TheCityUK: improving Europe’s listings regime and unlocking growth

TheCityUK, supported by King & Wood Mallesons, has today published its Capital markets for growing companies: a review of the European Listings Regime report, setting out its proposals for how Europe’s listings regime could be improved to the benefit of investors and issuers across the whole of the EU, with particular focus on growth companies.

Commissioned by the Chancellor of the Exchequer, the Rt. Hon George Osborne MP, the report includes 26 detailed recommendations which, if implemented collaboratively by all key stakeholders – the European Commission, national governments, regulators, stock exchanges, banks and capital markets advisers through to investors and growth companies – will help to achieve the European Commission’s Capital Markets Union initiative and develop an equity culture across Europe that is capable of providing sustained sources of capital to European businesses.

Chris Cummings, Chief Executive, TheCityUK, said, “We were very pleased to have been invited by the Chancellor to undertake this review of Europe’s listings regime. Capital markets currently play too small a role in financing growth and European businesses – in particular SMEs. Creating a more integrated capital markets regime and ensuring corporates are able to raise money more quickly and easily, more cheaply and from more diverse sources will ultimately help deliver a better system of funding to help firms grow and create jobs. This will help to foster the economic recovery and innovation that Europe needs.”

“A number of the issues raised in this report have been widely debated over recent years, but little progress has been made. Our proposals aim to move that debate forward and capitalise on the opportunity presented by the European Commission’s Prospectus Directive Review to make change happen. It’s time to stop talking about finding solutions and actually deliver positive change.”

Harriett Baldwin, Economic Secretary to the Treasury, said, “We support a strong Capital Markets Union that will improve businesses’ access to funding, and create jobs and growth across the EU. I welcome TheCityUK’s review of the European listing regime, which is an important contribution and makes some excellent proposals for the Commission, national governments across Europe, regulators, stock exchanges and banks.”

The steering group responsible for delivering the report comprised senior practitioners from Citigroup, Fidelity, Lloyds Banking Group, Deloitte, KPMG, Morgan Stanley, Oliver Wyman, City of London Law Society and King & Wood Mallesons.

Nick Anstee, Senior Director, King & Wood Mallesons and Chairman of the steering group, said, “The Capital Markets Union presents an exciting development for significant business growth across Europe, by creating dynamic opportunities for companies to raise funds quicker and easier to secure long-term capital to sustain growth and employment. This report, based on contributions from many stakeholders from across the City, looks at the challenges and developments needed to develop an equity culture across Europe by 2019 that is capable of providing deep and liquid pools of capital across EU Member States.”

The report’s 26 recommendations focus around three core areas:

  • Initial capital raisings and the facilitation and improvement of SME access – increase awareness of capital markets' options available to SMEs; provide more information, incentives and cost efficiencies to investors and minimise the perceived complexity of the listing process.
  • Admission to a regulated market – make prospectus information available more quickly by splitting it into two parts and removing the blackout period; improve the quality of information provided; open up the initial listings offering to sophisticated retail investors and ensure a consistent approach by the National Competent Authorities to prospectus review and approval.
  • Improvement of capital raising in the secondary market – reduce the prospectus disclosure requirements for follow on issuances

 

Below is a summary of the report’s key recommendations:

  • Increase the awareness of capital markets options available to SMEs
  • Provide more information and increase incentives to investors in SMEs
  • Minimise the regulatory complexity of raising capital and listing on an unregulated market with a view to managing costs
  • Within the IPO process, make information available sooner to investors through a core registration statement followed by research, obviating the need for a blackout period
  • Broaden investor participation in IPOs to include more sophisticated retail investors
  • Enhance confidence in pan-European listings through increased use of peer-review of NCAs and encouraging the introduction of minimum corporate governance requirements
  • Reduce the prospectus disclosure requirements for follow on issuances.