Changes from report parliamentary committee draft to plenary report

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

▸5 unchanged paragraphs

on the proposal for a directive of the European Parliament and of the Council amending Directive 2014/65/EU to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises and repealing Directive 2001/34/EC

(COM(2022)0760 – C90415/2022 – 2022/0405(COD))

(Ordinary legislative procedure: first reading)

The European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2022)0760),

Changed– having regard to Article 294(2) and ArticleArticles 50, 51(2) and 114 of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90415/2022),

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

Removed– having regard to Rule 59 of its Rules of Procedure,

Added– having regard to the opinion of the European Economic and Social Committee of 23 March 2023

Changed– having regard to Rule 59 of its Rules of Procedure,– having regard to the opinionreport of the Committee on Industry, ResearchEconomic and Energy,Monetary Affairs (A9-0303/2023),

Removed– having regard to the opinion of the European Economic and Social Committee of 23 March 2023,

Removed– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0000/2023),

1. Adopts its position at first reading hereinafter set out;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 1

RemovedRecital 5: (5) In addition, to further support the coverage of small and medium capitalisation companies by investment research, research material paid fully or partially by issuers should be labelled as ‘issuer-sponsored research’. To ensure an adequate level of objectivity and independence of such research material, such material should be produced in line with a code of conduct developed or endorsed by ESMA. In order to support more visibility of the issuer-sponsored research, issuers should have the possibility to submit their issuer-sponsored research to the relevant collection body as defined in Article 2 (2) of Regulation(EU) .../... of the European Parliament and the Council33. / (deleted) / 33 Regulation (EU) .../... of the European Parliament and the Council establishing a European single access point providing centralised access to publicly available information of relevance to financial services, capital markets and sustainability (2021/0378(COD)).

AddedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

RemovedRecital 6 a (new): (6a) Member States should require that a financial instrument of an issuer which is admitted to trading on an SME growth market may also be traded on another trading venue only if the issuer has been informed and has given its consent. Shares in SMEs are often illiquid by nature as they have a smaller market capitalisation and a lower trading volume. Issuers should therefore be able to object to being traded on another trading venue, as this could be beneficial in terms of reducing the risks of fragmentation of liquidity.

Addedto the Commission proposal

RemovedIt would be beneficial to extend the issuer non-objection requirement in the first part of Article 33(7) of MiFID II concerning the admission to trading of an instrument already admitted on SME Growth Markets to any trading venue. Such extension would be beneficial in reducing the risks of fragmentation of liquidity.

Added---------------------------------------------------------

RemovedDirective 2014/65/EU

Added2022/0405 (COD)

RemovedArticle 1 – paragraph 1 – point 2 – point a, Article 24 – paragraph 3b – subparagraph 1: Where the research is paid, fully or partially, by the issuer and disseminated to the public or to investment firms or to the clients of investment firms providing portfolio management or other investment or ancillary services, such research shall be labelled as “issuer-sponsored research” provided that it is produced in compliance the EU code of conduct for issuer-sponsored research to be developed by ESMA.

AddedProposal for a

RemovedDirective 2014/65/EU

AddedDIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

RemovedArticle 1 – paragraph 1 – point 2 – point a, Article 24 – paragraph 3b – subparagraph 2: ESMA shall develop draft regulatory technical standards to establish a harmonised EU code of conduct for issuer-sponsored research. The code of conduct shall set out minimum standards of independency and objectivity to be complied with by the providers of such research, and specify procedures for the effective identification and prevention of conflicts of interest. / ESMA shall submit those draft regulatory technical standards to the Commission by ... [12 months after the date of entry into force of this Directive]. / Power is delegated to the Commission to adopt the regulatory technical standards referred to in the second subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010. / The EU code of conduct shall be made available to the public on ESMA’s website. / The competent authorities of Member States shall be given supervisory powers in order to ensure that investment firms comply with the requirements of the EU code of conduct developed by ESMA. The competent authorities of Member States shall have the necessary powers to do the following: / (a) check whether investment firms have in place the organisational measures to ensure that the issuer-sponsored research that they receive is produced in compliance with the EU code of conduct; / (b) suspend the distribution by investment firms of any issuer-sponsored research that is not produced in compliance with the EU code of conduct; / (c) issue warnings to inform the public that the …

Addedamending Directive 2014/65/EU to make public capital markets in the Union more attractive for companies and to facilitate access to capital for small and medium-sized enterprises and repealing Directive 2001/34/EC

RemovedDirective 2014/65/EU

Added(Text with EEA relevance)

RemovedArticle 1 – paragraph 1 – point 2 – point a, Article 24 – paragraph 3d: 3d. Research that is labelled as issuer-sponsored research shall indicate on its front page in a clear and prominent way that it has been prepared in accordance with a code of conduct. Any other research material paid fully or in part by the issuer but not produced in compliance with a code of conduct as referred to in paragraph 3b shall be labelled as marketing communication.;

AddedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

RemovedDirective 2014/65/EU

AddedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 50, 53(1) and 114 thereof,

RemovedArticle 1 – paragraph 1 – point 2 a (new) – point a (new), Article 27 – paragraph 1 – subpagragh 1: (2a) Article 27 is amended as follows: / (a) in paragraph 1, the first subparagraph is replaced by the following: / ‘1. Member States shall require that investment firms take all sufficient steps to obtain, when executing orders, the best possible result for their clients taking into account price, costs, speed, likelihood of execution and settlement, size, nature, the provision of research, or any other consideration relevant to the execution of the order. Nevertheless, where there is a specific instruction from the client the investment firm shall execute the order following the specific instruction.’

AddedHaving regard to the proposal from the European Commission,

RemovedDirective 2014/65/EU

AddedAfter transmission of the draft legislative act to the national parliaments,

RemovedArticle 1 – paragraph 1 – point 2 a (new) – point b (new), Article 27 – paragraph 7: (b) paragraph 7 is replaced by the following: / ‘7. Member States shall require that a financial instrument of an issuer which is admitted to trading on an SME growth market may also be traded on another trading venue only if the issuer has been informed and has given its consent.’

AddedHaving regard to the opinion of the European Economic and Social Committee,

RemovedDirective 2014/65/EU

AddedActing in accordance with the ordinary legislative procedure,

RemovedArticle 1 – paragraph 1 – point 4, Article 51a – paragraph 4: 4. Member States shall require that regulated markets ensure that at least 10% of the subscribed capital represented by the class of shares concerned by the application for admission to trading is held by the public at the time of admission.

AddedWhereas:

RemovedDirective 2014/65/EU

Added(1) Directive 2014/65/EU of the European Parliament and of the Council has been amended by Regulation (EU) 2019/2115 of the European Parliament and of the Council, which introduced proportionate alleviations to enhance the use of SME growth markets and to reduce the excessive regulatory requirements for issuers seeking admission of securities on SME growth markets, while preserving an appropriate level of investor protection and market integrity. However, to streamline the listing process and to render the regulatory treatment of companies more flexible and proportionate to their size, further amendments to Directive 2014/65/EU are necessary.

RemovedArticle 1 – paragraph 1 – point 4, Article 51a – paragraph 5: 5. Member States shall deem sufficient the number of shares distributed where either: / (a) the shares in respect of which an application for admission has been made are held by the public to the extent of at least 10 % of the subscribed capital represented by the class of shares concerned; or / (b) in view of the large number of shares of the same class and the extent of their distribution to the public, the market can operate properly with a lower percentage.

Added(2) Directive 2014/65/EU and Commission Delegated Directive (EU) 2017/593 set out the conditions under which the provision of investment research by third parties to investment firms providing portfolio management or other investment or ancillary services is not to be regarded as an inducement. In order to foster more investment research on companies in the Union, in particular small and medium capitalisation companies, and to bring those companies greater visibility and more prospect of attracting potential investors, it is necessary to introduce▌ amendments to that Directive.

RemovedDirective 2014/65/EU

Added(3) The provisions concerning research laid down in Directive 2014/65/EU require investment firms to separate payments which they receive as brokerage commissions from the compensation perceived for providing investment research (‘research unbundling rules’), or to pay for investment research from their own resources and assess the quality of the research they purchase based on robust quality criteria and the ability of such research to contribute to better investment decisions. In 2021, those rules have been amended by Directive (EU) 2021/338 of the European Parliament and of the Council to allow for bundled payments for execution services and research for small and medium capitalisation companies below a market capitalisation of EUR 1 billion. The decline of investment research has, however, not slowed down.

RemovedArticle 1 – paragraph 1 – point 4 a (new), Article 69 – paragraph 2 – point u a (new): (4a) In the first subparagraph of Article 69(2), the following point is added: / (ua) supervise whether investment firms that produce or distribute issuer-sponsored research do so in compliance with the EU code of conduct developed by ESMA as referred to in Article 24.

Added(4) Compared to larger firms, small and medium-sized enterprises (SMEs) continue to be characterised by a lower amount of analyst research, a higher probability of losing coverage, a lower quality of research and limited secondary market liquidity. In order to revitalise the market for investment research and to ensure sufficient research coverage of companies, in particular the small and medium capitalisation companies, ▌unbundling rules should be further adjusted. Investment firms should have more flexibility to choose the way in which they wish to organise the payments of execution services and research. However, doing so would require a level of transparency to be maintained vis-a-vis clients as to the payment choice made by investment firms. Investment firms should inform their clients whether they apply a separate or joint payment for execution services and the provision of third party research. Investment firms should ensure that clients receive appropriate information by keeping records of the charges attributable to research and execution services and also via the provision of an annual report on those payments to clients.