EUROPEAN COMMISSION

Brussels, 7.12.2022

COM(2022) 760 final

2022/0405(COD)

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

(Text with EEA relevance)

{SEC(2022) 760 final} - {SWD(2022) 762 final} - {SWD(2022) 763 final}

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Political context

This proposal is part of the Listing Act package, a set of measures to make public markets more attractive to EU companies and facilitate access to capital for small and medium-sized companies (SMEs). It is in line with the main aim of the Capital Markets Union (CMU) to improve access to market-based sources of financing for EU companies at each stage of their development, including for smaller companies. Listed companies, including those recently listed, often outpace privately owned companies in terms of annual revenue growth and job creation. 1  By listing on public markets, companies can diversify their investor base, reduce their dependency on bank financing, gain easier and cheaper access to additional equity capital and debt finance (through secondary offers), raise their public profile and increase brand recognition.

Since the publication of the first CMU action plan in 2015, progress has been made to make it easier and cheaper for companies, in particular SMEs, to access public markets. In January 2018, the Directive 2014/65/EU of the European Parliament and of the Council (MiFID II) 2 introduced a new category of multilateral trading facilities (MTFs), the SME growth markets 3 , to incentivise SMEs access to capital markets. In 2019, new EU rules were put forward under Regulation (EU) 2019/2115 of the European Parliament and of the Council 4 (SME Listing Act) reduce the regulatory burden for companies listing on SME growth markets, while preserving a high level of investor protection and market integrity. Nevertheless, despite this progress, stakeholders argue that further regulatory action is needed to streamline the listing process and make it more flexible for issuers.

Reason for the proposal

In 2021, the unbundling rules were first amended, as part of a more general effort under the CMRP 9 to help the recovery from the COVID-19 crisis which forced companies to rely more heavily on debt, weakening their funding structures. In circumstances, where companies needed urgent re-capitalisation, the need for more visibility of EU companies, in particular small and medium capitalisation companies, was considered fundamental and the implicit cost of not having the research coverage even higher. In that context, the CMRP, applicable since 28 February 2022, sought to improve the small and medium capitalisation companies’ research coverage 10 by providing an exemption from the unbundling rules for investment research covering issuers whose market capitalisation does not exceed EUR 1 billion for the period of 36 months preceding the provision of the research, hence allowing in such cases for a joint payment for trade execution and research. Nevertheless, while this measure was widely welcomed, it did not sufficiently address the problem. As many investment firms and brokers offer services to companies of a varying size (and capitalisation), including those exceeding the capitalisation of EUR 1 billion set out in the CMRP, these investment firms and brokers decided against introducing two parallel systems for research invoicing, maintaining the unbundled approach for all clients. Therefore, the amendment in the CMRP did not fully reach its objective to support the production of the small and medium capitalisation companies research and a further legislative review in this context would be necessary.

In addition to amendments to the research unbundling regime, the proposal introduces a limited number of amendments to the legislative framework governing the SME growth market, a category of MTFs, created under MiFID II to raise SMEs visibility and profile as well as to aid the development of common regulatory standards in the EU for markets specialised in SMEs. 11  

Objectives of the proposal

16 In order to make investment research labelled as issuer-sponsored research more easily accessible to the public and to promote the visibility of small and medium capitalisation companies with potential investors, the proposal mentions that Member States shall ensure that issuers may submit their issuer-sponsored research to the collection body as defined under [Article 2(2) of the proposal for a regulation on a European Single Access Point].

Once established, the European Single Access Point (ESAP), proposed by the Commission on 25 November 2021 17 and currently under interinstitutional negotiations with the EU co-legislators will provide a single point of access to public financial information on EU companies, including SMEs, and EU investment products. ESAP is designed to give EU companies, especially SMEs, greater visibility to investors and could be used to collect and disseminate issuer-sponsored research. Going forward, ESAP may be used to publish the issuers’ notifications related to issuer-sponsored research and the contents of such research.

•Consistency with existing policy provisions in the policy area

•Consistency with other Union policies

The proposal is fully in line with the CMU core aim to make financing more accessible to EU companies and in particular to SMEs. It is consistent with a number of legislative and non-legislative actions taken by the Commission in the framework of the 2015 CMU Action Plan, 19 2017 Mid-term Review of the CMU Action Plan 20 and 2020 CMU Action Plan.

