EUROPEAN PARLIAMENT
1999
 






 
2004
Committee on Economic and Monetary Affairs
PROVISIONAL
2001/0117(COD)
6 May 2003
***II
DRAFT RECOMMENDATION FOR
SECOND READING
on the Council common position for adopting a European Parliament and
Council directive on prospectus to be published for securities (overhaul direct.
80/390/EEC, 89/298/EEC, 2001/34/EC)
(COM(2002) 460 – C5-0143/203 – 2001/0117(COD))
Committee on Economic and Monetary Affairs
Rapporteur: Christopher Huhne
PR\495526TR.doc
EN
PE 323.161
EN
CODE2AMC
Symbols for procedures
*
**I
**II
***
***I
***II
***III
Consultation procedure
majority of the votes cast
Cooperation procedure (first reading)
majority of the votes cast
Cooperation procedure (second reading)
majority of the votes cast, to approve the common position
majority of Parliament’s component Members, to reject or amend
the common position
Assent procedure
majority of Parliament’s component Members except in cases
covered by Articles 105, 107, 161 and 300 of the EC Treaty and
Article 7 of the EU Treaty
Codecision procedure (first reading)
majority of the votes cast
Codecision procedure (second reading)
majority of the votes cast, to approve the common position
majority of Parliament’s component Members, to reject or amend
the common position
Codecision procedure (third reading)
majority of the votes cast, to approve the joint text
(The type of procedure depends on the legal basis proposed by the
Commission)
Amendments to a legislative text
In amendments by Parliament, amended text is highlighted in bold italics.
Highlighting in normal italics is an indication for the relevant departments
showing parts of the legislative text for which a correction is proposed, to
assist preparation of the final text (for instance, obvious errors or omissions
in a given language version). These suggested corrections are subject to the
agreement of the departments concerned.
PE 323.161
EN
2/29
PR\495526TR.doc
CONTENTS
Page
PROCEDURAL PAGE .............................................................................................................. 4
DRAFT LEGISLATIVE RESOLUTION .................................................................................. 5
EXPLANATORY STATEMENT............................................................................................ 26
PR\495526TR.doc
3/29
PE 323.161
EN
PROCEDURAL PAGE
At the sitting of ... Parliament adopted its position at first reading on the proposal/amended
proposal for a European Parliament and Council directive on prospectus to be published for
securities (overhaul direct. 80/390/EEC, 89/298/EEC, 2001/34/EC) (COM(2002) 460 –
2001/0117 (COD)).
At the sitting of ... the President of Parliament announced that the common position had been
received and referred to the Committee on Economic and Monetary Affairs ((2002) 460 –
C5-0143/203).
The committee had appointed Christopher Huhne rapporteur at its meeting of ....
The committee considered the common position and draft recommendation for second reading
at its meeting(s) of ....
At the latter/last meeting it adopted the draft legislative resolution by ... votes to ..., with ...
abstention(s)/unanimously.
The following were present for the vote: ..., chairman/acting chairman; ... (and ...), vicechairman/vice-chairmen/; ..., rapporteur; ..., ... (for ...), ... (for ... , pursuant to Rule 153(2)), ...
and ....
The recommendation for second reading was tabled on ....
PE 323.161
EN
4/29
PR\495526TR.doc
DRAFT LEGISLATIVE RESOLUTION
European Parliament legislative resolution on the Council common position for
adopting a European Parliament and Council directive on prospectus to be published
for securities (overhaul direct. 80/390/EEC, 89/298/EEC, 2001/34/EC) (COM(2002) 460
– C5-0143/203 – 2001/0117(COD))
(Codecision procedure: second reading)
The European Parliament,
– having regard to the Council common position (5930/03 – C5-0143/203),
– having regard to its position at first reading1 on the Commission proposal (and amended
proposal) to Parliament and the Council (COM(2001) 2802),
– having regard to the Commission's amended proposal (COM(2002) 4603),
– having regard to Article 251(2) of the EC Treaty,
– having regard to Rule 80 of its Rules of Procedure,
– having regard to the recommendation for second reading of the Committee on Economic
and Monetary Affairs (A5-0072/2002),
1. Amends the common position as follows;
2. Instructs its President to forward its position to the Council and Commission.
1
OJ C047, 27.02.2003, p. 511-524.
OJ C 240, 28.08.2001, p. 272-288.
3
OJ C 020, 28.01.2003, p. 122-159.
2
PR\495526TR.doc
5/29
PE 323.161
EN
Council common position
Amendments by Parliament
Amendment 1
Article 1, paragraph 2, point (b)
(b)
non-equity securities issued by a
Member State or by one of a
Member State's regional or local
authorities, by public international
bodies of which one or more
Member States are members, by the
European Central Bank or by the
central banks of the Member States,
(b)
non-equity securities issued by a
Member State or by one of a
Member State's regional or local
authorities, or by public international
bodies of which one or more
Member States are members,
providing, in the case of Member
States and public international
bodies, that their credit ratings
assigned by all European Central
Bank recognised rating agencies are
in line with the ratings of the most
creditworthy Member States and, in
the case of regional or local
authorities, that they have the same
credit status as the Member State in
which they are situated, in
accordance with a decision of their
national supervisory authority or
authorities, or by the European
Central Bank or by the central banks
of the Member States,
Justification
Debt issues by Member States, regional and local bodies, public international bodies, central
banks etc. should be provided with an exemption from the obligation to publish a prospectus,
provided that their creditworthiness is assured. However, the enlarged union will include a
very substantial range of government creditworthiness – including some non-investment
grade credits – while many regional and local authorities issuing bonds are non-investment
grade. Investor protection therefore requires full publication of a prospectus.
