Hearing on Prospectus Directive in EP - Contributions of Participants

17 October 2001

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At the hearing on proposals for prospectuses, the European Commission came in for criticism from three experts from the financial services industry. The consensus of the industry was that the Commission's proposal was too burdensome and would entail expensive regulatory provisions. Indeed one speaker went soas far as to say that without substantial change it would defeat the object of the exercise and not lead to an integrated capital market.

Specific criticism was levelled at the requirement for the prospectus to be issued under the control of the regulator of the country of its company's registered office. This will restrict freedom of choice and flexibility and put up costs. Furthermore, the proposed directive only stipulates minimum requirements, thus allowing national regulators the opportunity to impose extra requirements contrary to the mutual recognition principle. The obligation to update registration documents annually would also put up costs while increased disclosure requirements would impact adversely on SMEs. Increased information requirements would also put up the cost of professional fees for entrepreneurs, trying to raise venture capital on the AIM or the Neuer Markt.

In reply the Commission argued that it was only following the recommendations of regulators and that it was acting on behalf of investors. The problem was dealing with 15 different sets of national rules.

The experts were Clifford Dammers from the International Primary Market Association, Francesco Chiapetta representing UNICE and Iain Richards from Schroder Investment Management.

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