In order to support jobs and growth in the EU, facilitating access to finance for companies, especially SMEs, has been a key goal of the CMU from the outset. Since the publication of the CMU Action Plan in 2015, some targeted actions were taken to develop adequate sources of funding for SMEs through all their stages of development. In its Mid-term Review of the CMU Action Plan published in June 2017, the Commission chose to raise its level of ambition and strengthened its focus on the SMEs’ access to public markets. In May 2018, the Commission published a proposal for the SME Listing Act 21 aiming to reduce the administrative burden and the high compliance costs faced by SME growth market issuers while ensuring a high level of market integrity and investor protection; foster the liquidity of publicly listed SME shares to make these markets more attractive for investors, issuers and intermediaries; and facilitate the registration of MTFs as SME growth markets. The SME Listing Act was adopted in November 2019.

Furthermore, following the COVID-19 crisis, the Commission published the CMRP, which comprised of targeted amendments to capital markets and bank regulation, with the overarching aim to make it easier for capital markets to support EU businesses to recover from the COVID-19 crisis. The suggested changes to the capital market rules aimed in particular to alleviate regulatory burden and complexity for investment firms and issuers.

This proposal follows up on the 2020 CMU Action Plan and its objective to make financing more accessible to EU companies (Action 2 “supporting access to public markets”). The proposal focuses on alleviating the regulatory requirements that can deter a company from deciding to list or to remain listed. Other factors that may deter issuers from listing, such as a narrow investor base and a more favourable tax treatment of debt over equity, are addressed by other ongoing and upcoming CMU initiatives that complement the amendments put forward in this proposal and should be analysed in conjunction with this initiative. These initiatives relate, for example, to (i) the creation of an EU Single Access Point (ESAP) that will tackle the lack of accessible and comparable data for investors, making companies more visible to investors, (ii) the centralisation of EU trading information in a consolidated tape for a more efficient public market trading landscape and price discovery, (ii) the introduction of a debt-equity bias reduction allowance (DEBRA) 22 to make equity financing more attractive (and less costly) for companies.

Furthermore, a series of the Commission initiatives will further strengthen the investor base for listed equity. The EU SME IPO Fund will play the role of an anchor investor to attract more private investment in SMEs’ public equity by partnering with institutional investors and investing in funds focused on SME issuers. The CRR and Solvency II reviews will increase the investor base for issuers by facilitating investments from banks and insurance companies in public (long-term) equity.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

•Subsidiarity (for non-exclusive competence)

•Proportionality

•Choice of the instrument

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Ex-post evaluations/fitness checks of existing legislation

To inform this initiative, the Commission services collected a significant amount of data directly from trading venues and issuers (including SME associations). TESG (in force between October 2020 and May 2021) provided some evidence in addition to the input received from market participants. The Commission also contracted a study on Primary and Secondary Equity Markets in the EU from Oxera in November 2020, which contains a very detailed overview of EU capital markets. Other sources used included extensive academic literature and research.

•Stakeholder consultations

On 19 November 2021, the Commission launched a 14-week public and targeted consultation seeking views from stakeholders on how to increase the overall attractiveness of listings on public markets in the Union, including any potential shortcomings in the regulatory framework that dissuade companies from raising funds via capital markets. The consultation put forward specific questions concerning Regulation (EU) 2017/1129, Regulation (EU) No 596/2014, and including the Directive 2001/34/EC and Directive 2014/65/EU and areas of improvement from a general standpoint.

Overall, 108 responses were received, sent by stakeholders from 22 Member States, the US, the UK and Switzerland.

The majority of respondents (60%) saw merit in including in Level 1 the conditions under which an operator of an MTF may register a segment of the MTF as an SME growth market. They highlighted that this would enhance legal clarity. They added that such an amendment could also incentivise more MTFs to register SME GM segments.

A small majority of respondents (51%) viewed the new research regime introduced by the CMRP as positive to support SMEs’ access to capital markets. Most of those respondents pointed out that the impact of the CMRP is however very limited. Some pointed out that research coverage for SMEs is considered uneconomic for asset managers and research providers and that this appears as a long-term trend. Nevertheless, business associations, in particular, and NCAs pointed out it is still too early to tell what the overall impact of the new regime is. The overwhelming majority of respondents (72.9%) would see merit in alleviating the MiFID II regime on research even further. While some suggested to lift the exemption threshold in order to fully cover the small and mid-cap segment, several business associations considered that going back to fully bundled execution and company research pricing is the only solution to boost research for SMEs (which dropped to an almost non-existent level). Some also considered that the MiFID II research regime was wrongly designed for companies of any size. They claimed that MiFID II regime has indirectly become an incentive to allocate a larger part of research services value in the hands of a few big players (i.e. leading to consolidation in the industry).

•Collection and use of expertise

Over the recent years, companies’ and especially SMEs’ access to public markets has been the focus of the Commission’s continuous evaluations. Issues relating to regulatory burden on companies when accessing public markets were raised in the context of the TESG and the 2020 CMU Action Plan. The Commission also took into account extensive research on the topic undertaken in the Oxera study.

