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

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*** Consent procedure

***I Ordinary legislative procedure (first reading)

***II Ordinary legislative procedure (second reading)

***III Ordinary legislative procedure (third reading)

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Amendments to a draft act

Amendments by Parliament set out in two columns

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Amendments by Parliament in the form of a consolidated text

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DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

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

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

(Ordinary legislative procedure: first reading)

– having regard to the Commission proposal to Parliament and the Council (COM(2022)0760),

– having regard to Article 294(2) and Article 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90415/2022),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

– having regard to Rule 59 of its Rules of Procedure,

– having regard to the opinion of the Committee on Industry, Research and Energy,

– having regard to the opinion of the European Economic and Social Committee of 23 March 2023,

– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0000/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Amendment 1

Proposal for a directive

Recital 5

Text proposed by the Commission

Amendment

(5) In addition, to further support the coverage of small and medium capitalisation companies by investment research, research material paid fully or partially by issuers should be labelled as ‘issuer-sponsored research’. To ensure an adequate level of objectivity and independence of such research material, such material should be produced in line with a code of conduct developed or endorsed by a market operator registered in a Member State or by a competent authority. In order to support more visibility of the issuer-sponsored research, issuers should have the possibility to submit their issuer-sponsored research to the relevant collection body as defined32 in [Article 2 (2) of the proposal for a Regulation33 on a European Single Access Point].

(5) In addition, to further support the coverage of small and medium capitalisation companies by investment research, research material paid fully or partially by issuers should be labelled as ‘issuer-sponsored research’. To ensure an adequate level of objectivity and independence of such research material, such material should be produced in line with a code of conduct developed or endorsed by ESMA. In order to support more visibility of the issuer-sponsored research, issuers should have the possibility to submit their issuer-sponsored research to the relevant collection body as defined in Article 2 (2) of Regulation(EU) .../... of the European Parliament and the Council33.

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32 See Article2.2 o proposal for a Regulation [2021.78.COD]

33 Proposal for a Regulation [2021/03.78.COD]

33 Regulation (EU) .../... of the European Parliament and the Council establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability (2021/0378(COD)).

Or. en

Amendment 2

Proposal for a directive

Recital 6 a (new)

Text proposed by the Commission

Amendment

(6a) Member States should require that a financial instrument of an issuer which is 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. Shares in SMEs are often illiquid by nature as they have a smaller market capitalisation and a lower trading volume. Issuers should therefore be able to object to being traded on another trading venue, as this could be beneficial in terms of reducing the risks of fragmentation of liquidity.

Or. en

Justification

It would be beneficial to extend the issuer non-objection requirement in the first part of Article 33(7) of MiFID II concerning the admission to trading of an instrument already admitted on SME Growth Markets to any trading venue. Such extension would be beneficial in reducing the risks of fragmentation of liquidity.

Amendment 3

Proposal for a directive

Article 1 – paragraph 1 – point 2 – point a

Directive 2014/65/EU

Article 24 – paragraph 3b – subparagraph 1

Text proposed by the Commission

Amendment

Where the research is paid, fully or partially, by the issuer and disseminated to the public or to investment firms or to the clients of investment firms providing portfolio management or other investment or ancillary services, such research shall be labelled as “issuer-sponsored research” provided that it is produced in compliance with a code of conduct developed or endorsed by a market operator registered in a Member State or by a competent authority.

Where the research is paid, fully or partially, by the issuer and disseminated to the public or to investment firms or to the clients of investment firms providing portfolio management or other investment or ancillary services, such research shall be labelled as “issuer-sponsored research” provided that it is produced in compliance the EU code of conduct for issuer-sponsored research to be developed by ESMA.

Or. en

Amendment 4

Proposal for a directive

Article 1 – paragraph 1 – point 2 – point a

Directive 2014/65/EU

Article 24 – paragraph 3b – subparagraph 2

Text proposed by the Commission

Amendment

The code of conduct shall set out minimum standards of independency and objectivity to be complied with by the providers of such research. The market operator or the competent authority shall publish the code of conduct on its website and review and re-endorse it every 2 years.

