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Brussels, 20 April 2007

Financial services: Commission consults on facilitating cross-border investment by expert investors (private placement)

The European Commission has published a call for evidence regarding the functioning in EU Member States of private placement regimes, under which securities can be sold privately to a limited number of eligible investors. The Commission White Paper on investment funds identified the absence of a common approach to private placement as a possible stumbling block to mutually beneficial transactions between financial professionals. Reactions from all interested stakeholders are invited before 30 June 2007. A first discussion on these issues will be held on the occasion of the UCITS open hearing on 26 April 2007. Responses to this consultation will contribute to the Commission's assessment on the need and potential options for a European private placement regime scheduled for end 2007.

Internal Market and Services Commissioner Charlie McCreevy said: "It has been argued that the lack of a European private placement regime creates legal uncertainty and materially hinders cross-border business between seasoned financial market participants. We now want to test this proposition more seriously. Is there an important single market failure here? What are the economics of this? What could a useful private placement regime look like? Once we have a better understanding of these issues and input from a wide range of serious market participants, we can start working on how to give effect to any useful improvements as cost-effectively as possible."

In its White Paper on enhancing the single market framework for investment funds (IP/06/1569) the Commission committed to "undertake a systematic analysis of national barriers to private placement".

Proper arrangements for private placement could be particularly helpful in freeing up cross-border transactions in non-harmonised investment funds or institutional products such as private equity investments which are not suitable for the retail investor. Legal uncertainty and barriers to cross-border business with regard to private placement are considered as factors that increase the costs of raising money, particularly by inflating legal and advisory fees. These higher organisational costs, in turn, impact negatively on the returns available to investors.

As a first step in preparing its report, the Commission is currently gathering information and views on the need for and possible design of a European private placement regime. With this call for evidence interested parties are invited to express their views and to submit relevant evidence.

The call for evidence requests input on three issues. First, it seeks quantitative or qualitative material to determine whether the absence of a common approach to private placement constitutes a material impediment to cross-border financial investments. Second, it invites comments on the appropriate parameters of a possible private placement regime – in terms of the boundary between public and private offer, eligible participants, and enforcement issues. Third, it opens discussion on whether and how a private placement regime could be established at European level. The Commission requests that replies be as fully evidenced as possible and be supported by examples of best practice from national level within or outside the EU.

In the context of this consultation, the Commission will devote one panel to a first exchange of ideas on this topic during the open hearing on investment funds which will be held in Brussels on 26 April 2007. The call for evidence plus online registration for the open hearing are available at:

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