The European Council agreed, at its meeting on 8 and 9 March 2007, that administrative burdens on companies should be reduced by 25 % by the year 2012 in order to enhance the competitiveness of companies in the Union.

Some of the obligations provided for in Directive 2003/71/EC of the European Parliament and of the Council4 have been identified by the Commission as appearing to be excessively burdensome on companies.

Those obligations need to be reviewed in order to reduce the burdens weighing on companies within the Union to the necessary minimum without compromising the protection of investors and the proper functioning of the securities markets in the Union.

Directive 2003/71/EC requires the Commission to make an assessment of the application of that Directive 5 years after the date of its entry into force and to present, where appropriate, proposals for its review. That assessment has revealed that certain elements of Directive 2003/71/EC should be amended in order to simplify and improve its application, increase its efficiency and enhance the international competitiveness of the Union, thereby contributing to the reduction of administrative burdens.

Following the conclusions of the report of the High-Level Group on Financial Supervision in the EU (the ‘de Larosière report’), the Commission put forward concrete legislative proposals on 23 September 2009 in order to establish a European System of Financial Supervisors comprising a network of national financial supervisors working in tandem with new European supervisory authorities. One of those new authorities, the European Supervisory Authority (European Securities and Markets Authority), is to replace the Committee of European Securities Regulators.

The way limits of maximum offering amounts are calculated in Directive 2003/71/EC should be clarified for reasons of legal certainty and efficiency. The total consideration for certain offers referred to in that Directive should be computed on a Union-wide basis.

For the purposes of private placements of securities, investment firms and credit institutions should be entitled to treat as qualified investors those persons or entities that are described in points (1) to (4) of Section I of Annex II to Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments5 and other persons or entities that are treated as professional clients, åor that are recognised eligible counterparties in accordance with Directive 2004/39/EC. Investment firms authorised to continue considering existing professional clients as such in accordance with Article 71(6) of Directive 2004/39/EC should be authorised to treat those clients as qualified investors under this Directive. Such an alignment of the relevant provisions of Directives 2003/71/EC and 2004/39/EC is likely to reduce complexity and costs for investment firms in the event of private placements because the firms would be able to define the persons or entities to whom the placement is to be addressed relying on their own list of professional clients and eligible counterparties. The issuer should be able to rely on the list of professional clients and eligible counterparties that has been drawn up in accordance with Annex II to Directive 2004/39/EC. The definition of qualified investors in Directive 2003/71/EC should therefore be widened to include those persons or entities and no separate regime for registers should be maintained.

Ensuring the correct and full application of Union law is a core prerequisite for the integrity, efficiency and orderly functioning of financial markets. It is expected that the establishment of the European Supervisory Authority (European Securities and Markets Authority) will contribute to that goal by issuing a single rulebook and by fostering a more convergent approach regarding the scrutiny and approval of prospectuses. The Commission should undertake a review of Article 2(1)(m)(ii) of Directive 2003/71/EC in relation to the limitation on the determination of the home Member State for issues of non-equity securities with a denomination below EUR 1 000. Following that review, it should consider whether the provision should be maintained or revoked.

The threshold of EUR 50 000 in Article 3(2)(c) and (d) of Directive 2003/71/EC no longer reflects the distinction between retail investors and professional investors in terms of investor capacity, since it appears that even retail investors have recently made investments of more than EUR 50 000 in a single transaction. For that reason it is appropriate to increase the said threshold and amend other provisions in which that threshold is mentioned accordingly. Corresponding adjustments should be made in Directive 2004/109/EC of the European Parliament and of the Council6. Following those adjustments and taking into consideration the outstanding period of debt securities, there should be a grandfathering provision in relation to Article 8(1)(b), Article 18(3) and Article 20(6) of Directive 2004/109/EC in respect of debt securities with a denomination per unit of at least EUR 50 000, which have already been admitted to trading on a regulated market in the Union prior to the entry into force of this Directive.

A valid prospectus, drawn up by the issuer or the person responsible for drawing up the prospectus and available to the public at the time of the final placement of securities through financial intermediaries or in any subsequent resale of securities, provides sufficient information for investors to make informed investment decisions. Therefore, financial intermediaries placing or subsequently reselling the securities should be entitled to rely upon the initial prospectus published by the issuer or the person responsible for drawing up the prospectus as long as this is valid and duly supplemented in accordance with Articles 9 and 16 of Directive 2003/71/EC and the issuer or the person responsible for drawing up the prospectus consents to its use. The issuer or the person responsible for drawing up the prospectus should be able to attach conditions to his or her consent. The consent, including any conditions attached thereto, should be given in a written agreement between the parties involved enabling assessment by relevant parties of whether the resale or final placement of securities complies with the agreement. In the event that consent to use the prospectus has been given, the issuer or person responsible for drawing up the initial prospectus should be liable for the information stated therein and in case of a base prospectus, for providing and filing final terms and no other prospectus should be required. However, in case the issuer or the person responsible for drawing up such initial prospectus does not consent to its use, the financial intermediary should be required to publish a new prospectus. In that case, the financial intermediary should be liable for the information in the prospectus, including all information incorporated by reference and, in case of a base prospectus, final terms.