Amendment 2
PE 323.161
EN
6/29
PR\495526TR.doc
Article 2, paragraph 1, point (b)
(b)
"equity securities" means shares
and other transferable securities equivalent
to shares in companies, as well as any
other type of transferable securities giving
the right to acquire any of the
aforementioned securities as a
consequence of their being converted or
the rights conferred by them being
exercised, provided that securities of the
latter type are issued by the issuer of the
underlying shares or by an entity
belonging to the group of the said issuer,
(b)
"equity securities" means shares
and other transferable securities equivalent
to shares in companies,
Justification
There is a contradiction in the Council common position that should be resolved. The
definition of equity securities in Article 2.1 (b) includes convertible bonds and warrants
where the underlying is a share of the issuer. Recital 12, however, explicitly states that
convertible bonds should be treated as non-equity securities. It should be clarified that these
securities are classified as non-equity securities.
Amendment 3
Article 2, paragraph 1, point (e), sub-point (iv)
(iv)
certain natural persons: subject to
mutual recognition, a Member State may
choose to authorise natural persons who
are resident in the Member State and who
expressly ask to be considered as qualified
investors if these persons meet at least two
of the criteria set out in paragraph 2;
(iv)
natural persons who are resident in
the Member State and who expressly ask to
be considered as qualified investors if these
persons meet at least two of the criteria set
out in paragraph 2;
Justification
The Member States should not be permitted an opt-out with regard to whether a natural
PR\495526TR.doc
7/29
PE 323.161
EN
person or SME may choose to be classified as a qualified investor. These bodies should be
permitted, under the strict conditions outlined in paragraph 2. The Council text would
undermine a fundamental objective of the directive ie. the harmonisation of conditions for
raising capital across the EU. It would introduce an unnecessary complication where some
member states thought individuals were not to be trusted to make their own decisions. It
would also set up a distortion in the single market where individuals who wanted to trade
would merely set up an account in a member state that allowed them to do so. See
justification for amendment to Article 2, paragraph 1, point (e), sub-point (v).
Amendment 4
Article 2, paragraph 1, point (e), sub-point (v)
(v)
certain SMEs: subject to mutual
recognition, a Member State may choose
to authorise SMEs which have their
registered office in that Member State and
who expressly ask to be considered as
qualified investors,
(v)
SMEs which have their registered
office in that Member State and who
expressly ask to be considered as qualified
investors,
Justification
The Member States should not be permitted an opt-out with regard to whether a natural
person or SME may choose to be classified as a qualified investor. These bodies should be
permitted, under the strict conditions outlined in paragraph 2. The text of the Common
Position would undermine a fundamental objective of the directive, which is the
harmonisation of conditions for raising capital across the EU. See justification for
amendment to Article 2, paragraph 1, point (e), sub-point (iv).
Amendment 5
Article 2, paragraph 1, point (k)
(k)
"offering programme" means an
issuer's plan for the issuance of nonequity securities, including warrants in any
form, having a similar type and/or class,
in a continuous or repeated manner during
a specified issuing period.
PE 323.161
EN
(k)
"offering programme" means a
programme which would permit the
issuance of non-equity securities including
warrants in any form, in a continuous or
repeated manner during a specified issuing
period.
8/29
PR\495526TR.doc
Justification
(i) At the time of the setting up of an offering programme such as an MTN programmes it is
not possible to know what the "plan" is with regards to the number of issues which will be
made since programmes are set up to enable issuers to make a wide range of types of issue.
There may not be another issue during the "specified period" and the Council text means that
the first issue would not therefore part of an offering programme and that the type of
prospectus approved would not be correct. See justification for amendment to Article 2.1 (l).
(ii) The definition of offering programme should clarify that non-equity securities shall benefit
from the programme and that not just certain warrants should benefit.
Amendment 6
Article 2, paragraph 1, point (l)
(l)
"securities issued in a continuous or
repeated manner" means issues on tap with
at least two separate issues of securities of
a similar type and/or class over a period of
twelve months,
(l)
"securities issued in a continuous or
repeated manner" means at least two
separate issues of securities over a period
of twelve months,
Justification
(i) See justification for amendment to article 2.1.(k) as the definition of Article 2.1 (l) relates
to wording included in the definition of "offering programme". (ii) Only very few programme
issuers in the EU are by issuers which are raising such large amounts of money that they are
"on tap" and able to issue on every working day if an investor contacts them asking to buy an
issue from the issuer. This wording should therefore deleted. (iii) It should also be possible,
as is current practice, for different securities to be issued as part of the same offering
programme and the relevant wording should therefore be deleted.
