11.3 In her letter of 26 April 2002, the Economic Secretary to the Treasury (Ruth Kelly) provides the information we requested.
11.4 As regards the relationship on existing Directives, the Minister says that generally the existing directives (Public Offers Directive and Listing Particulars Directive) work well, although the provision of a passport for issuers does not. As a result, the cost of raising capital in the pan-European capital market is more expensive than in comparable markets. The Minister says that although the Government supports the original objectives for the directive (a passport arrangement that works in practice and results in a lower cost of accessing capital for issuers), it is concerned that certain aspects of the directive, as proposed by the Commission, could fragment the EU's wholesale financial markets, reduce its liquidity and lead to increased costs on second tier equity markets that currently fall outside of the scope of the Listing Particulars Directive. The Minister adds:
"Some of the areas requiring particular attention include: the definitions of home state, public offer, and qualified investor; shelf registration; special models of disclosure for professional securities (such as Eurobonds); the cost implications for SMEs; the scope of the exemptions provided for; and the scope for private/institutional placements."
11.5 The Minister says that the Government is concerned that the key concept of 'regulated market', which determines much of the scope of the directive is not explicitly defined in the text. A further concern is that the requirement that issuers regularly update their registration document, suggests an overlap between the Prospectus Directive (which is meant to cover initial information disclosure) and the forthcoming Regular Reporting Directive (which is meant to cover ongoing information disclosure).
11.6 The Minister provides a short update on the progress of negotiations and the amendments to the text that were agreed during its First Reading in the European Parliament. The Minister points out that although the text has improved under the Spanish Presidency, the Government continues to pursue solutions to the outstanding problems (such as the definition of home state). However, it recognises that on a number of issues the UK is in a relatively small minority.
11.7 The Minister outlines the arguments that the Government has put forward during meetings of ECOFIN. Finally, the Minister adds that the UK's position in the Council working group has been strengthened by the European Parliament's 14th March plenary vote to support the report on the Prospectus Directive of its Economic and Monetary Affairs Committee. The Minister says that the report proposes a large number of amendments that are generally supportive of the Government's approach, including: choice of home-state for issuers of securities; voluntary use of shelf registration and annual updating; exemption from prospectus requirements for high denomination securities (the Government would prefer a special lighter model of disclosure for such securities, rather than an exemption); and an improved definition of qualified investor.