The Commission also organised two technical meetings/workshops with industry stakeholders in April 2022 with a view to further refining the policy options under consideration.

Furthermore, the Commission presented the objective of the proposal at the European Securities Committee Expert Group and at the Coordinators of the Economic and Monetary Affairs Committee (ECON) of the European Parliament.

Expert group recommendations

In October 2020, the European Commission initiated the TESG. The Group had been tasked with monitoring and assessing the functioning of SME growth markets, as well as providing expertise and possible input on other relevant areas of SME access to public markets. The TESG confirmed the concerns expressed by the stakeholders that further legislative action is needed to support listing of companies and especially of SMEs. In its final report , published in May 2021, the TESG formulated 12 recommendations, including encouraging Member States to put in place measures to promote equity research coverage of all listed small and medium sized companies. 

Stakeholder meetings

Meetings with Member State experts

Meeting with the ECON coordinators in the European Parliament's Committee

•Impact assessment

The impact assessment focuses on identifying and addressing specific regulatory barriers at each stage of the listing process. It discusses barriers at the pre-IPO stage stemming from company law, in particular, from the fact that a multiple-vote share listing is not possible in some Member States. It then focuses on barriers at the IPO stage arising from the Prospectus Regulation, notably from the high costs of drawing up a prospectus. Finally, it addresses barriers encountered at the post-IPO stage stemming from MAR, in particular, costs due to the legal uncertainty regarding the issuers’ obligation to publicly disclose inside information. For each stage of the listing process, the impact assessment sets out two alternative policy options, after having analysed the available empirical evidence and accounting for stakeholders’ views.

The impact assessment analyses the options in relation to three objectives, that is whether they: (i) reduce the regulatory and compliance costs for companies seeking to list or those that are already listed, (ii) ensure a sufficient level of investor protection and market integrity, and (iii) provide issuers with more incentives to list. The preferred option (for each stage of the listing process) should thus be cost-efficient and effective in addressing the identified barrier while safeguarding a sufficiently high level of investor protection and market integrity. The proportionality of measures for smaller companies has been considered when identifying and assessing options.

While the regulatory amendments set out in the options, on their own, could not address all the challenges faced by EU public markets, together with other measures considered as part of a wider plan to enhance companies’ access to public capital markets, they seek to contribute to reversing the current negative trend in EU public markets. Absent of those regulatory improvements, EU public markets would continue to rely on the suboptimal regulatory framework for listing, which in turn would reduce the attractiveness of public markets, resulting in an economic cost for EU issuers, investors and the EU economy as a whole. The baseline scenario hence envisages no amendments to the legislative framework governing the rules for listing and already listed companies.

As regards the social, economic and environmental impacts, climate consistency check and do no significant harm principles, this proposal will contribute to the CMU agenda and its objectives to ensure the development and further integration of capital markets in the EU. The regulatory measures proposed in this initiative are expected to have an impact on all companies in the EU, but in particular on SMEs, which are more exposed to the (excessive) regulatory burden than larger companies with a higher cost absorption potential. This proposal would also be conducive to the development of more open and more competitive capital markets, benefitting in particular faster-growing companies in innovative and research-intense sectors that tend to have higher capital needs.

The initiative is not expected to have a direct social impact. However, there can be a positive indirect impact on employment. Although the (indirect) social impact cannot be quantified, it is likely to be positive. Provided that the proposal achieves its objective of easing the access to public markets by EU companies, the latter will be able to benefit from a more diversified and larger pool of funding sources, allowing these companies to innovate, grow and employ more people.

This proposal is in line with the SDG 8 26 - decent work and economic growth as it contributes to the growth of SMEs by providing easier access to funding through public markets. Newly listed companies are a key motor of new investment and job creation. Easier access to public markets creates incentives for entrepreneurs to diversify in times of economic turmoil, leading to a more resilient economy. It also contributes directly to Target 8.3 “Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalisation and growth of micro-, small- and medium-sized enterprises, including through access to financial services” and Target 8.10 “ Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all” as well as indirectly to Target 8.2 “Achieve higher levels of economic productivity through diversification, technological upgrading and innovation”.

Furthermore, it is in line with SDG 9 – industry, innovation, and infrastructure as an easier access to public markets would increase access of smaller (industrial) companies to new funding opportunities. This would provide them with alternative sources of financing and ensure their ability to grow and innovate, including in the areas of key strategic importance for the EU. Contributes indirectly to Target 9.3 “Increase the access of small-scale industrial and other enterprises to financial services, including affordable credit, and their integration into value chains and markets”.

