Select Committee on European Union Forty-Ninth Report


Letter from the Minister, Ruth Kelly, to the Chairman

  In August 2002, the European Commission adopted an amended text of the Prospectus Directive, and on 26 September, I sent you an Explanatory Memorandum (EM) (11502/02) and Regulatory Impact Assessment (RIA) in respect of this new text.

  Since then, there have been intensive negotiations, and the latest Presidency text reflects a number of positive changes. The most important of these may be summarised as follows.

    —  Issuers of securities that are admitted to trading on a regulated market would not now be required to update annually part of their prospectus. Instead, they would merely be required to produce an annual document that lists the various ongoing disclosures made by the issuer over the course of the previous 12 months. This represents a particularly significant step forward, compared to the Commission text.

    —  Increased scope for flexible application by competent authorities of disclosure requirements for high denomination securities.

    —  Issuers of covered warrants would now be able to choose their "home state".

    —  At the discretion of individual Member States, SMEs may now opt to be "qualified investors".

  Further work is still required. But the most recent Presidency text of the directive would provide for a more effective passport for issuers than existing directives, whilst the changes that we have secured over the past few weeks, would, I believe, significantly reduce the associated costs as set out in the EM and RIA.

  I should also mention that the Danish Presidency is aiming for political agreement on this dossier at the 5 November ECOFIN.

25 October 2002

Letter from the Minister, Ruth Kelly, to the Chairman

   In August 2002, the European Commission adopted an amended text of the Prospectus Directive, and on 26 September, I sent you an Explanatory Memorandum (EM) (11502/02) and Regulatory Impact Assessment (RIA) in respect of this new text. I am writing to you to give you an update on where things stand in respect of the Prospectus Directive process.

  At the November ECOFIN, political agreement was achieved in respect of the Council's first reading of the directive. The Common Council Position (CCP) text provides for a more effective passport for issuers than is provided by existing European legislation, and reflects a number of positive changes compared with the Commission's August 2002 text. The most important of these may be summarised as follows.

    —  Issuers of securities that are admitted to trading on a regulated market would not now be required to annually update part of their prospectus. Instead, they would merely be required to produce an annual document that lists the various ongoing disclosures made by the issuer over the course of the previous 12 months. This represents a particularly significant improvement, compared with the Commission text.

    —  An improved definition of "public offer".

    —  Issuers of covered warrants would now be able to choose their "home state", with the threshold for choice of "home state" for issuers of non-equity securities reduced from a minimum denomination of

    50,000 to a minimum denomination of

    5,000.

    —  Increased scope for flexible application by competent authorities of disclosure requirements for high denomination securities.

    —  At the discretion of individual Member States, SMEs may now opt to be "qualified investors".

  The CCP text now passes to the European Parliament for its second reading of the directive, which we expect to be completed by around the first half of April.

  Meanwhile, EU financial regulators (including the FSA), in the guise of CESR, have been consulting the private sector on draft detailed (level 2) rules, as provided for in the directive.

21 January 2002


 
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