Prospectus Directive

Speech by Chris Huhne MEP delivered to the Plenary Session of the European Parliament on Mon 30th Jun 2003

First of all, I would like to thank my colleagues on the economic and monetary committee for all the hard work that has gone into the prospectus directive. I hope that on Wednesday we will have an overwhelming vote in favour of the second reading compromise agreement with the Council of Ministers, and we will therefore have a prospectus directive later in July when the Ecofin council meets again.

This is a key part of the Financial Services Action Plan and of creating a single market in financial services. Instead of having to use fifteen separate prospectuses to reach retail investors in the existing union, in future an issuer of bonds or shares will only need one. And of course that will give a passport not just to fifteen member states but to twenty five, and a market of more than 400 million people. The single european market in new issues of shares and bonds is set to become a reality

This will lead to more competition and therefore greater choice for investors, cheaper capital for businesses, and more funding opportunities for many businesses that might be denied finance if they were limited to their national market. Moreover, this key advantage - a single passport - has been achieved without any of the baggage that was originally put forward in the Commission proposal and that would have enormously added to the regulatory burdens particularly on small listed companies. This deal ensures that there is no mandatory shelf registration, and that there is no mandatory annual updating unless the issuer intends to continue issuing shares or bonds. This is a significant achievement for this parliament in influencing the final shape of this legislation.

Crucially, this agreement also confirms the freedom that issuers of bonds have to go to different EU regulators for the approval of their prospectus so long as the minimum denomination is 1000 euros or more (or importantly a nearly equivalent amount in other currencies, so that 1000 dollars can also be a minimum amount). The euromarkets raised 1.6 trillion dollars equivalent of finance for business last year, and 60 per cent of that finance was in non-euro currencies like the dollar and the yen. Europe is the proud home of the international capital market, and this deal now gives that international market a way of accessing domestic investors too.

The Council and the Commission have accepted the vast majority of the amendments that the Parliament passed in its first reading in March 2002. On choice of EU regulator. On a light touch for small and medium sized businesses. On tailoring requirements to different issuers. On lightening the burden on issuers.

Thanks to parliament´s insistence, we have also reached a compromise on the ability of national authorities to delegate approval of prospectuses to stock exchanges and others such as the NOMADs (nominated advisers) in the AIM market. There will be a review after five years, and the Commission may reconsider the commitment to phasing out delegation after eight years.

We have also made clear that both national authorities and stock exchanges may continue to insist on higher standards of disclosure and corporate governance as a requirement of listing if they wish. This should put the Financial Services Authority's fears to rest.

In two last minute changes that were agreed only last week by the council, we have also clarified that existing Medium Term Note programmes - an important type of financing structure in the euromarkets - can continue unchanged. And we have made clear that bond issuers of US-dollar denominated bond issues will be able to go to different EU regulators if they have a minimum denomination of $1000 even if the euro-dollar exchange rate swings around. This potentially affects about 40 per cent of the bond issuance on the euromarkets.

This is a real breakthrough for the single market, and this house can be proud of its influence in ensuring that the directive is an effective means of extending competition, choice and efficiency.