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DRAFT REPORT (COM(2022)0760 – C90415/2022 – 2022/0405(COD))

On the proposal for a directive of the European Parliament and of the Council amending Directive 2014/65/EU to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises and repealing Directive 2001/34/EC

ECON-PR-749149

Committee on Economic and Monetary Affairs · Rapporteur: Alfred Sant

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This is the rapporteur's draft report on the Commission proposal to amend Directive 2014/65/EU (MiFID II) to make EU public capital markets more attractive for companies and to facilitate access to capital for small and medium-sized enterprises, and to repeal Directive 2001/34/EC. The draft report adopts Parliament's position at first reading and proposes amendments to the Commission proposal. The amendments require issuer-sponsored research to be labelled and produced under an EU code of conduct developed by ESMA, and give ESMA a mandate to draft regulatory technical standards. They also extend the issuer non-objection requirement for trading on another venue to any trading venue, and adjust best execution and order execution rules. The amendments modify the free float requirement for admission to trading, allowing a lower percentage under certain conditions.

Committee position. The rapporteur approves simplification and standardisation of the listing framework, provided investor protection is maintained, and proposes amendments on issuer-sponsored research, best execution, free float and issuer consent for trading on another venue.

Key points

  1. Parliament adopts its position at first reading on the proposal to amend Directive 2014/65/EU and repeal Directive 2001/34/EC.
  2. It calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal.
  3. Research paid fully or partially by an issuer and disseminated to the public or to investment firms must be labelled 'issuer-sponsored research' if produced in compliance with an EU code of conduct for issuer-sponsored research to be developed by ESMA.
  4. ESMA must develop draft regulatory technical standards to establish a harmonised EU code of conduct for issuer-sponsored research, setting minimum standards of independence and objectivity and procedures for identifying and preventing conflicts of interest.
  5. ESMA must submit those draft regulatory technical standards to the Commission by 12 months after the date of entry into force of the Directive, and the Commission is delegated power to adopt them.
  6. The EU code of conduct must be made available to the public on ESMA's website, and national competent authorities must have supervisory powers to ensure investment firms comply with it.
  7. Issuer-sponsored research must indicate on its front page that it has been prepared in accordance with a code of conduct; other research paid by the issuer but not compliant must be labelled as marketing communication.
  8. Member States must require that a financial instrument of an issuer admitted to trading on an SME growth market may also be traded on another trading venue only if the issuer has been informed and has given its consent.
  9. Investment firms must take all sufficient steps to obtain the best possible result for clients when executing orders, taking into account price, costs, speed, likelihood of execution and settlement, size, nature, the provision of research, or other relevant considerations.
  10. Member States must require that regulated markets ensure that at least 10% of the subscribed capital represented by the class of shares concerned is held by the public at the time of admission.
  11. Member States must deem a sufficient number of shares distributed where either at least 10% of the subscribed capital is held by the public, or the market can operate properly with a lower percentage given the large number of shares and their distribution.
  12. National competent authorities must supervise whether investment firms that produce or distribute issuer-sponsored research comply with the EU code of conduct developed by ESMA.

Who is affected

  • Issuers, especially small and medium-sized enterprises, seeking admission to trading on SME growth markets or regulated markets.
  • Investment firms that produce or distribute issuer-sponsored research or execute client orders.
  • ESMA, which must develop regulatory technical standards and an EU code of conduct.
  • National competent authorities, which must supervise compliance with the EU code of conduct.
  • Regulated markets, which must ensure free float requirements are met.

Figures and deadlines

  • 12 months after the date of entry into force of this Directive — deadline for ESMA to submit draft regulatory technical standards to the Commission.
  • 10% of the subscribed capital represented by the class of shares concerned — minimum public holding at the time of admission.

Legal basis: Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union.