recovery prospectus, it should be permanent and available for both secondary issuances of equity and non-equity securities. In addition, its use should not be subject to any restrictions beyond the requirement of the minimum and continuous period of admission of the securities concerned to trading on a regulated market or an SME growth market.

Added:Whereas:

Removed:Recital 26: (26) The EU Follow-on prospectus should contain a short-form summary as a useful source of information for investors. That summary should be set out at the beginning of the EU Follow-on prospectus and should focus on key information enabling investors to decide which offers to the public and admissions to trading of shares to study further, and subsequently to review the EU Follow-on prospectus as a whole to take an informed investment decision.

Added:(1) By developing Union capital markets and decreasing their fragmentation along national borders, the Capital Markets Union project aims to enable companies to access funding sources other than bank lending and to adapt their financing structure when maturing and growing in size. More diversified financing in the form of debt and equity will decrease risks for individual companies and the overall economy as well as help Union companies, including small and mid-sized enterprises (SMEs), realise their growth potential. It is acknowledged that the capital markets union needs to be realised more quickly and that investment funds need to reach the levels made necessary by the Union’s policy priorities related to environmental protection, digitalisation and strategic autonomy. Moving forward on the area of listing is a necessary step for the capital markets union, especially in the short term, but as a stand-alone measure it cannot be sufficient.

Removed:Recital 27: (27) In order to make the EU Follow-on prospectus a harmonised document and facilitate its readability for investors across the Union, irrespective of the jurisdiction where securities are offered to the public or admitted to trading on a regulated market, its format should be standardised for both equity and non-equity securities. For the same reason, the information in the EU Follow-on prospectus should be disclosed in a standardised sequence.

Added:(2) The Capital Markets Union requires an efficient and effective regulatory framework that supports access to public equity funding for companies, including SMEs. Directive 2014/65/EU of the European Parliament and of the Council created a new type of trading venue, the SME growth market, to facilitate access to capital specifically for SMEs. Recital 132 of Directive 2014/65/EU also expressed the need to monitor how future regulation should further foster and promote the use of SME growth markets, and provide further incentives for SMEs to access capital markets through SME growth markets. Such measures need to ensure not only that SME growth markets provide an increasingly attractive opportunity for SMEs to raise funds but also that, with time and success, SMEs are able to access other capital markets, if they choose to do so.

Removed:Recital 32: (32) The EU Growth issuance document should be a harmonised document which is easy to read by investors, irrespective of the jurisdiction within the Union where the securities concerned are offered to the public or admitted to trading on a regulated market. Its format should therefore be standardised for both equity and non-equity securities and the information included in the EU Growth issuance document should be disclosed in a standardised sequence.

Added:(3) Regulation (EU) 2019/2115 of the European Parliament and of the Council introduced proportionate alleviations to enhance the use of SME growth markets and to reduce the regulatory requirements for issuers seeking admission of securities on SME growth markets, while preserving an appropriate level of investor protection and market integrity. Nevertheless, more needs to be done to make access to Union public markets more attractive and render the regulatory treatment of companies more flexible and proportionate to their size. The High-Level Forum on the Capital Markets Union recommended the Commission to remove regulatory obstacles that hold companies back from accessing public markets. The Technical Expert Stakeholder Group on SMEs set out detailed recommendations on how to foster companies and, in particular, SMEs to access Union public markets.

Removed:Recital 34: (34) Risk factors that are material and specific to the issuer and his or her securities should be mentioned in the prospectus. For that reason, risk factors are also to be presented in a limited number of risk categories depending on their nature. To improve the comprehensibility of the prospectus and make it easier for investors to take informed investment decisions, it is necessary to specify that issuers should not overload the prospectus with risk factors that are generic, that only serve as disclaimers, or that could obscure the specific risk factors that investors should be aware of. Furthermore, in each risk category, the most material risk factors should be mentioned first.