In order to allow for the efficient application of Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse)7, Directive 2003/71/EC and Directive 2004/109/EC and to clarify underlying problems of differentiation and overlaps, the Commission should put forward a definition for each of the terms ‘primary market’, ‘secondary market’ and ‘public offer’.

Liability regimes in the Member States are significantly different due to national competence in civil law. In order to identify and monitor the arrangements in the Member States, the Commission should establish a comparative table of Member States’ regimes.

Article 4(1)(d) of Directive 2003/71/EC provides that the obligation to publish a prospectus does not apply to shares offered, allotted or to be allotted free of charge to existing shareholders. Under Article 3(2)(e) of that Directive an offer with a total consideration of less than EUR 100 000 is entirely exempt from the requirement to publish a prospectus. The exemption in Article 4(1)(d) is therefore redundant, since an offer that is free of charge falls within the scope of Article 3(2)(e).

The current exemptions for securities offered, allotted or to be allotted to existing or former employees or directors are too restrictive to be useful to a significant number of employers operating share schemes for employees in the Union. Participation of employees in the Union is particularly important for small and medium-sized enterprises (SMEs), in which individual employees are likely to have a significant role in the success of the company. Therefore, there should be no requirement to produce a prospectus for offers made in the context of an employee-share scheme by any Union company. Where the securities are not admitted to trading, the issuer is not subject to appropriate ongoing disclosure requirements and rules on market abuse. Therefore, employers or their affiliated undertakings should update the document referred to in Article 4(1)(e) of Directive 2003/71/EC where necessary for an adequate assessment of the securities. The exemption should be extended also to public offers and admissions to trading of companies registered outside the Union whose securities are admitted to trading either on a regulated market or on a third-country market. In the latter case, the Commission must have taken a positive decision on the equivalence of the legal and supervisory framework of the corresponding regulation of markets in the third country in order for the exemption to apply. That should enable Union employees to have access to ongoing information about the company.

The summary of the prospectus should be a key source of information for retail investors. It should be a self-contained part of the prospectus and should be short, simple, clear and easy for targeted investors to understand. It should focus on key information that investors need in order to be able to decide which offers and admissions of securities to consider further. Such key information should convey the essential characteristics of, and risks associated with, the issuer, any guarantor, and the securities offered or admitted to trading on a regulated market. It should also provide the general terms of the offer, including estimated expenses charged to the investor by the issuer or the offeror, and indicate the total estimated expenses, since these could be substantial. It should also inform the investor of any rights attaching to the securities and of the risks associated with an investment in the relevant security. The format of the summary should be determined in a way that allows comparison of the summaries of similar products by ensuring that equivalent information always appears in the same position in the summary.

Member States should ensure that no civil liability attaches to any person solely on the basis of the summary, including any translation thereof, unless it is misleading, inaccurate or inconsistent with the relevant parts of the prospectus. The summary should contain a clear warning to this effect.

It is appropriate to clarify that final terms to a base prospectus should contain only information relating to the securities note which is specific to the issue and which can be determined only at the time of the individual issue. Such information might, for example, include the international securities identification number, the issue price, the date of maturity, any coupon, the exercise date, the exercise price, the redemption price and other terms not known at the time of drawing up the prospectus. Other new information which is capable of affecting the assessment of the issuer and the securities should, in general, be included in a supplement to the prospectus. Furthermore, in order to fulfil the obligation to provide key information also under a base prospectus, issuers should combine the summary with relevant parts of final terms in a way that is easily accessible to investors. No separate approval should be required in those cases.

In order to improve the efficiency of pre-emptive issues of equity securities and adequately to take account of the size of issuers, without prejudice to investor protection, a proportionate disclosure regime should be introduced for offers of shares to existing shareholders who can either subscribe those shares or sell the right to subscribe for the shares, for offers by SMEs and issuers with reduced market capitalisation (namely small companies whose shares are admitted to trading on a regulated market), and for offers of non-equity securities referred to in Article 1(2)(j) of Directive 2003/71/EC issued by credit institutions. Where such credit institutions issue securities below the limit laid down in that Article, but choose to opt into the regime of this Directive and, consequently, draw up a prospectus, they should be entitled to benefit from the relevant proportionate disclosure regime. The proportionate disclosure regime for pre-emptive issues should apply where the shares offered are of the same class as the shares of the issuer admitted to trading either on a regulated market or on a multilateral trading facility as defined in Article 4(1)(15) of Directive 2004/39/EC as long as the facility is subject to appropriate ongoing disclosure requirements and rules on market abuse. The European Supervisory Authority (European Securities and Markets Authority) should issue guidelines regarding these conditions in order to ensure a consistent approach by the competent authorities.

