Business, EU – Baltic States, Financial Services, Markets and Companies, Modern EU

Facilitating SMEs' access to finance at each stage of their development is central to the EU’s capital markets. Much has already been achieved in facilitating SME's access to finance (e.g. through simplified prospectus rules), in easing the requirements for SME’s growth to enable smaller companies to get equity capital and debt finance (bonds), which entered into force in January 2018. But more still needs to be done: the number of SME initial public offerings today has halved compared to 2006-2007.

In May 2018, the European Commission proposed more proportionate rules to support SME’s listing while safeguarding investor protection and market integrity.

More in: http://europa.eu/rapid/press-release_IP-18-3727_en.htm/ 24.05.2018. 

 The Commission and the member states regard SMEs as important tools for the EU and national economies; hence the need to make sure that SMEs enjoy the best possible financing conditions to grow and innovate. Present political agreement is an important step in making the rules on SME's access to capital markets fit for that purposes. These measures will enable SMEs to develop and prosper without being hindered by unnecessary costs and red tape, while preserving a high level of market integrity and investor protection.

The Parliament and the Council were acting swiftly to reach an agreement which demonstrated both the SMEs’ importance for Union’s capital markets Union and unanimous decision “to funnel” more investment into the SMEs in fostering innovations and growth. 

SME growth markets

The EU initiative focuses on “SME growth markets”, which is a new category of multilateral trading facilities created by the “Markets in financial instruments directive”, MiFID II in January 2018 to facilitate access to capital for SMEs, i.e. companies that have an average market capitalisation of not more than €200 million.

It is part of a broader set of measures announced in 2017 in the context of the CMU Mid-Term Review, and aimed at making it easier for high-growth SMEs to access public capital markets (the SME Listing Package).

On MiFID II in: https://ec.europa.eu/info/law/markets-financial-instruments-mifid-ii-directive-2014-65-eu_en

Being a key element of the Capital Markets Union, CMU the new rules will ensure that smaller businesses in the EU have access to diversified sources of financing at each stage of their development. In particular, the revised rules will make it cheaper and simpler for SMEs to access public markets through the so-called “SME growth markets”, a new category of trading venue dedicated to small issuers.

Listing on stock exchanges can give a significant boost to small and medium enterprises, including a reduced dependence on bank funding, a broader investor base, easier access to additional equity capital and debt finance, and a higher public profile and brand recognition. More on CMU in:

Amending EU legislation

The proposal provides for amendments to two key pieces of the EU’s financial services legislation, i.e. the “Market Abuse Regulation, MAR” and the Prospectus Regulation.

The amendments to the rules on market abuse aim to strike a balance between cutting red tape for small businesses while safeguarding market integrity and investor protection. The revised framework also creates a common set of rules on liquidity contracts for SME Growth Markets in all Member States while giving national competent authorities sufficient flexibility to tailor market practices to local conditions. This will ensure minimum liquidity and reduce volatility of SME shares. More in:

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/securities-markets/ensuring-integrity-securities-markets_en

The changes to the Prospectus Regulation allow issuers in SMEs markets to produce a lighter prospectus when transferring to a regulated market (i.e. a main stock exchange), which can lead to significant cost-saving for growing SMEs. New rules are making it easier and cheaper for SMEs to access capital; they introduce simplification and flexibility for all types of issuers, in particular for secondary issuances and frequent issuers which are already known to capital markets. Besides, they improve prospectuses for investors by introducing a retail investor-friendly summary of key information, catering for the specific information and protection needs of investors.

On prospectus regulation in: 

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-markets/securities-markets/securities-prospectus_en#prospectus-regulation

Further technical work will include a formal adoption of the final texts on a) proposal for a regulation amending the market abuse regulation and the prospectus regulation, and b) regulation bringing technical adjustments to MiFID II from December 2018.

General source:

http://europa.eu/rapid/press-release_IP-19-1568_en.htm?locale=en/ Brussels, 6 March 2019