The European Crowdfunding Network (ECN) welcomes the public consultation of the European Commission on the Prospectus Directive. We have since long questioned its application, especially with regard to the extensive differences of member state interpretation for transactions below €5 million. ECN believes that the prevailing interpretations of the Prospectus Directive on member state level are a key hurdle for small- and medium sized enterprises to access capital. The current consultation is an opportunity to simplify access to capital while ensuring consumer protection through more adequate measures.
The prospectus is a legal document that companies have to produce to access capital markets and to attract investments. It contains facts to help investors to make informed investment decisions. However, it can be very costly and burdensome for companies to produce – especially for SMEs – and, at the same time, complex for investors to analyse, due to the enormous amount of information provided. The European Commission has thus launched a consultation on Prospectus Directive, as part of its wider initiative for Capital Markets Union, in order to understand how to make it easier for companies (including SMEs) to raise capital throughout the EU while ensuring effective investor protection.
Key focuses of the consultation – which is open to any interested stakeholder – are: i) the reduction of administrative hoops through which companies have to jump to produce the document; ii) the simplification of the information provided; iii) the review of when a prospectus is necessary and when it is not and how to streamline the approval process.
With the regard to this latter point and in light of recent developments in financial markets, like securities based crowdfunding, the Commission asks the stakeholders whether the current thresholds (e.g. €5 million offer and 150 retail investors), under which companies do not have to produce a prospectus and Members States are free to implement national regulations, should be reviewed. The EC also seeks feedback on whether more harmonization would be beneficial in the area currently left to Members States discretion.
The consultation on Prospectus Directive was launched in parallel with the consultation on Capital Markets Union, the great initiative of the EC to unlock funding opportunities for EU businesses. The deadline for the submission of responses to both consultation is the 13th of May 2015.
Find the Prospectus Consultation document at this link. The European Crowdfunding Network and its members will submit their thoughts to the consultation and we encourage relevant stakeholders to do the same.