ESMA shall develop draft regulatory technical standards to establish a harmonised EU code of conduct for issuer-sponsored research. The code of conduct shall set out minimum standards of independency and objectivity to be complied with by the providers of such research, and specify procedures for the effective identification and prevention of conflicts of interest.

ESMA shall submit those draft regulatory technical standards to the Commission by ... [12 months after the date of entry into force of this Directive].

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the second subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

The EU code of conduct shall be made available to the public on ESMA’s website.

The competent authorities of Member States shall be given supervisory powers in order to ensure that investment firms comply with the requirements of the EU code of conduct developed by ESMA. The competent authorities of Member States shall have the necessary powers to do the following:

(a) check whether investment firms have in place the organisational measures to ensure that the issuer-sponsored research that they receive is produced in compliance with the EU code of conduct;

(b) suspend the distribution by investment firms of any issuer-sponsored research that is not produced in compliance with the EU code of conduct;

(c) issue warnings to inform the public that the issuer-sponsored research is not produced in compliance with the EU code of conduct.

ESMA shall ... [24 months after the date of entry into force of this Directive], be required to conduct a mandatory peer review analysis of the supervisory activities of the competent authorities in relation to the application of this Article. That peer review shall focus on the supervisory activities of the competent authorities ensuring that investment firms comply with the requirements of the EU code of conduct. ESMA shall assess on a regular basis, and at least every three years, whether the EU code of conduct needs to be reviewed, in which case it shall submit amended draft regulatory technical standards to the Commission.

Or. en

Amendment 5

Proposal for a directive

Article 1 – paragraph 1 – point 2 – point a

Directive 2014/65/EU

Article 24 – paragraph 3d

Text proposed by the Commission

Amendment

3d. Research that is labelled as issuer-sponsored research shall indicate on its front page in a clear and prominent way that it has been prepared in accordance with a code of conduct. The name of the market operator or competent authority that has developed or endorsed such code of conduct shall also be mentioned. Any other research material paid fully or in part by the issuer but not produced in compliance with a code of conduct as referred to in paragraph 3b shall be labelled as marketing communication.;

3d. Research that is labelled as issuer-sponsored research shall indicate on its front page in a clear and prominent way that it has been prepared in accordance with a code of conduct. Any other research material paid fully or in part by the issuer but not produced in compliance with a code of conduct as referred to in paragraph 3b shall be labelled as marketing communication.;

Or. en

Amendment 6

Proposal for a directive

Article 1 – paragraph 1 – point 2 a (new) – point a (new)

Directive 2014/65/EU

Article 27 – paragraph 1 – subpagragh 1

Present text

Amendment

(2a) Article 27 is amended as follows:

(a) in paragraph 1, the first subparagraph is replaced by the following:

1. Member States shall require that investment firms take all sufficient steps to obtain, when executing orders, the best possible result for their clients taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order. Nevertheless, where there is a specific instruction from the client the investment firm shall execute the order following the specific instruction.

‘1. Member States shall require that investment firms take all sufficient steps to obtain, when executing orders, the best possible result for their clients taking into account price, costs, speed, likelihood of execution and settlement, size, nature, the provision of research, or any other consideration relevant to the execution of the order. Nevertheless, where there is a specific instruction from the client the investment firm shall execute the order following the specific instruction.’

Or. en

Amendment 7

Proposal for a directive

Article 1 – paragraph 1 – point 2 a (new) – point b (new)

Directive 2014/65/EU

Article 27 – paragraph 7

Present text

Amendment

(b) paragraph 7 is replaced by the following:

7. Member States shall require investment firms who execute client orders to monitor the effectiveness of their order execution arrangements and execution policy in order to identify and, where appropriate, correct any deficiencies. In particular, they shall assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for the client or whether they need to make changes to their execution arrangements, taking account of, inter alia, the information published under paragraphs 3 and 6. Member States shall require investment firms to notify clients with whom they have an ongoing client relationship of any material changes to their order execution arrangements or execution policy.

