Parliament votes further 21 amendments to prospectus directive: final version approved

12.00.00am BST (GMT +0100) Wed 2nd Jul 2003

The European Parliament today voted a further 21 amendments to finalise the EU directive setting out information requirements for share and bond issuers in Europe.

The amendments have the backing of the EU Commission and the Council of Ministers, which is expected to approve them formally at the finance ministers' meeting later this month.

The parliament's draftsman on the prospectus directive, Chris Huhne MEP (Liberal Democrat/UK), said: "This is a key part of the Financial Services Action plan. Once a company has approved its prospectus for share or bond issues in one member state, it will now be able to market to investors in all fifteen and soon to be 25 member states. Until now, a company has needed separate prospectuses and official approvals in each member state."

"Now companies will be able to market their issues to professional investors purely with an English-language prospectus, and to retail investors so long as they have translated a 2,500 word summary into the local language. No extra approval will be necessary" Mr Huhne said.

'This is a major step in the integration of European capital markets with important benefits for investors and issuers. This will increase investor choice, provide necessary information to the market and thereby protect investors, reduce the costs of raising capital for business, and open up new sources of funding for small and growing businesses" said Mr Huhne.

The key amendments voted in parliament today will:

• ensure that issuers of bonds – worth $1.6 trillion in the euromarkets last year – can go to any EU regulator for approval of their prospectus so long as the unit is at least €1000

• cut the time allowed to regulators to approve prospectuses from 15 to 10 working days, and for IPOs from 30 to 20 working days

• provide for easier electronic publication with hyperlinks to enable investors to read and download prospectuses quickly from either the issuer, regulator or market

• ensure that existing arrangements for the approval of prospectuses by stock exchanges and nominated advisers – as in the London AIM market – can continue for at least 8 years with a review that may extend this further after five years

• guarantee that member states and stock exchanges can continue to insist upon higher standards of corporate governance and disclosure if they want to do so

• extend Medium Term Note programmes (MTNs) throughout Europe and provide them with a passport so that issuers can go to all investors. MTNs allow companies to issue a variety of bonds (structured, secured, index-linked etc)

• safeguard the 40 per cent of the euro-bond markets that are denominated in US dollars by allowing issuers choice of regulator if the unit size is nearly equivalent to €1000

The amendments, which follow a further 60 parliamentary amendments already incorporated into the text, were welcomed today as finalising a directive that will create a single European market in new issues.

'This will be a really effective tool for opening up European capital markets' said Mr Huhne. 'And that is my key test for the usefulness of EU single market directives like this one'.

Among the previous parliamentary amendments already accepted prior to this stage of the legislative process, Mr Huhne noted:

• eliminating the Commission proposal for mandatory annual updating of all prospectuses whether the issuer continued to issue or not, which would have added great costs with no extra benefit in investor protection.

• eliminating the Commission proposal for compulsory shelf registration of all EU companies on the US model, a severe extra regulatory burden

• tailoring information requirements in the prospectus to the type of issuer and security (derivatives, bonds, shares etc)

• widening of allowed professional investors with access to the professional market to include small businesses and individuals with market experience or large portfolios

• prospectus requirements for governments and other public issuers if they want a passport to all EU investors

• exemption for employee share option plans

• exemptions for small start-ups marketed to business angels

The approval of the directive brings to 36 the number of measures approved in the Financial Services Action Plan (FSAP). Twenty four of the 42 FSAP measures are legislative. Twenty pieces of EU legislation have now been finalised, including new rules on insider dealing, international accounting standards, pensions, unit trusts, savings tax and supervision of financial conglomerates. Remaining measures include the investment services directive (on conduct of business rules), transparency and takeover bids and minimum capital requirements (Basel revision).

For more information please contact : Chris Huhne on +333 88 17 5221 or +44 7748 928 422