ESMA is seeking views before making recommendations to the European Commission by the end of 2017.
As well as the streamlined overall prospectus requirements, ESMA wants issuers, investors and advisers to work through the finer details of the new simplified ‘EU Growth’ prospectus. This pared back version of a prospectus is aimed at helping SMEs access capital markets. An untested area of European capital markets, we don’t yet know whether investors have an appetite for these types of securities. ESMA’s proposals focus on core information investors will want, while simplifying the more complex requirements that might prohibit an SME from issuing securities. KPMG was supportive of the work done by Accountancy Europe on the key elements of a simplified prospectus (see here for report).
The new rules for prospectuses need to strike a careful balance between somewhat contradictory objectives: on the one hand reducing the costs and complexities of due diligence, while on the other maintaining high levels of investor protection. Investors will wish to consider the implications of some areas of proposed simplification. For instance, by removing the requirements for some financial information to have been validated, is the investment made less attractive?
ESMA is consulting on the draft standards until September. As with other parts of CMU agenda – including the pan-European Personal Pension proposal – industry needs to stay engaged in the finer details so that the overall picture adds up to bigger and stronger European capital markets.