Amendment 7
Article 2, paragraph 1, point (m), sub-point (ii)
(ii)
for any issues of non-equity
PR\495526TR.doc
(ii)
9/29
for any issues of non-equity
PE 323.161
EN
securities whose denomination per unit
amounts to at least EUR 5 000, and for
any issues of non-equity securities giving
the right to acquire any transferable
securities or to receive a cash amount, as
a consequence of their being converted or
the rights conferred by them being
exercised, provided that the issuer of the
non-equity securities is not the issuer of
the underlying securities or an entity
belonging to the group of the latter issuer,
the Member State where the issuer has its
registered office, or where the securities
were or are to be admitted to trading on a
regulated market or where the securities
are offered to the public, at the choice of
the issuer, the offeror or the person asking
for admission, as the case may be;
securities the Member State where the
issuer has its registered office, or where the
securities were or are to be admitted to
trading on a regulated market or where the
securities are offered to the public, at the
choice of the issuer, the offeror or the
person asking for admission, as the case
may be;
Justification
Amendment 16 established choice of competent authority for both equity and non-equity
securities. The Council restricted choice of competent authority to a narrow segment of non
equity securities as defined by a minimum denomination threshold. However, the
denomination amount is problematic, and the only compromise approach that would be in the
interest of investors and the economy overall would be to allow all issuers of non equity
securities – without a denomination restriction – to benefit from this flexibility. Even a
denomination of 5,000 Euro, while seemingly better than the originally contemplated amounts
in the Council, would still restrict choice of competent authority to less than 20% of issuers.
Given that these issuers today enjoy the choice of competent authority and that the
Commission has not been able to demonstrate why this choice should be taken away from
issuers in order to make the passport work, a compromise with no denomination is the
minimum that would be needed. Furthermore, convertible bonds and warrants where the
underlying are the shares of the issuer should also be under choice.
Amendment 8
Article 2, paragraph 1, point (qa) (new)
pa) ‘base prospectus’ means a document
containing all relevant information
concerning the issuer and the securities to
PE 323.161
EN
10/29
PR\495526TR.doc
be offered to the public or admitted to
trading (excluding the final terms of the
offering.
Justification
A definition for the new concept of "base prospectus"(Article 5.4) is needed.
Amendment 9
Article 2, paragraph 3
3.
For the purposes of paragraphs
1(e)(iv) and (v) the following shall apply:
Deleted
Each competent authority shall ensure
that appropriate mechanisms are in place
for a register of natural persons and
SMEs considered as qualified investors,
taking into account the need to ensure an
adequate level of data protection. The
register shall be available to all issuers.
Each natural person or SME wishing to
be considered as a qualified investor shall
register and each registered investor may
decide to opt out at any moment.
Justification
The concept of a "register" to maintain a record of natural persons and SMEs which are
considered to be qualified investors is impractical and would comprise a disproportionate
and unnecssary administrative burden for competent authorities and issuers alike. It could
discourage natural persons and SMEs from asking to be categorised as such. Furthermore,
the qualified investor regime in the Prospectus Directive should be consistent with that of the
Investment Services Directive, which does not require such a register. Hence, this paragraph
should be deleted.
Amendment 10
Article 3, paragraph 2
PR\495526TR.doc
11/29
PE 323.161
EN
2.
The obligation to publish a
prospectus shall not apply to the following
types of offer:
2.
The obligation to publish a
prospectus shall not apply to the following
types of offer:
(a)
an offer of securities addressed
solely to qualified investors, and/or;
(a)
an offer of securities addressed
solely to qualified investors, and/or;
(b)
an offer of securities addressed to
fewer than 100 natural or legal persons per
Member State, other than qualified
investors, and/or;
(b)
an offer of securities addressed to
fewer than 100 natural or legal persons per
Member State, other than qualified
investors, and/or;
(c)
an offer of securities addressed to
investors who acquire securities for a total
consideration of at least EUR 50 000 per
investor, for each separate offer, and/or;
(c)
an offer of securities addressed to
investors who acquire securities for a total
consideration of at least EUR 50 000 per
investor, for each separate offer, and/or;
(d)
an offer of securities whose
denomination per unit amounts to at least
EUR 50 000, and/or;
(d)
an offer of securities whose
denomination per unit amounts to at least
EUR 50 000, and/or;
(e)
an offer of securities with a total
consideration of less than EUR 100 000,
which limit shall be calculated over a
period of twelve months.
(e)
an offer of securities with a total
consideration of less than EUR 100 000,
which limit shall be calculated over a
period of twelve months.
However, any subsequent resale of
securities which were previously the
subject of one or more of the types of offer
mentioned in this paragraph shall be
regarded as a separate offer and the
definition set out to in Article 2(1)(d) shall
apply for the purpose of deciding whether
that resale is an offer of securities to the
public. The placement of securities
through financial intermediaries shall be
subject to publication of a prospectus if
none of the conditions (a) to (e) are met for
the final placement.
However, any subsequent resale of
securities which were previously the
subject of one or more of the types of offer
mentioned in this paragraph shall be
regarded as a separate offer. The separate
offers and the placement of securities
through financial intermediaries shall be
subject to publication of a prospectus if
none of the conditions (a) to (e) are met for
the final placement.
PE 323.161
EN
12/29
PR\495526TR.doc
Justification
The intention is to apply the same provisions to both resales of securities and private
placement of securities, the wording of the article can have different consequences for the
two. In the Common Position, the definition of public offer applies to decide whether a
prospectus should be published for resales, yet for private placements, clear criteria are
applied in (a) to (e). The text of the Common Position is therefore confusing and it should be
ensured that both subsequent separate offers and private placements are eligible for the same
clear criteria tests listed from (a) to (e) in order to enhance legal certainty.
