FEE response to the EC consultation on review of the prospectus directive

20 May 2015

FEE explains that the quantitative criteria, which are included in the Directive, should not be used in isolation. FEE proposes a proportionate application of IFRS.

In light of creating a single market for capital, the Commission launched a consultation on the Prospectus Directive. This review aims to make it easier for companies (including SMEs) to raise capital throughout the EU while ensuring effective investor protection. The expertise of the accountancy profession in ensuring appropriate and transparent corporate reporting is instrumental to this objective.

FEE has thus commented on this consultation with the following main points:

• Quantitative criteria do not suffice in assessing if a full prospectus is required for a public offering. Therefore, we urge the Commission to consider introducing qualitative criteria as well and address assessing the level of protection the target audience for a prospectus needs.
• “Incorporation by reference” should be allowed. This means that issuers can include information that is already publicly available in the prospectus by referencing to it, instead of duplicating this information.
• Broader use of  International Financial Reporting Standards (IFRS), for entities listed on Regulated Markets or Multilateral Trading Platforms (MTFs), could diminish the information asymmetry between companies and investors. This could be achieved through ongoing simplification of recognition and measurement requirements in IFRS, and reduced disclosures through the completion of the IASB Disclosure Initiative.
• Applying IFRS in this manner would increase transparency so there is no need to require full prospectuses for entities seeking to raise finance on MTFs. Such a prospectus requirement would add such costs for SMEs ‘going public’, that this may hinder their ability access to finance.

Press release

Full comment letter

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