Delays hit Prospectus Directive amendments as European Commission proposes signature requirement

The European Parliament has delayed the implementation of amendments to the European Commission's Prospectus Directive, evoking fresh fears for those with reason to oppose the latest proposals

European Commission suggestions delay Prospecus Directive amendments

A final decision on amendments to the European Commission's Prospectus Directive  (PD) recommended by the European Securities and Markets Authority (Esma), due in December 2011, has been delayed until at least the beginning of February as a result of changes requested by the European Parliament, according to Christian Vollmuth, managing director at the Deutscher Derivate Verband (DDV) in Berlin. The final impact assessment meeting was replaced by a written procedure.

One of the developments that prevented a final decision being reached was a suggestion from the Commission for a signature requirement for final terms. "The DDV, being in close contact with the European Parliament and the German legislator, has in discussions highlighted the negative administrative consequences of a signature requirement for final terms," says Vollmuth. "The DDV is conservatively optimistic that it may gain some amendments to the unofficial draft, in a waiver of the signature requirement. It is the DDV's aim to ensure for the structured products industry that the already harmful Esma advice is not further exaggerated by the EU-Commission."

According to the Commission, the Prospectus Directive Amending Directive has three main objectives: increasing efficiency in the prospectus regime; reducing administrative burdens for companies when raising capital in the European securities markets; and enhancing investor protection.

The signature requirement would appear to jeopardise the concept of reducing ‘the administrative burdens on companies' included in the first draft, vastly increasing the administrative burden for authorities, given the total number of final terms issued. "Furthermore, it would be a burden - especially with respect to cross-national offerings - in connection with the new requirement to file the final terms with the home and the host member state(s)," says a Frankfurt-based source. "We heard that the Parliament is not in favour of this and we are hoping that it won't make its way into the final paper."

Once Esma passes final judgement on its latest amendment to the Prospectus Directive, a 20-odd page document designed to aid investor protection in Germany is likely to be done away with.

A response submitted to the EC by the Joint Associations Committee noted: "If implemented in their current form, the Esma Proposals: (a) will place a heavy burden on providers of structured investment products in terms of increased costs and delays in getting products to market, with consequent loss of business; (b) risk driving a significant portion of the structured investment products business outside of the EU, particularly in respect of securities which are not being publicly offered but which need to be listed on an exchange; and (c) will reduce the universe of potential investment products otherwise available to EU investors."