Amendment 11
Article 4, paragraph 2, point (a)
(a)
shares representing, over a period
of twelve months, less than 10 per cent of
the number of shares of the same class
already admitted to trading on the same
regulated market;
(a)
securities representing, over a
period of twelve months, less than 10 per
cent of the number of securities of the
same class already admitted to trading on
the same regulated market;
Justification
This exemption from the obligation to publish a prospectus should be applicable to securities
other than shares It is common for the numbers of depositary receipts outsanding to fluctuate
during a year as they are surrendered for shares or created from shares.
Amendment 12
Article 5, paragraph 4, subparagraph 1
4.
For the following types of
securities, the prospectus shall consist of a
base prospectus containing all relevant
information concerning the issuer and the
PR\495526TR.doc
4.
For the following types of
securities, the prospectus can, at the
choice of the issuer, consist of a base
prospectus containing all relevant
13/29
PE 323.161
EN
securities offered to the public or to be
admitted to trading on a regulated market:
information concerning the issuer and the
securities to be offered to the public or
admitted to trading on a regulated market:
Justification
The optionality for the shelf-registration format should also be replicated for the base
prospectus. The issuer should be able to decide whether to use a base prospectus, shelf
registration or a single document.
Amendment 13
Article 5, paragraph 4, subparagraph 3
If the final terms of the offer are not
included in either the base prospectus or a
supplement, the final terms shall be
provided to investors and filed with the
competent authority when each public offer
is made as soon as practicable and if
possible in advance of the beginning of the
offer. The provisions of Article 8(1)(a)
shall be applicable in any such case.
The final terms of the offer shall be
provided to investors and filed with the
competent authority when each public offer
is made as soon as practicable and if
possible in advance of the beginning of the
offer.
Justification
It is not possible to include the "final terms" in either the base prospectus or in the
supplement since the final terms of an issue that is part of a programme are not known in
advance. Hence, this provision should be deleted.
Amendment 14
Article 11, paragraph 1
1.
Member States shall allow
information to be incorporated in the
PE 323.161
EN
1.
Member States shall allow
information to be incorporated in the
14/29
PR\495526TR.doc
prospectus by reference to one or more
previously published documents that have
been approved by the competent authority
of the home Member State or filed with it
in accordance with this Directive, in
particular pursuant to Article 10, or with
Titles IV and V of Directive 2001/34/EC.
This information shall be the latest
available to the issuer. The summary shall
not incorporate information by reference.
prospectus by reference to one or more
previously or simultaneously published
documents that have been approved by the
competent authority of the home Member
State or filed with it in accordance with
this Directive, in particular pursuant to
Article 10, or with Titles IV and V of
Directive 2001/34/EC or equivalent
legislation in 3rd countries. This
information shall be the latest available to
the issuer. The summary shall not
incorporate information by reference. In
the case of an offering programme, the
base prospectus may also incorporate by
reference annual or half yearly financial
reports and quarterly financial
information that will be so approved or
filed, but such incorporation shall only be
effective in relation to issues under the
offering programme made after the date
of such approval or filing.
Justification
(i) Simultaneous filing should be permitted. (ii) The documents that issuers can incorporate
by reference should not be limited only to those filed under EU law as this would restrict the
development of EU markets by discouraging 3rd country issuers from issuing in the EU.
(iii) The concept of incorporation by reference should be applicable to offering programmes,
to enable documents produced after publication of the base prospectus to be incorporated by
reference.
Amendment 15
Article 13, paragraph 2, subparagraph 1
2.
This competent authority shall
notify the issuer, the offeror or the person
asking for admission to trading on a
regulated market, as the case may be, of its
decision regarding the approval of the
prospectus within 15 working days of the
submission of the draft prospectus.
PR\495526TR.doc
2.
This competent authority shall
notify the issuer, the offeror or the person
asking for admission to trading on a
regulated market, as the case may be, of its
decision regarding the approval of the
prospectus within 7 working days of the
submission of the draft prospectus.
15/29
PE 323.161
EN
Justification
A general approval period for prospectuses of 15 working days constitutes an unnecessarily
lengthy period of time, at variance with best practice in the member states. In order to allow
companies to react to fast-changing market conditions and to minimise uncertainty, while
allowing regulators sufficient time to review a prospectus, it is reasonable to set the maximum
period of approval at 7 working days. Competent authorities should also be obliged to
improve their procedures in order to ensure a general improvement in disclosure conditions
Amendment 16
Article 13, paragraph 2, subparagraph 2
If the competent authority fails to give a
decision on the prospectus within the time
limits laid down in this paragraph and
paragraph 3, this shall not be deemed to
constitute approval of the application.
If the issuer is unable to exercise any
choice over the competent authority, and
the competent authority fails to give a
decision on the prospectus within the time
limits laid down in this paragraph and
paragraph 3, this shall be deemed to
constitute approval of the application.
Justification
Where issuers have a choice over EU regulators, they may avoid unnecessary delays in
approval and the risk of adverse market conditions by opting for another regulator. However,
where they have no choice over the regulator, they should have some assurance of timely
attention. Non-action from a regulator should be presumed to be an approval of the
prospectus.
Amendment 17
Article 13, paragraph 3
3.
The time limit referred to in
paragraph 2 shall be extended to 30
working days if the public offer involves
PE 323.161
EN
3.