‘7. Member States shall require that a financial instrument of an issuer which is 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.’

Or. en

Amendment 8

Proposal for a directive

Article 1 – paragraph 1 – point 4

Directive 2014/65/EU

Article 51a – paragraph 4

Text proposed by the Commission

Amendment

4. Member States shall require that regulated markets ensure that at any time at least 10% of the subscribed capital represented by the class of shares concerned by the application for admission to trading is held by the public.

4. Member States shall require that regulated markets ensure that at least 10% of the subscribed capital represented by the class of shares concerned by the application for admission to trading is held by the public at the time of admission.

Or. en

Amendment 9

Proposal for a directive

Article 1 – paragraph 1 – point 4

Directive 2014/65/EU

Article 51a – paragraph 5

Text proposed by the Commission

Amendment

5. Where the percentage of shares held by the public is below 10% of the subscribed capital, Member States shall ensure that regulated markets require that a sufficient number of shares is distributed to the public to fulfil the requirement laid down in paragraph 4.

5. Member States shall deem sufficient the number of shares distributed where either:

(a) the shares in respect of which an application for admission has been made are held by the public to the extent of at least 10 % of the subscribed capital represented by the class of shares concerned; or

(b) in view of the large number of shares of the same class and the extent of their distribution to the public, the market can operate properly with a lower percentage.

Or. en

Amendment 10

Proposal for a directive

Article 1 – paragraph 1 – point 4 a (new)

Directive 2014/65/EU

Article 69 – paragraph 2 – point u a (new)

Text proposed by the Commission

Amendment

(4a) In the first subparagraph of Article 69(2), the following point is added:

(ua) supervise whether investment firms that produce or distribute issuer-sponsored research do so in compliance with the EU code of conduct developed by ESMA as referred to in Article 24.

Or. en

EXPLANATORY STATEMENT

The Rapporteur welcomes the Commission’s proposal for the Listing Act and its designed overhaul of the current EU framework for company listings.

As part of this proposal, a package of reviews to existing pieces of legislation is in front of us.

The Commission proposals comprise the following:

 A proposal to amend (i) the Prospectus Regulation to harmonise requirements for the drawing up, approval, and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (2017/1129), (ii) the regulation on market abuse (MAR) aimed at preventing and detecting market abuse, market manipulation and insider dealing (596/2014), and (iii) the regulation on markets in financial instruments (MiFIR), which provides a legal framework for securities markets, investment intermediaries, and trading venues (600/2014);

 A proposal to amend the directive on markets in financial instruments, MiFID II, designed to regulate financial markets and improve protections for investors (2014/65/EU), and to repeal the Listing Directive coordinating the conditions for admission of securities to official stock exchange listings and the information to be published on those securities (2001/34/EC);

 A proposal for a new directive on multiple-vote share structures in companies that seek the admission to trading of their shares on an SME growth market. The proposal aims to address the regulatory burden faced by companies during the phase preceding the initial public offering (IPO) and the imbalance across the EU when choosing appropriate governance structures when they list (2022/0406).

As a general approach, the Rapporteur approves simplification and standardisation of the listing framework in the EU, as long as this is not to the detriment of investors and/or the market. There is a general acceptance from all sides: work on the CMU has fallen too far behind, and it is not delivering results.

The EU capital market continues to lose ground when compared to other continent-wide markets. In relative terms but not only, the share of market capitalisation worldwide has been shrinking these last three years, and this with Brexit taken into account.

The Listing Act aims to reduce regulatory burdens, generally perceived as one of the main obstacles to progress towards a flourishing EU capital market. A reduction in regulatory burdens associated with listing must, however, not come at the expense of keeping strong investor protection rules in place.