Member States publish abundant information on their financial situation which is in general available in the public domain. Where a Member State guarantees an offer of securities, the issuer should not be obliged to provide in the prospectus information about that Member State acting as guarantor.

In order to improve legal certainty, the validity of a prospectus should commence at its approval, a point in time which is easily verified by the competent authority. Furthermore, in order to enhance flexibility, issuers should also be able to update the registration document in accordance with the procedure for supplementing prospectuses.

As a consequence of the entry into force of Directive 2004/109/EC, the obligation in Directive 2003/71/EC for the issuer to provide annually a document containing or referring to all information published in the 12 months preceding the issuance of the prospectus has become a dual obligation and should therefore be abolished. As a consequence, a registration document, instead of being updated in accordance with Article 10 of Directive 2003/71/EC, should be updated by means of a supplement or securities note.

Internet ensures easy access to information. In order to ensure better accessibility for investors, the prospectus should always be published in an electronic form on the relevant website. Where a person other than the issuer is responsible for drawing up the prospectus, it should be sufficient for that person to publish the prospectus on the website of that person.

In order to improve legal certainty, it should be clarified when the requirement to publish a supplement to the prospectus and the right of withdrawal end. Those provisions should be looked at separately. The obligation to supplement a prospectus should be terminated at the final closing of the offering period or the time when trading of such securities on a regulated market begins, whichever occurs later. On the other hand, the right to withdraw an acceptance should be applicable only where the prospectus relates to an offer of securities to the public and the new factor, mistake or inaccuracy arose before the final closing of the offer and the delivery of the securities. Hence, the right of withdrawal is linked to the timing of the new factor, mistake or inaccuracy that gives rise to a supplement, and assumes that that triggering event has occurred while the offer was open and before delivery of the securities.

When the prospectus is supplemented, harmonisation at Union level of the time-frame for the exercise by investors of the right of withdrawal of their previous acceptances would provide certainty to issuers making cross-border offers of securities. To provide flexibility to issuers from Member States with a tradition of a longer time-frame in this regard, the issuer or the offeror should be able to extend the term for the exercise of that right voluntarily. To improve legal certainty, the supplement to the prospectus should specify when the right of withdrawal ends.

The authority responsible for the approval of the prospectus should also notify the issuer or the person responsible for drawing up the prospectus of the certificate of approval of the prospectus that is addressed to the authorities of host Member States in accordance with Directive 2003/71/EC in order to provide the issuer or the person responsible for drawing up the prospectus with certainty as to whether and when a notification has actually been effected.

The measures necessary for the implementation of this Directive should be adopted by means of implementing acts in accordance with Article 291 of the Treaty on the Functioning of the European Union (TFEU). It is particularly important that the European Parliament receive draft measures and draft implementing acts as well as any other relevant information before the Commission decides on the equivalence of prospectuses drawn up in a particular third country.

In order to respect the principles set out in recital 41 of Directive 2003/71/EC and to take account of the technical developments in the financial markets and to specify the requirements laid down in Directive 2003/71/EC, the Commission should be empowered to adopt delegated acts in accordance with Article 290 TFEU. In particular, delegated acts may be necessary to update the thresholds and the definitions for reduced market capitalisation and SMEs established in this Directive and in Directive 2003/71/EC, and to specify the detailed content and specific form of the summary in accordance with the outcome of the debate launched by the Commission’s Communication on Packaged Retail Investment Products of 30 April 2009, aligning to the greatest extent possible the content and form of the summary for securities with that outcome, preventing the duplication of documents and potential confusion for investors as well as minimising the costs.

The European Parliament and the Council should have 3 months from the date of notification to object to a delegated act. At the initiative of the European Parliament or the Council, it should be possible to prolong that period by 3 months in regard to significant areas of concern. It should also be possible for the European Parliament and the Council to inform the other institutions of their intention not to raise objections. Such early approval of delegated acts is particularly appropriate when deadlines need to be met, for example where there are timetables in the basic act for the Commission to adopt delegated acts.

In Declaration 39 on Article 290 TFEU, annexed to the Final Act of the Intergovernmental Conference which adopted the Treaty of Lisbon, signed on 13 December 2007, the Conference took note of the Commission’s intention to continue to consult experts appointed by the Member States in the preparation of draft delegated acts in the financial services area, in accordance with its established practice.

Since the objective of this Directive, namely reducing administrative burdens relating to the publication of a prospectus in the case of offers of securities to the public and admission to trading in regulated markets within the Union, cannot be sufficiently achieved by Member States and can therefore, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.

Directives 2003/71/EC and 2004/109/EC should therefore be amended accordingly,