The time limit referred to in
paragraph 2 shall be extended to 20
working days if the public offer involves
16/29
PR\495526TR.doc
securities issued by an issuer which does
not have any securities admitted to trading
on a regulated market and who has not
previously offered securities to the public.
securities issued by an issuer which does
not have any securities admitted to trading
on a regulated market and who has not
previously offered securities to the public.
Justification
An initial public offering (IPO) will require a longer approval time than a subsequent issue,
but 30 working days would constitute a disproportionate long approval period. A period of
20 working days is more than sufficient to enable a full review without unduly disrupting the
financing plans of the company or increasing its exposure to market risk.
Amendment 18
Article 13, paragraph 4
4.
If the competent authority finds, on
reasonable grounds, that the documents
submitted to it are incomplete or that
supplementary information is needed, the
time limits referred to in paragraphs 2 and
3 shall apply only from the date on which
such information is provided by the issuer,
the offeror or the person asking for
admission to trading on a regulated market.
4.
If the competent authority finds, on
reasonable grounds, that the documents
submitted to it are materially incomplete or
that supplementary information is needed,
the time limits referred to in paragraphs 2
and 3 shall apply only from the date on
which such information is provided by the
issuer, the offeror or the person asking for
admission to trading on a regulated market.
The competent authority should notify the
issuer if the documents are incomplete
within 5 working days of the submission
of the application
Justification
(i) The deadline for the approval period should be extended only for those cases where the
information is "materially"incomplete. This is in line with Article 16.1 regarding the wording
"material" mistakes. (ii) The competent authority should be obliged to check the completeness
of the documents within a set time period of 5 working days, otherwise the right to extend the
deadline could be misused to the disadvantage of issuers.
PR\495526TR.doc
17/29
PE 323.161
EN
Amendment 19
Article 14, paragraph 2, point ca (new)
ca (new) in an electronic form on the
website of the regulated market where the
admission to trading is sought, or
Justification
The Common Position imposes a new requirement that home Member States may require
issuers who publish their prospectus in a printed form, to also publish it on the issuers
website. This obliges the issuer to use its own website and the related costs and issuer should
be given the choice to publish the prospectus on the website of the relevant regulated market,
as is the case in several Member States.
Amendment 20
Article 14, paragraph 4
The competent authority of the home
Member State shall publish on its web-site
over a period of twelve months, at its
choice, all the prospectuses approved, or at
least the list of prospectuses approved in
accordance with Article 13, including, if
applicable, a hyperlink to the prospectus
published on the web-site of the issuer.
The competent authority of the home
Member State shall publish on its web-site
over a period of twelve months, at its
choice, all the prospectuses approved, or at
least the list of prospectuses approved in
accordance with Article 13, including, if
applicable, a hyperlink to the prospectus
published on the web-site of the issuer, or
on the web-site of the regulated market.
Justification
See justification to amendment to Article 14.2
PE 323.161
EN
18/29
PR\495526TR.doc
Amendment 21
Article 15, paragraph 3
3.
Advertisements shall be clearly
recognisable as such. The information
contained in an advertisement shall not be
inaccurate, misleading or inconsistent with
that contained in the prospectus or that
expected to be contained therein.
Advertisements shall be clearly
recognisable as such. The information
contained in an advertisement shall not be
inaccurate, misleading or inconsistent with
the information contained in the
prospectus, if the prospectus is already
published, or inconsistent with the
information required to be in the
prospectus, if the prospectus is published
afterwards.
Justification
The sentence in paragraph 3 of Article 15 creates confusion as to whether the inaccurate,
misleading or inconsistent nature of the prospectus must be checked up against the
expectation of investors or authorities. In the case of an advertisement that precedes the
prospectus, the consistency or accuracy of the information in the advertisement should be
evaluated not against subjective expectations, but rather against objective information that is
required to be in the prospectus, whenever this may be published. If the sentence is not
changed to clarify this point, it would leave too much room for censuring an advertising
campaign merely on the basis of subjective expectations of investors.
Amendment 22
Article 16, paragraph 1
1.
Every significant new factor,
material mistake or inaccuracy relating to
the information included in the prospectus
which is capable of affecting the
assessment of the securities and which
arises or is noted between the time when
the prospectus is approved and the final
closing of the offer to the public or, as the
case may be, the time when trading on a
regulated market begins, shall be
mentioned in a supplement to the
prospectus. Such a supplement shall be
PR\495526TR.doc
1.
Every significant new factor,
material mistake or inaccuracy relating to
the information included in the prospectus
which is capable of affecting the
assessment of the securities and which
arises or is noted between the time when
the prospectus is approved and the final
closing of the offer to the public or, as the
case may be, the time when trading on a
regulated market begins, shall be
mentioned in a supplement to the
prospectus. Such a supplement shall
19/29
PE 323.161
EN
approved in the same way and published
in accordance with at least the same
arrangements as were applied when the
original prospectus was published. The
summary, and any translations thereof,
shall also be supplemented, if necessary to
take into account the new information
included in the supplement.
normally be approved in a maximum of
three working days. The summary, and
any translations thereof, shall also be
supplemented, if necessary to take into
account the new information included in
the supplement.
Justification
The supplement contains information that needs to be accessed by investors as soon as
possible. If the supplement were to be subjected to the same approval procedure as the
prospectus itself, this could mean that its approval could last several weeks which would
contradict the general principle concerning the immediate dissemination of price sensitive
information.Also, the supplement should normally be approved within three working days.
