13 February 2002

EMAC presents Draft Report on Prospectuses

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The Report on the proposed Directive on Prospectuses will be subject to a first consideration in parliamentary Committee on its next meeting on 19-20 February. Vote in Committee is expeted on 26 February. The rapporteur Christopher Huhne claims a number of difficulties with the text which need to be addressed. Common themes emerging from the amendments include the scope of exemptions and how prospectuses should be adapted according to the type of issue.

One recurring criticism of the proposal is that it is has been drawn up primarily with equities in mind, and does not sufficiently take account of the specificities of bonds, in particular Eurobonds, mortgage bonds (or Pfandbriefe) and Medium Term Notes. The Commission has also excluded government debt securities from the need to make disclosures, which seems oddly out of line with the EU member states’ commitments to transparency. Moreover, it fails to recognise that the Euromarkets are becoming a significant source of capital for third country governments, which may be even less inclined to put the interests of European investors ahead of their own taxpayers.

The definition of the home Member State authority leaves something to be desired. It would be better for EU issuers to be able to choose, as is the case today, to have their prospectus vetted by the authorities of the country where they are making the public offer or are admitted to trading, rather than where they have their registered office.

Another concern is the definition of a 'qualified investor'. In particular, large corporations are excluded from this definition, as are hedge funds and national central banks. A common approach to the definition of a qualified or professional investor, which also arises in other key EU legislation, notably the Investment Services Directive should be taken. A new definition of qualified investor which is based on the current proposal by the CESR in its consultation on harmonisation of conduct of business rules.

A related issue is the exemption from prospectus requirements for qualified investors. The requirement for qualified investors to buy only 'for their own account' also needs clarification, and the potential impact of the prospectus proposal on second tier markets, such as AIM and the Neuer Markt must also be considered. A mandatory annual 'shelf registration' system is also a cause for concern.

Next to the 60 amendments made by the rapporteur himself another 78 amendments have been made by other parliamentarians so far.

See amendments and explanatory statement made by the rapporteur.
See amendments made by other parliamentarians.

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