European Commission initiative aims to boost small business growth

12 Jun 2018 | 2 min read
The European Commission has announced new regulatory initiatives which aim to promote small and medium enterprises (SME) growth markets as part of its Capital Markets Union. The announcements come in in the form of a proposal for a regulation amending the market abuse regulation and the prospectus regulation, and a draft delegated regulation bringing technical adjustments to the Markets in Financial Instruments Directive (MiFID II). The Commission is seeking comments back on the proposal by 21 June 2018.
The new rules proposed by the Commission aim to:• reduce the administrative burden and the high compliance costs faced by SME growth market issuers while ensuring a high level of market integrity and investor protection

• foster the liquidity of publicly listed SME shares to make these markets more attractive for investors, issuers and intermediaries

• facilitate the registration of multilateral trading facilities as SME growth markets

The proposed changes to SME listings rules aim to allow issuers with at least three years of listing on SME growth markets to produce a lighter prospectus when transferring to a regulated market. A prospectus is a legal document with information an investor needs to have before making a decision whether to invest in the company. The new proposal goes even further than the already overhauled and simplified prospectus rules in terms of making it easier for firms to tap Europe's capital markets. Other changes include:

• adapt current obligations to keep registers of persons that have access to price-sensitive information so as to avoid excessive administrative burden for SMEs, while ensuring that competent authorities can still investigate cases of insider dealing

• make it easier for trading venues specialised in bond issuance to register as SME growth markets by setting a new definition of debt-only issuers—ie companies that issue less than €50m bonds over a 12-months period

• create a common set of rules on liquidity contracts for SME growth markets in all Member States, in parallel to 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

The market abuse regulation and prospectus regulation proposal can be seen here.

The MiFID II draft delegated regulation can be seen here.

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