Amendment 23
Article 16, paragraph 2
2.
Investors who have already agreed
to purchase or subscribe for the securities
before the supplement is published shall
have the right, exercisable within a timelimit which shall not be shorter than two
working days after the publication of the
supplement, to withdraw their acceptances.
PE 323.161
EN
2.
In the case of a supplement
containing a new adverse fact or
materially significant mistake which
affects the assessment of the prospects of
the company, and if such a supplement is
published before the allotment of the
securities, investors who have accepted to
purchase or subscribe to the securities
before the supplement is published shall
have the right, exercisable within a time
liit which shall not be shorter than two
working days after the publication of the
supplement, to withdraw their
acceptances.
20/29
PR\495526TR.doc
Justification
The materiality test is necessary in order to prevent a potential abuse of the right by
investors who may simply change their minds about the purchase.
Amendment 24
Article 19, paragraph 4
4. Where admission to trading on a
regulated market of non-equity securities
whose denomination per unit amounts to at
least EUR 50 000 is sought in one or more
Member States, the prospectus shall be
drawn up either in a language accepted by
the competent authorities of the home and
host Member States or in a language
customary in the sphere of international
finance, at the choice of the issuer, offeror,
or person asking for admission to trading,
as the case may be. Member States may
choose to require in their national
legislation that a summary be drawn up in
their official language(s).
4. Where admission to trading on a
regulated market of non-equity securities
whose denomination per unit amounts to at
least EUR 50 000 is sought in one or more
Member States, the prospectus shall be
drawn up either in a language accepted by
the competent authorities of the home and
host Member States or in a language
customary in the sphere of international
finance, at the choice of the issuer, offeror,
or person asking for admission to trading,
as the case may be.
Justification
Non-equity securities issued with a minimum denomination per unit of €50,000 are aimed
squarely at the professional market. There are no grounds for insisting on extra translation as
a matter of investor protection, and this would add both to costs and time delays where
timeliness can be critical in the euromarkets. This provision should therefore be deleted.
Amendment 25
Article 21, paragrah 2, subparagraph 1
2.
Member States may allow their
PR\495526TR.doc
2.
21/29
Member States may allow their
PE 323.161
EN
competent authority or authorities to
delegate tasks. Except for delegation of
the publication on the Internet of approved
prospectuses as mentioned in Article 14,
any delegation of tasks relating to the
obligations provided for in this Directive
and in its implementing measures shall end
on ............ *. Any delegation of tasks to
entities other than the authorities referred
to in paragraph 1 shall be made in a
specific manner stating the tasks to be
undertaken and the conditions under which
they are to be carried out.
competent authority or authorities to
delegate tasks. Any delegation of
responsibilities to other entities such as
market operators can only take place
within the context of a clearly defined and
documented framework for the exercise of
delegated functions and responsibilities.
In any case, the final responsibility for
supervising compliance with the
provisions adopted for the implementation
of this Directive and for international
collaboration shall lie with the competent
authority designated in accordance with
paragraph 1. However, for admission to
trading sought in a Member State other
than the home Member State, the central
competent authority designated by each
Member State shall not be allowed to
delegate the power to approve the
prospectus and shall exercise this power
itself. Except for delegation of the
publication on the Internet of approved
prospectuses as mentioned in Article 14,
any delegation of tasks relating to the
obligations provided for in this Directive
and in its implementing measures will be
reviewed in five years after the entry into
force of the directive. Any delegation of
tasks to entities other than the authorities
referred to in paragraph 1 shall be made in
a specific manner stating the tasks to be
undertaken and the conditions under which
they are to be carried out.
Justification
(i)Delegation should take place under carefully controlled circumstances within a clear
framework. (ii) When admission to trading is sought in a Member State other than the home
Member State, the possibility that the approval of the prospectus be delegated by the central
competent authorities to regulated markets creates competition issues at EU level.
(iii)Delegation should not be automatically ended since it is a practice common in several
Member States and there is no investor protection reason to end it. It should, however, be
reviewed after 5 years.
*
Five years after the date of entry into force of this Directive.
PE 323.161
EN
22/29
PR\495526TR.doc
Amendment 26
Article 21, paragraph 4, point (d)
(d)
carry out on-site inspections in its
territory in accordance with national law,
in order to verify compliance with the
provisions of this Directive and its
implementing measures. Where
necessary under national law, the
competent authority or authorities may
use this power by applying to the relevant
judicial authority and/or in cooperation
with other authorities.
Deleted
Justification
The possibility for competent authorities to carry out on-site inspectiions is a
disproportionate power for the case of the approval of prospectuses.
Amendment 27
Article 22, title
Professional secrecy and cooperation
between authorities
Professional secrecy and cooperation
between authorities as well as with other
entities
Justification
Competent authorities requiring suspension or prohibition of trading should cooperate
closely with their counterparts in other Member States in order to ensure a level playing field
between trading venues in Europe and ensure adequate investor protection. Furthermore,
market operators should be consulted, since an exchange of information between competent
authorities and market operators is key to ensure that adequate decisions are taken.
PR\495526TR.doc
23/29
PE 323.161
EN
Amendment 28
Article 22, paragraph 2, subparagraph 1a (new)
2.
