Capital Market Union (CMU)

On 30 September 2015, the European Commission published an action plan containing 20 measures designed to build a single market for capital in Europe. In connection with this, it issued a call for evidence on the cumulative impact of financial legislation as it sought to gather information and empirical data on rules that might compromise the economy’s capacity to finance itself and grow because of overlapping, inconsistent or unwanted regulatory provisions. 
Based primarily around selected examples, AMAFI’s contribution (AMAFI / 16-08) also tackled the priorities that should guide the assessment of the European legislative framework, which include:

• Striking a balance between protecting investors and financing the economy;
• Considering diverse needs and solutions in market financing. In other words, the drive to harmonise should not interfere with the orderly operation of vital local ecosystems;
• Giving equity and equity markets absolute priority – a key aspect of risk finance;
• Creating a prudential framework that upholds market liquidity and diversity of participants, notably through effective application of the proportionality principle;
• Establishing a policy for treatment of non-EU countries, aimed at maintaining Corporate Europe’s competitive edge;
• Revisiting the European legislative process to improve the standards that it produces.

AMAFI also said it was a great pity that this initiative had not been underpinned by an in-depth discussion over the right market model for Europe and noted the lack of ambition in the two legislative proposals presented by the Commission on securitisation and the revision of the Prospectus Directive.

Prospectus

On 30 November, the European Commission published a draft Prospectus Regulation that is intended to replace the 2003 directive. The proposal followed a consultation launched last spring as part of CMU (AMAFI / 15-27). 

Relative to the expectations generated by the consultation’s open questions, some of the draft proposals, although heading in the right direction overall, are something of a let down. For example, while certain thresholds creating the obligation to prepare a prospectus, whether for an offering or an admission of securities to trading on a regulated market, have been significantly raised, giving Member States the option of raising this threshold to €10 million for domestic offerings reflects a regrettable lack of harmonisation. The proposal to introduce a universal registration document for frequent issuers is to be welcomed, although the fairly limited effects associated with this status are somewhat disappointing and an ex post review system was not proposed as had been suggested. Likewise, the determination to create specific regimes for secondary issues and SMEs is laudable, but the proposals on secondary issues fall well short of those put forward by AMAFI. 

Meanwhile, the details of the streamlined prospectus for SMEs, which AMAFI naturally supports in principle, have still to be revealed in the delegated acts of the European Commission and forthcoming guidance from ESMA.