Listed Companies' Disclosure of Information
Adopted in 2003, the Prospectus Directive is an essential instrument to the achievement of the internal market, facilitating the widest possible access to investment capital on a Union-wide basis by granting a single passport to issuers. The Directive has been amended to further the framework's original objectives of ensuring investor protection and market efficiency, by for instance clarifying the content of a prospectus, especially the summary thereof, developing calibrated prospectus disclosure rules for smaller issuers and also by facilitating for non-EU companies to list on EU markets. The new rules entered in force during the year 2012. Now the Prospectus Directive is up for a new review starting in 2015.
Nasdaq has submitted a reply to the European Commission’s consultation on the review of the Prospectus Directive.
Highlights of the reply are:
- Abolish prospectus requirement for additional capital raisings and switches from MTF to main market.
- A more flexible language regime
- Review the thresholds for bond prospectuses, so as to facilitate retail participation and liquidity in bond markets
- Do not generally extend the Prospectus Directive to MTFs.
The Transparency Directive regulates what type of information listed companies need to disclose and when to do so. The information includes regular financial information and also major shareholdings. It has been revised and the new version is to be implemented during 2015. The revisions include:
- Quarterly reporting – Listed companies, including small and medium-sized issuers, may no longer be obliged to publish quarterly financial information
- Country-by-Country Reporting (CBCR) – This system would apply to EU privately-owned large companies or companies listed in the EU that are active in the oil, gas, mining or logging sectors. Reporting taxes, royalties and bonuses that a multinational pays to a host government will show a company's financial impact in host countries.
- Major holdings – Furthermore, the revision prevents investors from secretly building up a controlling stake in a listed company ("hidden ownership"). Such practices can give rise to possible market abuse, low levels of investor confidence and misalignment of investor intentions.
By proposing to amend the Accounting Directives, the EU aims to reduce the administrative burden for small companies. Simplifying the preparation of financial statements would also make these more comparable, clearer and easier to understand. It would also allow users of financial statements such as shareholders, banks and suppliers to gain a better understanding of a company's performance and financial position. Potential cost savings for SMEs are estimated at € 1.7 billion per year.