Competent authorities of
Member States shall cooperate with each
other whenever necessary for the purpose
of carrying out their duties and making use
of their powers. Competent authorities
shall render assistance to competent
authorities of other Member States. In
particular, they shall exchange information
and cooperate when an issuer has more
than one home competent authority
because of its various classes of securities.
Where appropriate, the competent authority
of the host Member State may request the
assistance of the competent authority of the
home Member State from the stage at
which the case is scrutinised, in particular
as regards a new type or rare forms of
securities. The competent authority of the
home Member State may ask for
information from the competent authority
of the host Member State on any items
specific to the relevant market.
2.
Competent authorities of
Member States shall cooperate with each
other whenever necessary for the purpose
of carrying out their duties and making use
of their powers. Competent authorities
shall render assistance to competent
authorities of other Member States. In
particular, they shall exchange information
and cooperate when an issuer has more
than one home competent authority
because of its various classes of securities.
They shall also closely cooperate when
requiring suspension or prohibition of
trading for securities traded in various
Member States in order to ensure a level
playing field between trading venues and
protection of investors. Where appropriate,
the competent authority of the host
Member State may request the assistance
of the competent authority of the home
Member State from the stage at which the
case is scrutinised, in particular as regards
a new type or rare forms of securities. The
competent authority of the home
Member State may ask for information
from the competent authority of the host
Member State on any items specific to the
relevant market.
Competent authorities of Member States
shall consult with operators of regulated
markets as necessary and, in particular,
when deciding to suspend, or to ask a
regulated market to suspend trading or to
prohibit trading.
Justification
See justification for amendment to Article 22, title.
PE 323.161
EN
24/29
PR\495526TR.doc
PR\495526TR.doc
25/29
PE 323.161
EN
EXPLANATORY STATEMENT
The prospectus directive is a central plank in the Financial Services Action Plan and will
contribute to the creation of a legal framework which enhances the conditions for raising of
capital via Europe's financial markets and improves disclosure standards for investors. It is
vital to reach consensus and ensure a rapid adoption of the directive.
The Council has taken on board a majority of the amendments of the European Parliament's
1st Reading and your Rapporteur broadly welcomes the Common Position. There are several
main issues which relate to the need to reinstate Amendments adopted by the Parliament at 1st
Reading eg. regarding choice of competent authority, exemption for government debt,
definition of qualified investor, approval periods and deemed approval, delegation, on-site
inspections. There are also some other more technical points which relate to new text which
has been inserted by the Council in accordance with new text in the amended proposal.
Choice of competent authority
Amendment 16 of the European Parliament established a free choice of EU competent
authority for both equity and non-equity securities. However, Article 2.1.(m) of the Common
Position provides a threshold whereby choice of competent authority is contemplated only for
non-equity securities whose denomination per unit is at least EUR 5 000.
In the interests rapid adoption, and taking account of the fact that the Council has already
moved a considerable way towards the Parliament's 1st Reading, your Rapporteur considers
that an appropriate compromise by the Parliament is to move the threshold away from the
arbitrary figure selected by the Council and to provide choice of competent authority for all
non-equity securities.
There is some rationale for this compromise since almost all equity issuers go at present to
their home market and regulator first. Although this locks in this situation for the future, it is
at least less disruptive than the original proposal of insisting that all issuers go to their home
regulator, even though currently they have choice on the debt side.
Convertible bonds and warrants: Related to the discussion on issuer choice is the lack of
clarity regarding the definition of "equity securities" and "non-equity securities". There is a
confusion in the Common Position concerning the categorisation of convertible bonds and
warrants, since in Article 2.1 (b) of the Common Position, convertible bonds and warrants
where the underlying shares are shares of the issuer are defined as "equity securities", whereas
Recital 12 refers to convertible bonds as "non-equity securities". Convertible bonds and
warrants should be classified as non-equity instruments in accordance with Recital 12.
Restriction of exemption for government debt
The Council has failed to incorporate Amendment 65/rev which restricted the exemption for
government debt only provided that their credit ratings were the same as the most
creditworthy Member States. Your Rapporteur considers that in the interests of proper
disclosure for investors, Member States and their sub-national authorities should not be
PE 323.161
EN
26/29
PR\495526TR.doc
excluded from the directive. The Council text does provide that sovereign issuers may only
benefit from the passport if they draw up a prospectus (Article 1.3). This does not, however,
resolve the issue of information provision to investors.
A number of new Member States have bonds outstanding with ratings hovering just above
investment grade (eg Poland, Latvia, Lithuania, Slovakia) and their bonds cannot therefore be
regarded as comparable to those, say of top rated issuers like the Federal Republic of
Germany or the Republic of France. Several sub-national authorities issue non-investment
grade bonds. It is not in the interests of investor protection to pretend that all EU government
bonds are equivalently secure, and this has been recognised by the Member States themselves
in the ‘no bail-out’ clause of the Maastricht treaty.
Definition of Qualified Investors
The Common Position allows Member States, subject to mutual recognition, to choose not to
allow natural persons and SMEs to be considered as "qualified investors" even if they
expressly ask to be considered as such. This is counter to Amendment 15 since investors are
capable of deciding for themselves whether they should be deemed qualified investors and the
provision would create a non-harmonised definition.
The new concept of a competent authority having to keep a "register" of natural
persons/SMEs who are considered as qualified investors would entail an unjustified
administrative burden without significant commensurate benefits for investors. It would also
be inconsist with the Investment Services Directive.
