Commission cuts red tape and improves investor protection on securities prospectuses

24 September 2009

The proposal increases legal clarity and efficiency in the prospectus regime and reduces administrative burdens for issuers and intermediaries. It also bears in mind the importance of enhancing the level of investor protection.

 In line with the "Better Regulation" principles, the European Commission has today put forward a proposal for the review of the Prospectus Directive. The proposal is part of simplification exercise within the Action Program of the European Commission for the Reduction of Administrative Burdens in the European Union. The proposal increases legal clarity and efficiency in the prospectus regime and reduces administrative burdens for issuers and intermediaries. It also bears in mind the importance of enhancing the level of investor protection and ensuring that the information provided is sufficient and adequate to cover the needs of retail investors. It reflects consultation with all major stakeholders.

The new rules will make securities issues more efficient by making the rules easier to understand (greater legal clarity); reducing administrative burdens for issuers and intermediaries; giving issuers' employees access to a full range of investment opportunities; and helping retail investors more effectively analyse the prospects and risks posed by a security before investing.
The main changes proposed are as follows:
·                     some types of securities issue will be subject to less comprehensive disclosure requirements (small companies, small lenders, rights issues and government guarantee schemes);
·                     the format and content of the prospectus summary have been improved;
·                     there are clearer exemptions from the obligation to publish a prospectus when companies sell through intermediaries (“retail cascades”) and for employee share schemes;
·                     disclosure requirements that currently overlap with the Transparency Directive will be repealed;
·                     issuers of all non-equity securities will be able to determine their home Member State;
·                     the definition of 'qualified investors' in the Prospectus Directivewill be aligned with the one
 
 
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