•Regulatory fitness and simplification

•Fundamental rights

4.BUDGETARY IMPLICATIONS

5.OTHER ELEMENTS

•Implementation plans and monitoring, evaluation and reporting arrangements

•Detailed explanation of the specific provisions of the proposal

Amendments to Directive 2014/65/EU

·Article 1(1) of the proposal amends Article 4(1), point (12) of Directive 2014/65/EU, which is the definition of “SME growth markets”, to also include the segment of an MTF in the definition.

·Article 1(2), point (a) of the proposal introduces a new point 3a on the qualities of investment research. It sets out that research provided by third parties shall be fair, clear and not misleading.

·Article 1(2), point (a) of the proposal also inserts a new point 3b on the conditions to label research as “issuer-sponsored research”. Such conditions include the requirement for research to comply with a code of conduct, as well as the requirements for the content, publication and review of such code of conduct. The Article also clarifies that issuers may submit their issuer-sponsored research to the collection body under the proposal for a European single access point. A final clarification is added that any research material paid by the issuer but not produced in compliance with such code of conduct shall be labelled as a marketing communication. 

·Article 1(2), point (a) of the proposal introduces a new point 3d. For research labelled as issuer-sponsored research, it must be a clearly indicated on the front page of the research that it has been prepared in line with a code of conduct.

·Article 1(2), point (b) of the proposal increases the threshold of companies’ market capitalisation to EUR 10 billion, below which the unbundling rules do not apply.

·Article 1(3), points (a) to (c) clarify that a segment of MTF can be registered as an SME growth market and set out the conditions and requirements for its registration or de-registration.

·Article 1(4) of the proposal introduces a new Article 51a to cover the specific conditions for the admission of shares to trading on a regulated market. Such conditions are the EUR 1 million minimum market capitalisation requirement for companies that seek to list their shares on a regulated market, as well as a 10% minimum free float requirement. Furthermore, the Commission is empowered to adopt delegated acts to change such thresholds when they hamper the liquidity on public markets, taking into account financial developments.

Amendments to Directive 2001/34/EC

2022/0405 (COD)

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

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 50, 53(1) and 114 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee 27 ,

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1)Directive 2014/65/EU of the European Parliament and of the Council 28 has been amended by Regulation (EU) 2019/2115 of the European Parliament and of the Council 29 , which introduced proportionate alleviations to enhance the use of SME growth markets and to reduce the excessive regulatory requirements for issuers seeking admission of securities on SME growth markets, while preserving an appropriate level of investor protection and market integrity. However, to streamline the listing process and to render the regulatory treatment of companies more flexible and proportionate to their size, further amendments to Directive 2014/65/EU are necessary.

(2)Directive 2014/65/EU and Commission Delegated Directive (EU) 2017/593 30 set out the conditions under which the provision of investment research by third parties to investment firms providing portfolio management or other investment or ancillary services is not to be regarded as an inducement. In order to foster more investment research on companies in the Union, in particular small and medium capitalisation companies, and to bring those companies greater visibility and more prospect of attracting potential investors, it is necessary to introduce some amendments to that Directive.

(3)The provisions concerning research laid down in Directive 2014/65/EU require investment firms to separate payments which they receive as brokerage commissions from the compensation perceived for providing investment research (‘research unbundling rules’), or to pay for investment research from their own resources and assess the quality of the research they purchase based on robust quality criteria and the ability of such research to contribute to better investment decisions. In 2021, those rules have been amended by Directive (EU) 2021/338 of the European Parliament and of the Council 31  to allow for bundled payments for execution services and research for small and medium capitalisation companies below a market capitalisation of EUR 1 billion. The decline of investment research has, however, not slowed down.

(4)In order to revitalise the market for investment research and to ensure sufficient research coverage of companies, in particular the small and medium capitalisation companies, further alleviation of the research unbundling rules are necessary. By increasing from EUR 1 billion to EUR 10 billion the threshold of companies’ market capitalisation below which the unbundling rules do not apply, more small and medium capitalisation companies, and in particular more medium capitalisation companies will benefit from a larger research coverage, bringing those companies more visibility from potential investors and thus increasing their capacity to raise funding in the markets.

(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 defined 32  in [Article 2 (2) of the proposal for a Regulation 33 on a European Single Access Point].

(6)Directive 2014/65/EU introduced the SME growth market category to increase the visibility and profile of markets specialised in SMEs and foster the development of common regulatory standards in the Union of markets specialised in SMEs. SME growth markets play a key function in facilitating access to capital for those smaller issuers by catering for their needs. To foster the development of such specialised markets and to limit the organisational burden for the operators of multilateral trading facilities (MTFs), it is necessary to allow the segment of a MTF to apply to become a SME growth market provided that such segment is clearly separated from the rest of the MTF.

