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The regulations on access to the EU capital market can be improved, according to CFA Institute and BETTER FINANCE

The regulations on access to the EU capital market can be improved, according to CFA Institute and BETTER FINANCE

The EU Listing Act Agreement should provide better support for SMEs to access capital markets.
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22 APR, 2024

By RankiaPro Europe


Following the political agreement between the Council and the European Parliament on the EU Listing Act, a report by CFA Institute and BETTER FINANCE highlights that investment professionals and retail investors believe that the regulations for listing companies on the EU's financial markets should offer better support to SMEs, to access capital markets more efficiently and cover their financing needs.

Prior to the European Commission's proposal on the EU Listing Act Agreement, which seeks to increase the attractiveness of the markets, CFA Institute and BETTER FINANCE conducted surveys with their EU-based members to assess their opinions on the obstacles faced by European companies when trying to obtain financing through capital markets. For its realization, the Federation of European Securities Exchanges (FESE) provided details on the proposal of the EU Listing Act Agreement in line with the topics addressed in the survey.

The conclusions of the Report emphasize the need for Member States to prudently adopt any directive on multiple voting rights shares (MVRS).

The proposals of the EU Listing Act Agreement outlined in the political agreement include an amendment to the Regulation that promises to reduce burdens for issuers and improve transparency for investors. However, in the CFA Institute and BETTER FINANCE Report, additional solutions are mentioned that have the potential to reduce barriers for SMEs. Specifically, concerns related to the introduction of a directive on MVRS, as respondents estimated that allowing deviations from the principle of "one share, one vote" would encourage discrimination among shareholders.

Main findings of the CFA Institute and BETTER FINANCE report

  • Any MVRS directive at EU level is unnecessary to encourage listing or inadequate to increase investor confidence.
  • The Regulation would benefit from a review that reduced both the regulatory burden and costs for issuers (standardization, approval process) and facilitated information for investors.
  • A standardized SME definition at EU level is difficult to reconcile with the specific needs of Member States.

  • SMEs need better coverage to address the lack of liquidity in expanding markets, while increasing investor participation.

  • Expanding SME markets should be the main area of revised legislation, where listing costs should be alleviated, in addition to aid packages and the improvement of cross-border information.

  • Financial education programs should be provided through various channels and for all investors in order to increase knowledge of participation in the primary (and secondary) market.

SMEs represent 99% of all businesses in the EU, so it is imperative that they can easily access financing in capital markets. Although the EU Listing Act Agreement includes a number of recommendations to provide a more flexible regulatory environment for SMEs, the findings of our survey with investment professionals and retail investors establish additional recommendations for consideration. Specifically, we recommend further refinement of the suggested policy around the introduction of an MVRS directive, to effectively reconcile market integrity, investor protection, and proportionality. In addition, the legislative debate would justify further consideration of the views of key stakeholders before its completion. We strongly urge policymakers and Member States to review the recommendations.

Josina Kamerling, Head of Regulatory Affairs at CFA Institute in EMEA

Empowering SMEs to thrive in the European market is the next challenge, which must be reconciled with fostering a solid investment ecosystem characterized by transparency and fairness for investors. The introduction of multiple voting rights shares (MVRS) across the EU is a significant concern; therefore, it is imperative that Member States implement strict safeguards and ensure complete transparency throughout the investment chain to protect future shareholders. Overall, although the review of the EU Listing Act Agreement is moving in this direction, Level 2 technical standards require a balanced approach, on which BETTER FINANCE will actively collaborate with regulators and stakeholders.

Aleksandra Mączyńska, General Director of BETTER FINANCE

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