Approval periods
Approval periods are crucial since issuers should not be subject to bureaucratic delays and
queues which paralyse EU capital raising. In order to complete the overall improvement in
disclosure by issuers and given that issuers will have to tighten up procedures, competent
authorities should also strive to improve their practices:
General approval period: Article 13.2 provides the competent authority with an
unnecessarily lengthy 15 working days for the notification of its decision to issuers.
Amendment 36 should be re-instated, providing for 7 working days.
Deemed approval: Amendment 38 should be included that if the competent authority does
not react, the prospectus is deemed to be approved. The Council provides that non-action
should be deemed to be a rejection, which would involve significant administrative delay.
However, deemed approval should only apply when the issuer is locked into one regulator.
Where issuers have choice, they are able to avoid queues and delays by going elsewhere.
IPOs: Amendment 37 should be re-instated regarding an approval delay of 20 working days
for an IPO, instead of 30 working days.
Incomplete documents: This new wording should be tightened up so that only "materially"
incomplete information incurs the publication of a supplement. Also, the competent authority
should notify the issuer if documents are incomplete within 5 working days.
PR\495526TR.doc
27/29
PE 323.161
EN
Delegation
Amendment 7 and 56 should be reinstated, which provide that delegation should take place
within a clearly defined framework. Also, when admission to trading is sought in a country
other than the home Member State, the competent authority should not delegate power. Also,
delegation is undertaken in several Member States and there appears to be no investor
protection reason why delegation should be permitted only for 5 years.
On-site inspections
Amendment 57 of the European Parliament has not been reflected which had deleted the
power for a competent authority to carry out on-site inspections. This provision is
disproportionate and should be deleted.
Base prospectus
A definition should be included for this new concept. In the interests of consistency with the
optional shelf-registration format, the issuer should be permitted to use a base prospectus, a
shelf registration or a single document. Also, it is not practical that if the final terms of the
offer are not included in either the base prospectus or a supplement , they should be filed
separately since the final terms of an issue that is part of a programme cannot be known in
advance, hence will not be available to be included in the base prospectus or supplement.
Definition of offering programmes
The new definitions in Article 2.1 (k) and 2.1 (l). However they are problematic (and are
counter to Amendment 20), as when a programme is set up the issuer will not be certain of the
number of issues which will be made in the following 12 months - there might not be a further
issue during the period which would mean that the first issue was not part of an offering
programme and therefore that the type of prospectus approved was incorrect. Very few issues
are "on tap" in that they are willing to issue on every business day if an investor requests to
buy an issue from the issuer. As is market practice, it should be possible for different
securities to be issued as part of the same offering programme.
Private placements/ Resales
In the Common Position, the definition of public offer applies to decide whether a prospectus
should be published for resales, yet for private placements, clear criteria are applied in (a) to
(e). It should be ensured that both situations are eligible for the same clear criteria tests in (a)
to (e) in order to enhance legal certainty.
Securities representing less than 10% of the market
Part of Amendment 20 provided that securities representing over 12 months less than 10% of
the securities already admitted to trading on regulated markets should be exempted from the
need to publish a prospectus. The Common Position allows this exemption only for the
relevant "shares".
Internet publication
The Common Position imposes in Article 14.2 a new requirement on issuers that home
Member States may require issuers publishing their prospectus in a printed form, to also
publish it electronically on the issuers website. This obliges the issuer to use its own website
and the related costs and the issuer should be given the choice to publish the prospectus on the
PE 323.161
EN
28/29
PR\495526TR.doc
website of the relevant market.
Advertising
Article 15.3 creates confusion as to whether the inaccurate, misleading or inconsistent nature
of the prospectus must be checked up against the expectation of investors or authorities. The
consistency/accuracy should be evaluated not against subjective expectations, but against
objective information that is required to be in the prospectus.
Supplement
Content: The supplement contains information that needs to be accessed by investors as soon
as possible. If the supplement were to be subjected to the same approval procedure as the
prospectus itself, this could mean that its approval could last several weeks which would
contradict the general principle concerning the immediate dissemination of price sensitive
information. The supplement should be normally be approved within three working days.
Right of withdrawal: The materiality test is necessary in order to prevent a potential abuse of
the right by investors who might simply change their minds.
Summary
The language regime in the common position is not ideal, since it will allow certain regulators
to add costs for issuers by insisting on a full prospectus produced in at least two languages
rather than one. However, that provision is likely to be applied by relatively few regulators,
and may be regarded as a price for the acceptance of the directive. However, a provision
allowing regulators to insist on official language summaries for bonds with a minimum
denomination of €50,000 should be struck out, since this is a professional marketplace where
such investor protection is unnecessary and burdensome, adding to both costs and time delays.
Incorporation by reference
Simultaneous filing should be permitted. Also, the documents that can be incorporated by
reference should not be limited to only those filed under EU law, as this would restrict the
development of EU markets by discouraging 3rd country issuers from issuing in the EU.
Icorporation by reference should also be applicable to offering programmes.
Professional secrecy
The Common Position has expanded the provisions on professional secrecy and co-operation
in accordance with the amended proposal. Competent authorities which require suspension or
prohibition of trading should co-operate with their counterparts in other Member States and
should consult the market.
PR\495526TR.doc
29/29
PE 323.161
EN