(7)Directive 2001/34/EC of the European Parliament and of the Council 34 lays down rules concerning listing on Union markets. That Directive aims at coordinating the rules on the admission of securities to official stock exchange listing and on information to be published on those securities to provide equivalent protection for investors at Union level. That Directive also lays down the rules of the regulatory and supervisory framework for Union primary markets. In the course of the years, Directive 2001/34/EC has been amended significantly several times. Directives 2003/71/EC of the European Parliament and of the Council 35  and Directive 2004/109/EC of the European Parliament and of the Council 36 have replaced most of the provisions harmonising the conditions for the provision of information regarding requests for the admission of securities to official stock exchange listing and the information on securities admitted to trading, and have made large parts of Directive 2001/34/EC redundant. Directive 2001/34/EC as a minimum harmonisation Directive gives Member States a rather broad discretion to deviate from the rules laid down in that Directive, which has led to market fragmentation in the Union. To drive market harmonisation at Union level and create a single rule book, Directive 2001/34/EC should be repealed.

(8)Directive 2014/65/EU, like Directive 2001/34/EC, provides for the regulation of markets of financial instruments and strengthens investor protection in the Union. Directive 2014/65/EU also sets out rules on the admission of financial instruments to trading. By extending the scope of Directive 2014/65/EU to cover specific provisions from Directive 2001/34/EC will ensure that all relevant provisions from Directive 2001/34/EC are maintained. A number of provisions of Directive 2001/34/EC, including the requirements on free float and market capitalisation which still apply, are enforced by competent authorities and are considered important rules for seeking admission to trading of shares on regulated markets in the Union by market participants. It is therefore necessary to transfer those rules in Directive 2014/65/EU to set out, in a new provision of that Directive, specific minimum conditions for the admission to trading of shares on regulated markets. The application of that new provision should complement the general provisions on the admission of financial instrument to trading laid down in Directive 2014/65/EU.

(9)To allow for more flexibility for issuers and to make Union capital markets more competitive, the minimum free float requirement should be decreased to 10%, which is a threshold that ensures for a sufficient level of liquidity in the market. The free float requirement laid down in Directive 2001/34/EC that a sufficient number of shares is to be distributed to the public in one or more Member States refers to the public within the Union and the European Economic Area (EU/EEA). That geographical restriction of the free float requirement to the EU/EEA should not be maintained as Directive 2014/65/EU does not provide for such restriction for financial instruments admitted to trading. The requirement that a company is to have published or filed its annual accounts for a specific period of time should not be transferred to Directive 2014/65/EU since Regulation (EU) 2017/1129 of the European Parliament and of the Council 37 already contains a provision to that effect. Directive 2014/65/EU already lays down provisions to designate competent authorities. Thus, the provisions laid down in Directive 2001/34/EC to appoint one or more competent authorities are redundant. The requirement for debt securities that the amount of the loan is not be less than EUR 200 000 are considered obsolete in light of current market practice.

(10)The concept of admission of securities to official listing on stock exchanges provided for in Directive 2001/34/EC is no longer frequently used given market developments, as Directive 2014/65/EU already provides for the concept of ‘admission of financial instruments to trading on a regulated market’. The two concepts ‘admission to official listing’ and ‘admission to trading on a regulated market’ are often used interchangeably in some Member States. That means that, in some Member States, no distinction is made between the two concepts. Furthermore, the dual regime of admission to trading, on the one hand, and admission to official listing, on the other hand, could lead to legal uncertainty at Union level, in particular, due to the fact that the requirements laid down in Directive 2003/71/EC, Directive 2004/109/EC and Directive 2014/57/EU of the European Parliament and of the Council 38  do not apply to instruments admitted to official listing, while those requirements apply to instruments admitted to trading on a regulated market.

(11)To enhance the visibility of listed companies, in particular SMEs and to adapt the listing conditions to improve requirements for issuers, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of amending Directive 2014/65/EU. The market capitalisation threshold for companies, for which the re-bundling of trading execution and research fees would be possible, to capture small and medium capitalisation companies, and providing a framework for the development of a particular form of research for which the issuer pays should be adapted. The adaption of the listing rules in the Union should also reflect market practice for it to be effective and promote competition. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making 39 . In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.

(12)Directive 2014/65/EU should therefore be amended accordingly.

