May 24, 2018

EC proposed new rules to give small and medium enterprises (SMEs) better access to financing through public markets. This initiative encompasses a legislative proposal that amends certain technical rules in the Market Abuse Regulation (MAR) and the Prospectus Regulation, along with the envisaged technical amendments to delegated acts (also known as level 2 measures) under the Markets in Financial Instruments Directive (MiFID II). The proposal involving Level 2 measures is to amend Commission Delegated Regulation (EU) 2017/565 regarding certain registration conditions to promote the use of SME growth markets for the purposes of Directive 2014/65/EU of the European Parliament and of the Council. The proposal for a regulation amending the market abuse and prospectus rules will now be discussed by the European Parliament and the Council while amendments to the MiFID II delegated act will be published online for a four-week consultation, after which they will be adopted by EC and sent to the European Parliament and the Council for their scrutiny. The consultation on the MiFID II delegated regulation ends on June 21, 2018.

The initiative is confined to “SME growth markets,” a new category of multilateral trading facilities created by the Markets in financial instruments directive (MiFID II) as of January 2018 to facilitate access to capital for SMEs. The proposed amendments should boost companies' listing on SME Growth Markets in a way that preserves the core EU rules established to restore confidence in financial markets after the financial crisis. The rules aim to reduce the administrative burden and cut red-tape for small and medium companies trying to list and issue securities on SME Growth Markets. The new rules will introduce a more proportionate approach to support SME listing while safeguarding investor protection and market integrity. This legislative proposal is one of the numerous measures presented by EC since the launch of the Capital Markets Union in 2015 to improve SMEs' access to market-based finance. Main proposed changes to SME listings rules:

  • Adapt current obligations to keep registers of persons that have access to price-sensitive information, with the aim to avoid excessive administrative burden for SMEs, while ensuring that competent authorities can still investigate cases of insider dealing.
  • Allow issuers with at least three years of listing on SME Growth Markets to produce a lighter prospectus when transferring to a regulated market. This proposal goes even further than the already overhauled and simplified prospectus rules in terms of making it easier for firms to tap capital markets in Europe.
  • Make it easier for trading venues specialized in bond issuance to register as SME Growth Markets. This will be done by setting a new definition of debt-only issuers. Those would be companies that issue less than EUR 50 million of bonds over a 12-month period.
  • Create a common set of rules on liquidity contracts for SME Growth Markets in all member states, in parallel to the national rules. This refers to agreements between issuers and financial intermediaries (a bank or an investment firm) for buying and selling shares of and on behalf of the issuer. By so doing, the financial intermediary enhances the liquidity of the shares.

 

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Comment Due Date: June 21, 2018 (Commission Delegated Regulation)

Keywords: Europe, EU, Securities, MAR, Prospectus Regulation, MiFID II, SME Listing, Proportionality, Capital Markets Union, EC

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