Date: 31st March 2024

[The document has been updated to the final March 2024 version]

The report by CFA Institute and BETTER FINANCE critically reviews the EU’s listing rules, targeting reforms to improve public market accessibility for small and medium-sized enterprises (SMEs). It aims to foster debate amidst the ongoing review of the Listing Act by the European Commission (EC) and the legislative process.

Key highlights include:

  • Decline in Listed Companies: A significant drop in the number of companies listed in the EU, which affects SMEs’ capacity to obtain financing through public markets.
  • European Commission’s Listing Act: Seeks to attract more SMEs to public markets by lowering regulatory burdens and introducing more flexible arrangements for voting rights after IPOs.
  • Recommendations from the 2020 European IPO Task Force: Calls for proportional requirements for SMEs, enhanced promotion of SME growth markets, and improved access to equity research.
  • Survey Insights:
    • High costs and complex regulations are major barriers to accessing capital markets.
    • A unified SME definition across the EU is necessary.
    • Lack of liquidity and insufficient research coverage deter investments in SMEs.
    • Financial education is vital for boosting investments in public markets.
    • Multiple Voting Rights Shares (MVRS) are viewed sceptically due to potential negative effects on investor trust.

Convergence Points between CFA Institute and BETTER FINANCE:

  • Consensus against MVRS, advocating for a review of the Prospectus Regulation to lessen issuer burdens and enhance investor information access.
  • Calls for a nuanced SME definition and improvements in the attractiveness of SME Growth Markets.
  • Emphasise the importance of financial education for market participation.

FESE’s Contribution:

FESE provided input to the report, enabling it to offer complementary positions as the Federation of European Securities Exchanges. It supports the European Commission’s initiatives to strengthen European capital markets, advocating for adjustments that ensure an effective balance between practicality, market integrity, and investor protection.

The report underscores the importance of engaging in a constructive debate during the review of the EC’s Listing Act, emphasising the need for legislative refinements and stakeholder input, particularly regarding contentious issues like MVRS. It advocates for a balanced approach to legislative discussions and comprehensive guidelines on ESG disclosures to promote a more inclusive and sustainable EU capital market framework.