Huhne bids to ease market-access burden for small firms

Date: 08/11/01

By Laurence Frost

BRITISH MEP Chris Huhne will call for less red tape in proposals for harmonised stock market listing procedures when he unveils the European Parliament's draft position later this month.

Huhne will warn that the European Commission's plan for a single EU securities prospectus would increase the burden on start-ups and smaller businesses, as well as threaten the second-tier markets on which they are traded."A key objective of [the proposal] was to make access to finance easier and cheaper," said Huhne, who tables his report to the Parliament's economic and monetary affairs committee (EMAC) on 21 November. "But one of its consequences is to make access to finance harder and more expensive for an important subset of small businesses."

The proposal sets uniform standards for prospectuses - the accounting information and other documentation firms must 'disclose' to stock exchange regulators when they issue new securities (stocks or bonds) or introduce existing ones to new markets.

Smaller companies fear they will bear more than their fair share of the extra costs of administration and regulators' fees. Huhne is likely to propose that 'shelf registration' - the obligation to update prospectuses annually even when no new securities are issued - should be optional for firms. Huhne's comments will add to the Commission's embarrassment over its proposal's reception, which drew savage criticism from senior figures in the financial services industry after it was tabled last May. They said it would increase costs for smaller businesses listed on exchanges such as Britain's AIM and Ofex or Germany's Neuer Markt.

Until now firms raising capital on these markets have faced fewer regulatory hurdles than those listed on the major bourses. "What distinguishes these junior markets is that you can get a listing and raise capital without the heavy-duty requirements that go with one of the bigger markets," said Huhne. An influential EMAC committee member from the conservative PPE grouping has backed Huhne's position. In a letter to the Financial Times this week, British MEP Theresa Villiers called for a "rethink" of the directive and the "massive and unnecessary regulatory burden" it would impose on small firms.

Belgian former central banker Alexandre Lamfalussy last month said the Commission had failed to consult adequately over its proposal. Lamfalussy chaired the committee of 'wise men' whose February report was the basis of securities legislation, including the EU prospectus proposal.

Preview of the European Parliament's draft position on proposals for harmonised stock market listing procedures, due to be unveiled by British MEP Chris Huhne on 21 November 2001.