(13)Since the objectives of this Directive, namely to ease Union small and medium capitalisation companies’ access to capital markets, and to increase the coherence of Union listing rules cannot be sufficiently achieved by the Member States but can rather, by reason of the improvements and effects sought, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

HAVE ADOPTED THIS DIRECTIVE:

Article 1
Amendments to Directive 2014/65/EU

Directive 2014/65/EU is amended as follows:

(1)in Article 4(1), point (12) is replaced by the following:

‘(12)‘SME growth market’ means a MTF, or a segment of a MTF, that is registered as an SME growth market in accordance with Article 33;’;

(2)Article 24 is amended as follows:

(a)the following paragraphs 3a to 3d are inserted:

‘3a.research provided by third parties to investment firms providing portfolio management or other investment or ancillary services and research prepared and distributed by such firms shall be fair, clear and not misleading. Research shall be clearly identifiable as such or in similar terms, provided that all conditions applicable to the research are met.

3b.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.

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.

3c. Member States shall ensure that any issuer may submit its issuer-sponsored research, as referred to in paragraph 3b of this Article, to the relevant collection body as defined in [Article 2(2) of the proposal for a Regulation on a European Single Access Point 40 ].

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.’;

(b)in paragraph 9a, point (c) is replaced by the following:

‘(c)the research for which the combined charges or the joint payment is made concerns issuers whose market capitalisation for the period of 36 months preceding the provision of the research did not exceed EUR 10 billion, as expressed by end-year quotes for the years when those issuers are or were listed or by the own-capital for the financial years when those issuers are or were not listed.’;

(3)Article 33 is amended as follows:

(a)paragraphs 1 and 2 are replaced by the following:

‘1.Member States shall provide that the operator of a MTF may apply to its home competent authority to have the MTF or a segment thereof, registered as an SME growth market.

2.Member States shall provide that the home competent authority may register the MTF, or a segment thereof, as an SME growth market if the competent authority receives an application as referred to in paragraph 1 and is satisfied that the requirements in paragraph 3 are complied with in relation to the MTF, or that the requirements in paragraph 3a are complied with in relation to a segment of the MTF.’;

(b)the following paragraph 3a is added:

‘3a. Member States shall ensure that the relevant segment of the MTF is subject to effective rules, systems and procedures which ensure that the conditions referred to in paragraph 3 and all of the following conditions have been complied with:

(a)the segment of the MTF registered as ‘SME growth market’ is clearly separated from the other market segments operated by the MTF operator, which is inter alia indicated by a different name, different rulebook, different marketing strategy, and different publicity, as well as a specific allocation of the market identification code to the SME growth market segment;

(b)the transactions made on the specific SME growth market segment are clearly distinguished from other market activity within the other segments of the MTF;

(c)upon request of the MTF’s home competent authority, the MTF shall provide a comprehensive list of the instruments listed on the SME growth market segment concerned, as well as any information on the operation of the SME growth market segment that the competent authority may request.’;

(c)paragraphs 4 to 6 are replaced by the following:

‘4.The criteria laid down in paragraphs 3 and 3a are without prejudice to compliance by the investment firm or market operator operating the MTF, or a segment thereof, with other obligations under this Directive relevant to the operation of MTFs.

5.Member States shall provide that the home competent authority may deregister a MTF, or a segment thereof, as an SME growth market in any of the following cases:

(a)the investment firm or market operator operating the MTF, or a segment thereof, applies for its deregistration;

(b)the requirements in paragraph 3 or 3a are no longer complied with in relation to the MTF, or a segment thereof.

6.Members States shall require that if a home competent authority registers or deregisters a MTF, or a segment thereof, as an SME growth market under this Article, that authority shall as soon as possible notify ESMA of that registration or deregistration. ESMA shall publish on its website a list of SME growth markets and shall keep that list up to date.’;

(d)paragraph 8 is replaced by the following:

‘8.The Commission is empowered to adopt delegated acts in accordance with Article 89 to supplement this Directive by further specifying the requirements laid down in paragraphs 3 and 3a of this Article. Those requirements shall take into account the need to maintain high levels of investor protection to promote investor confidence in those markets while minimising the administrative burdens for issuers on the market. They shall also take into account that de-registrations do not occur nor shall registrations be refused merely because of a temporary failure to comply with the requirement laid down in paragraph 3, point (a), of this Article.’;

(4)the following Article 51a is inserted:

‘Article 51aSpecific conditions for the admission of shares to trading

1.Member States shall require that the foreseeable market capitalisation of the shares for which admission to trading is sought, or if this cannot be assessed, the company’s capital and reserves, including profit and loss, from the last financial year, shall be at least EUR 1 000 000 or an equivalent amount in a national currency other than the Euro.