Added:(4) Building on a Commission’s initiative within its post-Covid-19 recovery strategy, i.e. the Capital Markets Recovery Package, targeted amendments have been introduced into Regulation (EU) 2017/1129 of the European Parliament and of the Council, Regulation (EU) 2017/2402 of the European Parliament and of the Council, Directive 2014/65/EU and Directive 2004/109/EC of the European Parliament and of the Council to make it easier for companies affected by the economic crisis caused by the pandemic to raise equity capital on public markets, facilitate investments in the real economy, allow for the rapid re-capitalisation of businesses, and increase banks’ capacity to finance the recovery. Overall, however, and for a number of reasons, those measures could only have a limited impact.

Removed:Recital 35: deleted

Added:(5) On the basis of the recommendations of the Technical Expert Stakeholder Group on SMEs and building on Regulation 2019/2115 and on the measures adopted under Regulation (EU) 2021/337 of the European Parliament and of the Council, and as part of the Capital Markets Recovery Package, the Commission committed to put forward a legislative initiative to make access to Union public markets more attractive by reducing compliance costs, and by removing significant obstacles that hold back companies, including SMEs, from tapping public markets in the Union. To achieve its objectives, the scope of that legislative initiative should be broad and address obstacles that concern companies’ access to public markets, namely the pre-initial public offering (IPO), IPO and post-IPO phases. In particular, the simplification and removal of obstacles should focus on the IPO and post-IPO phases by addressing burdensome disclosure requirements to seek admission to trading on public markets laid down in Regulation (EU) 2017/1129, and by addressing burdensome ongoing disclosure requirements laid down in Regulation (EU) No 596/2014 of the European Parliament and of the Council.

Removed:Recital 36: (36) Article 19 of Regulation (EU) 2017/1129 gives issuers the possibility to incorporate into the prospectus certain information by reference. That possibility was introduced to reduce the burden for issuers and to avoid duplication of information that has already been disclosed and published under other Union financial services law. Companies should still be allowed to incorporate by reference on voluntary basis information that is not to be disclosed in a prospectus, provided that such information fulfils the conditions laid down in Article 19(1) of Regulation (EU) 2017/1129 on incorporation by reference. / (deleted)

Added:(6) Regulation (EU) 2017/1129 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 that is situated in or operating within a Member State. To reinforce the attractiveness of Union public markets, it is necessary to address obstacles stemming from the length, complexity and high costs of the prospectus documentation, both where companies, including SMEs, seek access to public markets for the first time (IPO), and where companies access public markets for secondary issuances of equity or non-equity securities. For the same reason, the length of the scrutiny and approval process of those prospectuses by competent authorities, and the lack of convergence of those processes across the Union should also be addressed.

Removed:Proposed deletion as change risks making prospectuses less comprehensible for investors because the information will be fragmented across numerous documents.

Added:(7) For small offers of securities to the public, the costs of producing a prospectus could be disproportionate in relation to the total consideration of the offer. Regulation (EU) 2017/1129 does not apply to offers of securities to the public with a total consideration in the Union of less than EUR 1 000 000. In addition, in view of the varying sizes of financial markets across the Union, Member States may exempt offers of securities to the public from the obligation to publish a prospectus where such offer stays below a certain threshold, which Member States may set between EUR 1 000 000 and EUR 8 000 000. Certain Member States have used that possibility, which has led to different exemption thresholds▌.

Removed:Recital 37: deleted

Added:(8) Having a wide range of exemption thresholds across Member States is not ideal in the context of cross-border activity and the development of the capital markets union. However, in order to adapt to the different national stock market conditions within the Union, Member States should be able to exempt offers of securities to the public from the obligation to publish a prospectus where the total aggregated consideration in the Union for the securities offered is less than EUR 5 000 000 per issuer or offeror, calculated over a period of 12 months, up to a threshold of EUR 12 000 000.▌ In the case of such an exemption, however, Member States should be able to require the publication of a summary as referred to in Article 7 of Regulation (EU) 2017/1129. Member States should strive to bring their different national requirements closer to each other.