The EC has Published Proposals to Amend Existing Legislation to Promote the Use of Small and Medium-Sized Enterprise (SME) Growth Markets


On May 24, 2018, the European Commission (“EC“) published:

  • A draft Regulation to amend the Market Abuse Regulation (Regulation 596/2014) (“MAR“) and the Prospectus Regulation ((EU) 2017/1129) in respect of promotion of the use of small and medium-sized enterprise (“SME“) growth markets.
  • A draft Delegated Regulation amending Delegated Regulation (EU) 2017/565 (the Commission Delegated Regulation) as regards certain registration conditions to promote the use of SME growth markets.

The MiFID II Directive (2014/65/EU) created a new type of trading venue, the SME growth market, as a sub-group of multilateral trading facilities (“MTFs“), to facilitate access to capital for SMEs and the further development of specialist markets to cater for the needs of SME issuers. However, the current definition of SMEs is not suitable for companies issuing bonds. In addition, SME growth market debt-only issuers have to produce a semi-annual financial report. This is a more stringent requirement than the one applying to issuers of bonds to professional investors on regulated markets.

Addressing these specific issues, the Commission’s proposals include measures that will make it easier for trading venues specialised in bond issuance to register as SME growth markets. This will be done by formulating a new definition of debt-only issuers; being those that issue less than EUR 50 million of bonds over a 12-month period.

The proposals also give more flexibility for SME growth market operators on whether or not to impose the obligation to produce semi-annual reports on SME debt-only issuers.

Other proposals include an exemption for privately-placed bonds from the ‘market sounding regime’ (subject to conditions). Market sounding is where information is given prior to the announcement of a transaction to gauge the interest of potential investors.

FCA Publishes Paper on SME Access to the FOS


The Financial Conduct Authority (“FCA“) is considering allowing Small and Medium Sized Enterprises (“SMEs“) access to Financial Ombudsman Service (“FOS“). On January 22, 2018, the FCA published a consultation paper, available here, exploring this option.

After speaking with SMEs, the FCA found that SMEs struggle to resolve disputes with financial firms through the courts and have no other means to seek redress.

The paper considers what size of SME should be allowed to use FOS, an “eligible complainant.” This term will be defined as a business that: is too large to be a micro-enterprise, has an annual turnover below £6.5 million, has a balance sheet not exceeding £5 million and has less than 50 employees. The FCA is also considering allowing charities and trusts of a similar size to be eligible complainants.

The FCA is also proposing that guarantors be eligible complainants. This will allow entities who provide security or guarantees to SMEs to be able to lodge a complaint with FOS.

Prospectus Directive: Commission Consultation

On February 18, 2015, the European Commission published a consultation paper on the review of the Prospectus Directive (2003/71/EC). Matters on which the Commission seeks views include:

When a prospectus is needed. In particular, views are sought as to whether the current exemption thresholds should be adjusted so that a larger number of offers can be carried out without a prospectus; whether there should be an exemption for secondary issues under certain conditions, in addition to the proportionate disclosure regime for rights issues; and whether a prospectus should be required when securities are admitted to trading on an MTF.

The information that a prospectus should contain. Questions include whether the proportionate disclosure regime should be modified or extended; whether there should be a simplified prospectus for SMEs and companies with reduced market capitalization admitted to trading on an SME growth market; and whether there should be a maximum length for prospectuses.

How prospectuses are approved, including the role of national competent authorities in the approval process of prospectuses and the equivalence of third-country prospectus regimes. In particular, the Commission asks whether the scrutiny and approval procedure should be made more transparent to the public and flexible for issuers, for example by making public the first draft prospectus filed with a competent authority for review and by allowing the issuer to carry out certain marketing activities, going beyond advertising, in the period between the first submission of a draft prospectus and the approval of the final version.

Responses must be received by May 13, 2015. The Commission intends to decide in the next months how the Prospectus Directive should be amended. It plans to prepare amendment proposals in the second half of 2015, to be presented to the European Parliament and Council of the EU, together with its review of the application of the Directive, in early 2016 at the latest.

Rating Agency Developments – Week of February 13, 2012

On February 7, DBRS released its methodology for CLOs and CDOs of large corporate credit. DBRS Methodology.

On February 7, DBRS released its Canadian surveillance methodology for CDOs of large corporate credit. DBRS Methodology.

On February 7, DBRS released its cash flow assumptions for corporate credit securitizations. DBRS Methodology.

On February 6, DBRS released its swap criteria for European structured finance transactions. DBRS Methodology.

On February 6, DBRS released its operational risk assessments for European ABS and SME CLO servicers. DBRS Methodology.

On February 6, DBRS released its operational risk assessments for European RMBS servicers. DBRS Methodology.

On February 6, DBRS released its master European structured finance surveillance methodology. DBRS Methodology.

On February 6, DBRS released its legal criteria for European structured finance transactions. DBRS Methodology.

Rating Agency Developments – Week of January 23, 2012

On January 18, Fitch updated its short-term rating criteria for non-financial corporates. Fitch Release. Fitch Report.

On January 17, S&P requested comment on proposed changes to methodologies and assumptions used to rate fully and partially credit-enhanced multiseller ABCP conduits. Comments must be submitted by March 31. S&P Release.

On January 17, S&P requested comment on its European SME CLO methodology and assumptions. Comments are due by February 24. S&P Release.

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