In the spirit of attaining a balanced approach, the Rapporteur has met with a great number of market participants and regulators. On this basis, the Rapporteur is proposing to amend the Commission’s proposal on a number of elements while maintaining and enhancing its main raison d’etre.

The major changes relate to the following issues: threshold for prospectus requirements; length of the prospectus; strengthening of ESG requirements; MAR’s revision on insiders; proposed changes to the Mifid II Directive; and the widening of the Multiple Voting Structure Directive.

Threshold for prospectus requirements

The Rapporteur believes that due to the current European market architecture, a uniform EUR 12 million threshold for exempting small offers of securities to the public from the obligation to publish a prospectus is not in the best interest of maintaining satisfactory regulation over the market at national level. Therefore, it is proposed to adopt the Commission’s approach on the sequencing of the prospectus, to also allow an increase of the threshold to EUR 12 million but at the same time giving flexibility to Member States to adopt lower thresholds with a minimum of EUR 5 million threshold.

Length of the prospectus

As part of the Listing Act proposal, the Commission is attempting to create an EU-level standardisation for prospectuses. This approach is generally welcomed by the Rapporteur. He fully agrees with the view that a uniform structure based on sequencing is ideal for all players on the market since it makes prospectuses more readable and comprehensible for both retail and professional investors.

Yet, the Commission also seeks to introduce a blanket length limit at 300 pages for prospectuses in order, it claims, to make it easier for retail investors to read such prospectuses. The Rapporteur recognises that prospectuses are lengthy and possibly unreadable for the average retail investor. Yet, data shows that retail investors do not read prospectuses, even in countries where prospectuses are lower than 300 pages. The prospectus in fact remains a professional document prepared for professional investors. It is seen as an instrument that covers issuers for legal liability, mostly read by professional investors or advisors operating out of investing funding agencies. They have, or should have, no problem with reading and understanding prospectuses, no matter their length. For these stated reasons, the Rapporteur adopts the Commission’s view on the sequencing of prospectuses while suggesting to remove page limits on prospectus documents.

Strengthening of ESG requirements

The Rapporteur welcomes the inclusion of ESG rules in the proposed framework, and is of the view that the placement of ESG rules needs to be strengthened in the prospectus presentation and elsewhere. Changes to the prospectus regulation must, in the Rapporteur’s view, remain coherent with the ongoing general EU reform commitment across this essential policy area, about which there is wide-ranging agreement.

MAR’s revision on insiders

The Listing Act’s proposals for changes to the MAR are generally welcomed although the Rapporteur recognises the controversial nature of the Commission’s proposed revision on insiders and how to identify and monitor them. Here, the Rapporteur notes ESMA’s warning regarding the simplifications being proposed, which could harm the capacity of national supervisors to easily enforce the rules against market abuse. Therefore, the Draft Report proposes the removal of the Commission’s text on insiders list.

Proposed changes to the Mifid II Directive

On a general note, the Rapporteur welcomes the elements introduced by the Commission to the Mifid II Directive and in this context recognises the efforts aimed at facilitating the listing of companies.

With the aim of improving on the Commission’s proposals, the Rapporteur introduces the idea of regulatory technical standards by ESMA to establish an EU harmonised code of conduct for issuer-sponsored research. Furthermore, in view of reducing the risks of fragmentation of liquidity, the Rapporteur, extends the issuer non-objection requirement concerning the admission to trading of an instrument already admitted on SME Growth Markets, to any trading venue.

Widening of Multiple Voting Structures while safeguarding investors

The Commission’s proposal for this Directive is that companies should be able to choose governance structures that best suit their development stage. The Rapporteur agrees with the approach with some proposed adjustments.

Specifically, in order to increase the attractiveness of listing in the EU, the option for multiple voting structures should not be limited to SME growth markets but expanded to all regulated markets. Furthermore, in order to maintain a high level of trust in the market, the Rapporteur introduces a set of obligatory safeguards including a limited voting ratio and a 10-year (definite time-set) sunset clause.