Financial Services: Prospectuses Directive adopted, July 2003

Ministers gathered for a meeting of the Economic and Financial Affairs Council adopted the Prospectuses Directive on 15 July 2003, which should make it easier and cheaper for companies to raise capital throughout the EU whilst offering investors greater protection.

The proposal for a Prospectus Directive is the centrepiece of the EU's Financial Services Action Plan and a key tool in the drive to create an integrated European securities market by 2003. The key objective of the new Directive is to introduce a single passport for issuers, which would mean that once approved by the authority in one Member State, a prospectus would then have to be accepted everywhere else in the European Union. Investor protection would be guaranteed through a set of common EU standards on the disclosure of information that would have to be met in order for a prospectus to be approved.

The European Commission first submitted a proposal for a Prospectus Directive on 30 May 2001 but this provoked much controversy and so the European Commission, taking account of the European Parliament's opinion, put forward an amended proposal [COM(2002)460 final] on 9 August 2002. MEPs voted to approve the Council's common position on this new proposal on 3 July 2003 with 21 compromise amendments, such as reducing the threshold above which issuers can freely choose the 'home competent authority' and establishing a transitional period for implementation of the legislation. The vote paved the way for adoption of the Directive by the Council on 15 July 2003 despite concerns voiced by the European Commission that certain administrative obstacles would delay the approval of the proposal until after the August recess.

Even now, Member States will have until 2011 to adopt the legislation, although the European Commission will conduct an initial review of the legislation in 2008. The Directive had faced considerable opposition from the financial sector amid concerns that the 'maximum harmonisation' aspect of the proposal would mean that countries could not add their own rules on top and the UK Financial Services Authority warned that this could lead to lower standards for British investors. The European Federation of Securities Exchanges also claimed that there had been a lack of lack of transparency and consultation with the market on the contents of the amended Prospectus Directive.

Links:
Council of the European Union:
	15.07.03:	Press Release: Economic and Financial Affairs Council, Brussels [PRES/03/201]
European Commission:
	15.07.03:	Press Release: Financial services: Commission welcomes Council's adoption of Prospectuses Directive [IP/03/1018]
	02.07.03:	Press Release: Financial services: Commission welcomes European Parliament's approval of prospectuses proposal [IP/03/933]
	DG Internal Market: Financial Services - Prospectus Directive
European Sources Online: Financial Times:
European Sources Online: In Focus
	Financial Services: European Commission amends its proposal for a new Prospectus Directive, September 2002

Helen Bower

Compiled: Wednesday, 16 July 2003

The prospectuses Directive was finally adopted at a meeting of the Economic and Financial Affairs Council in Brussels on 15 July 2003.