EuropeanIssuers: KID/PRIPs - New disclosures for shares and bonds

03 May 2013

EuropeanIssuers is very concerned about extending the scope of proposed regulation on a new KID for investment products to shares and bonds, as it fears that the extension would greatly hinder the ability of companies to raise finance from regulated markets and MTFs.

Summary:

EuropeanIssuers is very concerned about extending the scope of proposed regulation on a new Key Information Document for investment products to shares and bonds. There have been good and comprehensible reasons for excluding listed shares and bonds that are still valid. EuropeanIssuers fears that the extension would greatly hinder ability of companies to raise finance from regulated markets and MTFs, at a time when finance options are limited and growth and job creation in the European economy is needed and should be encouraged.

EuropeanIssuers' key points are:

• The KID requirements are not suitable for shares and bonds as they are different from packaged products and information related to listed companies cannot be summarised in a synthesis (or KID) because some relevant aspects would necessarily be left out;
• The performance and risks of shares and corporate bonds are linked to many factors that go well beyond the financial characteristics of the securities and therefore it is extremely difficult and potentially misleading, to summarise company’s risk and reward profile;
• If KID were to be treated as the only basis for an investment decision, it could be potentially harmful to retail investors, especially given the high level of financial illiteracy in society;
• KID requirement would make issuing shares and bonds more burdensome and less attractive to companies seeking to raise funding on the capital markets, in order to grow and create jobs;
• Much of the information sought is within the control of intermediaries rather than issuers;
• Given that the regulation was intended to cover packaged products, and that only very recently the European Parliament suggested extension of the regulation to shares and bonds, companies have not been properly consulted.

Position Paper

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