2.Paragraph 1 shall however not apply to the admission to trading of shares fungible with shares already admitted to trading.

3.Where, as a result of an adjustment of the equivalent amount of the Euro in national currency, the market capitalisation expressed in national currency remains for a period of 1 year at least 10 % approximately the value of EUR 1 000 000, the Member State shall, within the 12 months following the expiry of that period, adjust its laws, regulations or administrative provisions to comply with paragraph 1.

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.

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.

6.Where admission to trading is sought for shares fungible with shares already admitted to trading, regulated markets shall assess, to fulfil the requirement laid down in paragraph 4, whether a sufficient number of shares has been distributed to the public in relation to all the shares issued and not only in relation to the shares fungible with shares already admitted to trading.

7.The Commission is empowered to adopt delegated acts in accordance with Article 89 to amend this Directive by modifying the thresholds referred to in paragraphs 1 and 3 or in paragraphs 4 and 5 or in both, when the applicable thresholds impede the liquidity on public markets taking into account the financial developments.’;

(5)Article 89 is amended as follows:

(a)paragraphs 2 and 3 are replaced by the following:

‘2.The delegation of power referred to in Article 2(3), Article 2(4), Article 4(1)(2), second subparagraph, Article 4(2), Article 13(1), Article 16(12), Article 23(4), Article 24(13), Article 25(8), Article 27(9), Article 28(3), Article 30(5), Article 31(4), Article 32(4), Article 33(8), Article 51a(7), Article 52(4), Article 54(4), Article 58(6), Article 64(7), Article 65(7) and Article 79(8) shall be conferred on the Commission for an indeterminate period of time.

3.The delegation of power referred to in Article 2(3), Article 2(4), Article 4(1)(2), second subparagraph, Article 4(2), Article 13(1), Article 16(12), Article 23(4), Article 24(13), Article 25(8), Article 27(9), Article 28(3), Article 30(5), Article 31(4), Article 32(4), Article 33(8), Article 51a(7), Article 52(4) Article 54(4), Article 58(6), Article 64(7), Article 65(7) and Article 79(8) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.’;

(b)paragraph 5 is replaced by the following:

‘5.A delegated act adopted pursuant to Article 2(3), Article 2(4), Article 4(1)(2), second subparagraph, Article 4(2), Article 13(1), Article 16(12), Article 23(4), Article 24(13), Article 25(8), Article 27(9), Article 28(3), Article 30(5), Article 31(4), Article 32(4), Article 33(8), Article 51a(7), Article 52(4), Article 54(4), Article 58(6), Article 64(7), Article 65(7) or Article 79(8) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.’.

Article 2
Repeal of Directive 2001/34/EC

Directive 2001/34/EC is repealed as of … [OP please insert the date = 24 months from date of entry into force of this Directive].

Article 3
Transposition

1.Member States shall adopt and publish, by … [OP please insert the date = 12 months after the date of entry into force of this Directive] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

They shall apply those provisions from … [OP please insert the date = 18 months after the date of entry into force of this Directive].

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

2.Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 4
Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 5
Addressees

This Directive is addressed to the Member States.

Done at Brussels,

(1)    Empowering EU capital markets for SMEs - Making listing cool again Final report of the Technical Expert Stakeholder Group (TESG) on SMEs, May 2021. Oxera Consulting LPP, Primary and secondary equity markets in EU, Final report, November 2020, Oxera-study-Primary-and-Secondary-Markets-in-the-EU-Final-Report-EN-1.pdf .

(2)

   Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (recast) (OJ L 173 12.6.2014, p. 349).

(3)

   For an MTF to qualify as an SME growth market, at least 50% of the issuers whose financial instruments are traded on the MTF need to be SMEs, defined under MiFID II as companies with an average market capitalisation of less than EUR 200 million. In order to ensure the appropriate level of investor protection, the listing rules on SME growth markets must also satisfy certain quality standards, including the need to draw up an appropriate admission document (when a prospectus is not required) and to comply with periodic financial reporting. The SME growth market framework was developed to further acknowledge the special needs of SMEs accessing the public equity and bond markets for the first time.

(4)

   Regulation (EU) 2019/2115 of the European Parliament and of the Council of 27 November 2019 amending Directive 2014/65/EU and Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets (OJ L 320, 11.12.2019, p. 1).

(5)

    Final report of the Technical Expert Stakeholder Group (TESG) on SMEs - Empowering EU capital markets - Making listing cool again (europa.eu)

(6)

   See p. 4: state_of_the_union_2021_letter_of_intent_en.pdf (europa.eu) .

(7)

   Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Commission work programme 2022 Making Europe stronger together COM (2021) 645 final cwp2022_en.pdf (europa.eu) .

