Capital Markets Union (CMU)

Listing Act 

The European Commission has published a proposal for a Listing Act that seeks to promote access to capital markets by companies, especially SMEs, by simplifying listing requirements, in keeping with the goals of CMU (Info AMAFI No. 158). Through the working group set up to review the proposed changes, which comprises members of several committees, AMAFI responded to the Have your Say consultation organised by the European Commission after publishing its proposal.

AMAFI broadly supports the Commission’s proposals (AMAFI / 23-23), which are intended to streamline and clarify the listing regime. However, since it is vital to have a stable operating framework, a balance needs to be struck between the value added expected from the amendments, which may be minor, and the adjustments that these changes will mean for the firms affected by them. AMAFI found that some of the proposals are not desirable according to the cost-benefit analysis.

Research

AMAFI shares the Commission’s view that investment research coverage of SMEs is inadequate. However, it also believes that this situation will not be materially improved by the proposal to raise from €1 billion to €10 billion the market capitalisation threshold below which unbundling rules do not apply. For this increase to be impactful, asset managers would have to raise awareness among customers and persuade them to pay for a service that they have not been charged for since MiFID II came into effect. Managers would also need to operate two parallel invoicing systems: one for market caps below €10 billion and one for firms exceeding the threshold.

For this reason, AMAFI strongly supports the Commission’s proposal to set up a framework for sponsored research, which it sees as the most appropriate, operational solution to promote SME-focused research. Specifically, the Commission is proposing to recognise sponsored research as investment research provided that it complies with a code of conduct developed or endorsed by a competent authority or market operators. In France, the AMAFI-AFG-SFAF charter on sponsored research (AMAFI / 22-44), which was established in May 2022, has already proven effective, with over 210 contracts signed under the charter so far (cf. special feature p. 2).

As part of the discussions ongoing at European level, AMAFI presented France’s charter to the finance ministers of Germany, Italy, Sweden and Poland. AMAFI is also working with other EFSA members to forge a joint position. As a result, AMAFI observes that the French model arouses real interest in Europe.

Market abuse

AMAFI largely backs the Commission’s proposed amendments on this topic. However some of the suggested measures are problematic, such as the proposal to replace the obligation for issuers to draw up insider lists by a requirement to prepare a list of permanent insiders. In AMAFI’s view, this would provide insufficient protection to the market and investment services providers. Instead, AMAFI proposes to simplify the obligation by adjusting the scope of the information required for the list.

Product governance

AMAFI is once again calling for MiFID II governance obligations for plain-vanilla products such as shares and ordinary bonds to be streamlined. The rules are a barrier to the widespread distribution of these products, especially shares and bonds issued by small and mid caps. Such a change would run counter to the Commission’s goal of encouraging broader market participation by retail investors.

Prospectus 

AMAFI considers that many of the proposed modifications would provide benefits in terms of promoting flexibility and simplifying the market access process. In particular, it supports the proposal to reduce the delay between the publication of a prospectus and the end of the offering from six to three days , which will help to reduce risks in the event of market volatility.

However, some of the proposals could interfere with the flexibility offered by current provisions. For example, the proposal to establish a fixed order for presenting the different sections of the prospectus would prevent writers from making adjustments to reflect their firm’s specific circumstances. Likewise, AMAFI argues that incorporation by reference should remain optional when drafting the prospectus, instead of being mandatory as proposed by the Commission.