Brussels, 15 October 2007
Financial services: Consultation confirms national divergence hinders cross-border private placement
The European Commission has published a summary of the 38 responses it received to a call for evidence regarding the functioning in EU Member States of private placement regimes (IP/07/523). Under private placement securities can be sold privately to expert investors without triggering rules on investor protection, reporting and disclosures that apply when instruments are sold to the retail public. Respondents recognise serious problems in the cross-border distribution of some types of investment products, in particular non-harmonised investment funds. Respondents note that the arrangements established under the Prospectus Directive work well for securities and closed-end funds. Responses suggest that these arrangements should be extended to non-harmonised open-ended funds – such as institutional funds and hedge funds. The responses represent a valuable input to the Commission's assessment on the need and potential options for a European private placement regime scheduled for spring 2008.
Internal Market and Services Commissioner Charlie McCreevy said: "Effective private placement arrangements are a common feature of most developed financial systems around the world. Private placement rules allow seasoned market participants to buy and sell financial instruments without the full weight of regulatory burdens that apply when selling to the retail public. In Europe, we have no equivalent. We have a patchwork of national rules which are often mutually incompatible. This call for evidence confirms views of market players that a common understanding could bring benefits to the EU financial markets. But there are still many unanswered questions. We need to do further work on this – also with regulators and investors – to get a better sense of the best way forward."
38 reactions were received – almost exclusively from individual financial institutions (20%) or their respective associations at national (35%), European (40%) or international level. Only two responses were received from national authorities or supervisors. Responses were received from organisations in 11 Member States as well as from EU, US and international organisations.
Problems are particularly acute for (non-harmonised) open-ended investment funds which do not benefit from 'passporting opportunities' provided by the Prospectus Directive to securities and closed-end funds. Most respondents report that these latter arrangements work reasonably well. Many respondents urge the Commission to concentrate on replicating similar arrangements for (non-harmonised) open-ended funds. Any EU level arrangements should complement – but not over-ride or interfere with – more liberal existing EU and national regimes.
Beyond this, there are considerable differences of view on the design of a European private placement regime. Views diverge widely about the definition of eligible investors, the eligibility of third country providers or the types of public offer rules that should be relaxed under such a framework. Public authorities and supervisors have yet to engage with this work in a meaningful way.
The Commission will continue to analyse the scope, costs and benefits of
possible action, and to test possible options with stakeholders. On the basis of
this further work, the Commission will reach a view of whether EU level work on
this topic is warranted and the most promising options for making