The EU Commission has published proposals to overhaul the rules on prospectuses, where companies are raising equity or debt in public markets. But prospectuses are costly to produce, especially for smaller companies. As Ian Sayers of the AIC said after the above announcement: “One of the main problems with a prospectus is that the regime effectively compels issuers to include any information that an investor might conceivably want. Given the legal implications, the result is a huge amount of boilerplate of little value and huge complexity.”
Commissioner for Financial Stability, Financial Services and Capital Markets Union Jonathan Hill said: “We need a prospectus regime that gives investors the information they need, but that does not pile up unnecessary costs and put companies off raising money on the public markets. Today’s proposal strikes a better balance. It will make the system simpler, cheaper and quicker. It will safeguard investors, while making it easier for small and medium-sized enterprises and other businesses to raise money.”
The main changes proposed can be summarised as:
– The smallest capital raisings (less than €500,000) will no longer require a prospectus, and member states will be able to set even higher thresholds for their domestic markets.
– There will be a “lighter” prospectus for those companies with a market cap of less than €200 million (typically SMEs).
– Prospectuses should be shorter and clearer in future.
– Secondary issuance by existing listed companies will benefit from a new, simplified prospectus.
The proposed changes now have to be approved by the European Parliament and the Council of the EU. But these proposals are surely beneficial to all private investors.
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