(Finance) – Satisfaction with the compromises reached and optimism that a final approval will be reached before the end of the European legislature. This is what the trade associations representing listed SMEs and financial intermediaries expressed to Finance, after yesterday the Council of the EU and the European Parliament reached a provisional agreement on the Listing Actand in particular on one of the most debated aspects, namely the Directive on multiple voting shares. While on two other key measures of the package, the rules on Prospectus and Market Abuse, the agreement was reached in December 2023, on the multiple voting shares there was more uncertainty, because some proposals arrived during the discussion risked “compromising ” the objective of the measure, which is to encourage SMEs’ access to the capital market by eliminating one of the main obstacles to listing on the stock exchange, i.e. the fear of founders and families of losing control of the company once listed.
The agreement reached on the Listing Act will reduce bureaucratic burdens and costs to help European companies list and remain on EU public markets. The provisional agreement strikes a balance between reducing ongoing reporting requirements and maintaining market integrity and efficiency, simplifies the rules relating to investment research in order to increase the level of SME research, allows to re-aggregate payments for search services and order execution, strengthens cooperation and coordination between ESMA and the national competent authorities.
“The system that was promoted by the Commission and improved by the Council was then maintained – he explains Lukas Plattnerpartner of ADVANT Nctm and member of the Scientific Committee of AssoNext (the Italian Association of Listed SMEs) – As a trade association we are really very happy because we have brought home everything we asked forand there was good work at the level of the European associations, the Commission and the Council, with an initial slip-up in Parliament which was resolved in the end”.
Plattner, who followed the entire process of the provision on behalf of AssoNext, highlights that there are some innovations capable of significantly lightening the burdens of listed companies: “The prospectus will be no longer than 300 pages, and if I have to make a transition from EGM to the regulated market I will use a 50-page prospectus – therefore very simple, concise and with reduced approval times. Furthermore, if I have been listed on the regulated market for at least 18 months, I can do the secondary offerings without prospectus, as only a 10-page information document is needed which is not subject to CONSOB approval. Finally, if the capital increase is up to 30% of the shares in circulation, I do not have to do anything, with the threshold raised from 20 to 30%, while the threshold for exemption is 12 million euros”.
Another important point concerns market abuse, with the provision that narrows the scope of the disclosure obligation in the case of a prolonged process (multi-step event). “As far as issuers are concerned, and this is the fundamental step, in prolonged processes – such as the acquisition of a shareholding – only the final event must now be communicated, whereas previously the intermediate stages, such as the second diligence or the letter of intent – says Plattner – Issuers have greater certainty regarding what they must communicate, and This reduces the burdens and risks of sanctionsand, because CONSOB has often fined issuers tens of thousands of euros for not complying with the regulations”.
As for the Directive on multiple voting shares, the new agreement extends the scope to include, in addition to SME growth markets, any other multilateral trading facility (MTF) that allows the admission of SME shares to trading. A possible future extension of the scope to regulated markets could be included in the review clause. Furthermore, the co-legislators agreed to set a maximum voting ratio (i.e. the value of the votes per share that existing shareholders can hold compared to those entering the market), leaving its value to discretion of the Member States, or a restriction on (most) qualified majority decisions of the general assembly. Discretion was necessary to reach an agreement, as – especially from the Nordic countries – opposition had arisen to the regulation at community level of multiple voting share structures.
“Not only this rule clarifies the legitimacy of multiple voting structuresbut it also provides that states must allow it – he explains Marco Ventoruzzo, president of AMF Italia (Association of Financial Market Intermediaries, former Assosim) – In other words, it is an authorization rule that places a minimum threshold on what cannot be prohibited and, in my opinion, takes note of two things: before the listing, provided certain protections are provided, it is possible to access these structures to create equity leverage; but in any case one cannot ignore the market’s judgment, and if one decides to adopt these structures then the shares must still be sold and the free float created”.
Italian operators are satisfied with the provisional agreement reached at European level – which will now be finalized and presented to the representatives of the Member States and the European Parliament for approval – also because it is part of a phase of turmoil and revisions of the rules also in Italy . “The European regulation does not make changes to the TUF necessary, but makes them possible – says Ventoruzzo – Il timing is good though because the Capital Bill has seized these spaces and recognized the need for greater flexibility, and the Listing Act therefore provides indications for the next revision of the TUF. The European legislator has set some limits, but has foreseen that a minimum of freedom common to all States remains, trying to level the differences between the various systems“.
If some points of the Listing Act represent disruptive innovations, others do not have a high specific weight, despite their symbolic nature. This is the case of “re-bundling” payments for order searching and execution. Among the effects of the introduction of the MiFID II provisions was in fact the so-called “un-bundling” of financial research services, in the belief that paying for research through trading commissions was a form of “undue incentive”. According to many operators, the result has been negative for research production, especially for SMEs, with a consequent decrease in intermediaries producing research and a drying up of liquidity on smaller titles.
What emerges from the Listing Act “is essentially a recognition that the unbundling obligation has done more harm than good, but it is a unfortunately late recognitionwith the same intermediaries and managers who have organized themselves with cost centers and internal profits that make it difficult to reverse – says Ventoruzzo – It is therefore not obvious to return to the previous situation”.