(8)

   Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits (OJ L 87, 31.3.2017, p. 500).

(9)

   Directive (EU) 2021/338 of the European Parliament and of the Council of 16 February 2021 amending Directive 2014/65/EU as regards information requirements, product governance and position limits, and Directives 2013/36/EU and (EU) 2019/878 as regards their application to investment firms, to help the recovery from the COVID-19 crisis

(10)

   Recital 8 of the CMRP (Directive (EU) 2021/338 of the European Parliament and of the Council of 16 February 2021 amending Directive 2014/65/EU as regards information requirements, product governance and position limits, and Directives 2013/36/EU and (EU) 2019/878 as regards their application to investment firms, to help the recovery from the COVID-19 crisis) states that: “In the immediate aftermath of the COVID-19 pandemic, issuers, and in particular small and middle-capitalisation companies, need to be supported by strong capital markets. Research on small and middle-capitalisation issuers is essential to help issuers to connect with investors. That research increases the visibility of issuers and thus ensures a sufficient level of investment and liquidity. Investment firms should be allowed to pay jointly for the provision of research and for the provision of execution services provided certain conditions are met”.

(11)

   In April 2021, ESMA published its Final Report on the functioning of the regime for SME growth markets, which concluded that this new regime has been relatively successful with, at the time of the publication of the report, seventeen MTFs registered as SME growth markets. Report available at:  final_report_on_sme_gms_-_mifid_ii.pdf (europa.eu) .

(12)    Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, p. 64).

(13)    Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (OJ L 390, 31.12.2004, p. 38).

(14)

   Only 7 NCAs noticed that the Listing Directive is still in force or partially in force in their jurisdiction. A more detailed analysis can be found in Annex 7 of the Impact Assessment accompanying this proposal.

(15)

   Report entitled “Reviving research in the wake of Directive 2014/65/EU: Observations, issues and recommendations available at: 20200124-rapport-mission-recherche-projet-va-pm.pdf (amf-france.org)

(16)    Proposal for a Regulation of the European Parliament and of 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).

(17)    Proposal for a Regulation of the European Parliament and of 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)

(18)

   MiFID II, recital 132

(19)

   Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Action Plan on Building a Capital Markets Union COM(2015) 468 final

(20)

   Communication from the Commission on the mid-term review of the capital markets union action plan ({SWD(2017) 224 final} and {SWD(2017) 225 final} – 8 June 2017) https://ec.europa.eu/info/sites/info/files/communication-cmu-mid-term-review-june2017_en.pdf

(21)

   Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets COM(2018) 331 final

(22)

   Proposal for a Council Directive on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (COM/2022/216 final).

(23)

   Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - A New European Innovation Agenda (COM/2022/332 final).

(24)    European Commission - Statement, A “Relief Package” to give our SMEs a lifeline in troubled waters I Blog of Commissioner Thierry Breton; Brussels, 19 September 2022.

(25)

   OJ C 326, 26.10.2012, p. 47–390 (GA)

(26)    Amongst the Sustainable Development Goals (SDG) of the United Nations, SDG 8 concerns “decent work and economic growth”. The Listing Act is expected to contribute to the growth of SMEs by providing easier access to funding through public markets. Newly listed companies are a key motor of new investment and job creation. Easier access to public markets creates incentives for entrepreneurs to diversify in times of economic turmoil, leading to a more resilient economy.

(27)    OJ C , , p. .

(28)    Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349).

(29)    Regulation (EU) 2019/2115 of the European Parliament and of the Council of 27 November 2019 amending Directive 2014/65/EU and Regulations (EU) No 596/2014 and (EU) 2017/1129 as regards the promotion of the use of SME growth markets (OJ L 320, 11.12.2019, p. 1).

(30)    Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non-monetary benefits (OJ L 87, 31.3.2017, p. 500).

(31)    Directive (EU) 2021/338 of the European Parliament and of the Council of 16 February 2021 amending Directive 2014/65/EU as regards information requirements, product governance and position limits, and Directives 2013/36/EU and (EU) 2019/878 as regards their application to investment firms, to help the recovery from the COVID-19 crisis (OJ L 68, 26.2.2021, p. 14).

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

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

(34)    Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities (OJ L 184, 6.7.2001, p. 1).

(35)    Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ L 345, 31.12.2003, p. 64).

(36)    Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38).

(37)    Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC (OJ L 168, 30.6.2017, p. 12).

(38)    Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (market abuse directive) (OJ L 173, 12.6.2014, p. 179).

(39)    OJ L 123, 12.5.2016, p. 1.

(40)    Proposal for a Regulation [2021/0378.COD].