CMU’s new action plan lacks ambition: EuropeanIssuers

On the 03/02/21 at 7:33AM


Adrien Paredes-Vanheule

The association of European public companies, EuropeanIssuers, says listing rules remain too bureaucratic and must be lightened.

European public companies are wavering between enthusiasm and deception vis-à-vis the new action plan for a capital markets union in Europe. The plan unveiled by the European commission in September 2020 shall among others ease and support the access to public financing of European companies. However, the CMU’s action plan in its current shape is failing on this particular objective according to EuropeanIssuers, the organisation defending the interests of European publicly listed companies. EuropeanIssuers pushes for more alleviations as to reporting requirements and administrative burdens for EU public companies both in times of distress, “such as the current situation”, and in regular times.

“The Covid-19 Capital Markets Recovery Package only addressed a very small range of issues and certainly does not provide companies with sufficient alleviations. The intention to assess listing rules by Q4 2021, is thus too late,” penned EuropeanIssuers in its position paper upon the CMU’s new action plan. Nonetheless, the association supports the EU recovery prospectus introduced by the Capital Markets Recovery Package. EU public companies can use this abridged prospectus to communicate information to their investors when they issue shares and/or bonds.  EuropeanIssuers advised that the recovery prospectus should be established as a permanent measure and should apply to all issuers and all type of securities. Besides, the association wants current listing rules and their impact not only to be assessed for small and medium-sized enterprises (SMEs) but for companies of all sizes as all “have to cope with overburdening rules.”

Instead of assessing rules, the European commission should rather act to simplify them as well as burdens weighing on EU public companies, said EuropeanIssuers. The organisation targets “burdens and inconsistencies” deriving from the various European reporting requirements and is concerned about those that may result from upcoming regulations such as the non-financial reporting directive (NFRD) and the EU green taxonomy. “We draw attention to the fact that many companies are facing enormous challenges to survive economically the Covid-19 crisis, which is why policy makers should reflect on streamlining or postponing the introduction of detailed and burdensome non-financial reporting requirements,” wrote EuropeanIssuers.

Florence Bindelle, secretary general of EuropeanIssuers, added, “an efficient Capital Markets Union New Action Plan is not only about reducing or streamlining the reporting requirements and administrative burdens on all listed companies but moreover about the need for regulatory coherence to avoid the proliferation of measures acting against the establishment of the CMU which is overlooked in the present action plan.”

Choosing the AGM format

EuropeanIssuers is furthermore backing the creation of a EU single access point regarding financial and non-financial data albeit this does not form a priority for the association. It also said such platform should not be designed as a gateway to introduce new reporting formats. As to shareholder engagement, the association said a shareholder, through the concept of ‘end-investor’, shall be defined as “person having invested (own) money directly into a share.” EuropeanIssuers also believes some harmonisation of the information on corporate action and of rules could be achieved via amendments to the Shareholder Rights Directive II (SRD2).

In addition, on the topic of virtual general shareholder meetings, it fostered member states to allow companies for the option of having full online, full offline or hybrid general shareholder meetings. “However, practices implemented in various member states have lead some issuers to being discouraged in their desire to ensure a full online GSM. As such, we require further analysis in regard to what standards have to be met for online GMs, while also promoting flexibility and opt-in mechanisms for issuers. We also encourage clear protection for issuers which opt for such a meeting,” EuropeanIssuers highlighted.

Concerns around the Wirecard case impact on regulation

EuropeanIssuers also said it supports proposals that encourage long-term and equity financing from institutional investors with targeting changes in the review of the Solvency II and Basel III legislations, as well as those empowering citizens through financial literacy. Another measure backed is the exemption regarding the unbundling rules (unbundling execution and research fees) for brokers when those analyse listed SMEs.

Lastly, EuropeanIssuers is worried about the impact of the Wirecard scandal on EU company audit rules. It warns that the consequences of the Wirecard case should not be exaggerated and negatively impact public companies with robust internal control systems. “In particular, the commission should not overreact and adopt additional requirements in this field that could deter companies from listing or drive them to delist,” EuropeanIssuers said.

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