The European Commission launched a consultation on potential changes to the EU's Prospectus Directive earlier this year, as part of a review aimed at "lowering barriers to accessing capital markets", particularly for SMEs.
Louise Wolfson of Pinsent Masons, the law firm behind Out-Law.com, said: "The process for drawing up a prospectus and obtaining approval by the national competent authority can be complex, expensive and costly, with legal fees for even straightforward IPOs exceeding £100,000 ($157,000)".
"We support a number of the proposals in the consultation that make it less burdensome form companies to raise capital in the EU. In particular, we support adjustments to the current exemptions to the requirement to produce a prospectus," she said.
In its response to the consultation, Pinsent Masons proposed that the current €5m value threshold be raised to €10m, and the threshold for the number of persons below which no prospectus is required be increased from 150 to 200.
"This would enable offerings to be made to a more diverse investor base, which would potentially be useful to enable funding for SMEs, but sufficiently limited to ensure that offers are not made to a broader selection of the public, which could undermine investor protection," the response said.
Pinsent Masons also said that the European Commission should remove the need for a prospectus where an issuer is already listed, and proposes a subsequent, secondary issue of the same securities. This would be on the basis that the issuer is already subject to the continuing obligations regime, Wolfson said.
The firm, however, rejected the proposal that a prospectus should be required when securities are admitted to trading on a multilateral trading facility (MTF) such as AIM (Alternative Investment Market).
MTFs are different to the regulated markets, and are subject to a different level of regulation, Pinsent Masons said in its response: "To impose such a requirement ... would add a significant burden to issuers," it said. "The additional costs and resources required would generally not be available to the SMEs who typically look to admitting securities to such an MTF."
More harmonisation is needed across Europe, Pinsent Masons said, with standardisation so that individual member states cannot create extra costs and uncertainty by adding their own restrictions or requirements.
Overall, Pinsent Masons supports the proposed modifications to the proportionate disclosure regime "to ensure it achieves its original purpose of offering a lighter prospectus regime for certain types of issues and issuers," Wolfson said.
The lack of clarity in the current directive means that issuers often decide to prepare a full prospectus to avoid making incorrect choices about what to omit, Wolfson said.
All employee share schemes, whether private, listed, EU or non-EU, should also be exempt from the need to publish a prospectus, the response said.
"Unless the exemption is extended to non-EU companies, EU employees are unable to benefit from this incentive. In our experience, non-EU companies view the requirement to issue a prospectus as burdensome and may choose not to provide an employee share scheme to EU employees," it said.
In other comments, Pinsent Masons rejected a proposed limit to the length of each prospectus, saying that this would be "an arbitrary restriction, focussing on form over substance [which] may prevent disclosures that are necessary and / or useful".
The firm also agreed that a central, comprehensive EU filing system for all prospectuses would be useful.