EU Commission Welcomes New Rules for SMEs to Access Capital Markets

The European Commission has welcomed a new political agreement reached today (6 March 2019) by the European Parliament and Member States on new rules that will further help SMEs to finance their growth, innovate, and create jobs, a press release states.

A key element of the Capital Markets Union (CMU) agenda, the new rules will ensure that smaller businesses in the EU have access to diversified sources of financing at each stage of their development.

In particular, the revised rules will make it cheaper and simpler for SMEs to access public markets through the so-called ‘SME Growth Markets’, a new category of trading venue dedicated to small issuers.

Listing on stock exchanges can give a significant boost to small and medium enterprises, including a reduced dependence on bank funding, a broader investor base, easier access to additional equity capital and debt finance, and a higher public profile and brand recognition.

Commission Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “Given their importance for the EU economy, we need to make sure that SMEs enjoy the best possible financing conditions to grow and innovate. Today’s political agreement is an important step in making the rules on SME’s access to capital markets fit for that very purpose. These measures will enable SMEs to develop and prosper without being hindered by unnecessary costs and red tape, while preserving a high level of market integrity and investor protection”.

Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, said: “I wish to thank Parliament and Council for acting swiftly to reach a political agreement which demonstrates how important SMEs are for the Capital Markets Union. The measures agreed will help funnel more investment into Europe’s SMEs, fostering innovation, jobs and growth”. 

The proposal provides for targeted amendments to two key pieces of financial services legislation, namely the Market Abuse Regulation (MAR)and the Prospectus Regulation.

The amendments to the rules on market abuse aim to strike a balance between cutting red tape for small businesses while safeguarding market integrity and investor protection. The revised framework also creates a common set of rules on liquidity contracts for SME Growth Markets in all Member States while giving national competent authorities sufficient flexibility to tailor market practices to local conditions. This will ensure minimum liquidity and reduce volatility of SME shares.

The proposed changes to the Prospectus Regulation will allow issuers in SME Growth Markets to produce a lighter prospectus when transferring to a regulated market (i.e. a main stock exchange), which can lead to significant cost-saving for growing SMEs.

Find out more here.