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Capital Markets Union – boosting business finance

Capital Markets Union – boosting business finance

Political agreement was reached just before Christmas on a revamp of the EU requirements on prospectuses for issuing securities. This achieves a key goal of the Capital Markets Union (CMU) project, to broaden the fundraising options for business investment and growth. The revised rules aim to simplify the process for SMEs while providing the information investors want.

Jon Hogan

Director Regulatory Affairs, International Standards Group

KPMG in the UK


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Prospectus publication is required when securities are offered to the public or admitted to trading. There was evidence that SMEs were deterred because of the paperwork and costs involved in issuing a prospectus under the current rules.

The revised Prospectus Directive will be issued as a Regulation referred to as ‘PD3’. Key changes include:

  • no prospectus required below €1 million
  • mandatory prospectuses above €8 million – discretionary local growth markets rules below
  • EU growth prospectus for small issuances by unlisted companies
  • corporate bond prospectus for wholesale debt markets
  • frequent issuer regime and lighter requirements for secondary issuances
  • shorter and simpler prospectus summaries
  • paper prospectuses no longer required
  • European Securities and Markets Authority (ESMA) to operate an online database.

A key challenge to the success of the revised approach will be giving investors the confidence to invest in SMEs. While simplifying the process, increasing the value of information provided to investors will be key. Accountancy Europe provided a helpful summary (PDF 126 KB) of the information that investors want and which SMEs need to consider to make their offering attractive.

As ESMA begins the task of developing more detailed technical rules, getting the balance right between simplicity of process and value of information will be essential. As experience of agreeing information disclosure for retail investors in the PRIIP KID has shown, this might not be straightforward.

Subject to final agreements and technical standards the new prospectuses could be in use by 2019.

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