My Lord [Strathclyde],
Ladies and Gentlemen,
It is an honour to be here with you this evening and it is always a personal pleasure for me to be in London.
When this Dinner was planned several months ago most of us did not anticipate the most recent developments of what can hardly still be called a "financial turmoil". I have been involved in several economic and financial crises in my professional life and this is certainly one of the most serious ones I have witnessed. Markets are down, investors are jittery, credit is hard to come by. And the general feeling is that there is more to come.
Coming here as the European Commissioner in charge of financial services, I feel a bit as if I were entering the "Dragon's Den", although this time the smaller businesses are the jury, and I am doing the "pitch"!
You might be relieved to hear that despite the seriousness of the situation I am not here tonight to pronounce the thirteen most dreaded words in the English language: "I am from the European Commission and I am here to help you." I am here to listen to your concerns. I want to hear from you what you think the Commission should do.
Smaller quoted companies are vital to the European economy. SMEs generate most jobs and develop the most innovative products and services in the European economy. And yet they very often face unnecessary and insurmountable bureaucratic hurdles. It is only if we take care of smaller quoted companies that they will thrive and become "large caps". So we need to cut red tape and "think small" when we legislate to create an environment which is favourable to smaller companies.
The Commission has recently adopted a "Small Business Act for Europe". It contains a number of initiatives designed to create an environment that is supportive of SMEs by improving access to finance; providing support services, and strengthening economic incentives and innovative potential.
In my area of responsibility we are also working on reviews of some of the legislation currently in place in financial services, which may provide new opportunities to take account of the particular needs of smaller quoted companies. Our framework needs to be subject to regular evaluation and improvement if we want to stay competitive. At the moment we are reviewing the Prospectus, Transparency and Market Abuse Directives which should be of particular interest to you.
Prospectus Directive
Let me start with the Prospectus Directives: We are currently carrying out an evaluation of the functioning of the EU Prospectus regime, five years after it was put in place. Overall, our assessment is positive; however, we have identified a number of areas where the regime does not work as efficiently as we would like. Also we have found a number of unintended consequences nobody thought about when the text was agreed. Employee shares schemes are one example. But there are others. These are the areas where we want to propose changes to reduce the administrative burden on issuers, without lowering investor protection standards.
We shall of course consult before putting forward our proposals and I would like to invite you to share your views and experience with us.
Transparency Directive
The second initiative I would like to mention is the review of the Transparency Directive. Europe is often blamed for imposing too many transparency obligations on listed companies. We shall have to ask ourselves a number of critical questions such as: "Is the Transparency Directive too demanding for listed companies, in particular smaller quoted companies?"
One thing that we have heard so far is that the way Member States have implemented the Directive has not helped. My services are currently conducting research on the extent of the national gold plating. The preliminary findings show that problems with the Directive may not always be Brussels' fault. Interestingly, in the UK there are some slightly more stringent transparency measures in place because some obligations from a previous regime were maintained when transposing the Directive. Actually, when they were consulted, market participants had expressed a preference for the older rules they already knew. So, the UK chose to listen to market participants and did not to take all the opportunities for simplification offered by the Directive.
At the moment, we are commissioning an independent study on the way in which the Transparency Directive operates in practice. A survey on stakeholders' perceptions will be an important component of this study. And we will be listening carefully to smaller quoted companies. This study will help the Commission evaluate the Directive in 2009. I hope that it will help us identify any problems and how best to address them.
Market Abuse Directive
Let me also say a few words on the Market Abuse Directive. Like their bigger counterparts, small and medium-sized companies are very much concerned by some of the obligations under the Market Abuse Directive – especially the prohibition on dissemination of false information and the duty to inform the public of inside information as soon as possible. Smaller firms have fewer resources than bigger companies to control the application of these rules.
Our review of the Market Abuse Directive is well underway. It will look at the efficiency of the Market Abuse framework and, more precisely, its scope of application, insider dealings, market manipulations, the powers of national administrative authorities and the sanctioning process. This review will give us an excellent opportunity to simplify some provisions of the Directive. Again – we count on you to share your views with us.
Company Law, Accounting and Auditing
The reduction of administrative burdens caused by EU law is high on the Commission's agenda. Measurements of administrative costs carried out in a number of Member States have shown that information obligations entail particularly high costs for SMEs, which often have to call on to external help in order to make sure that they are in compliance.
Company law, accounting and auditing are one area where administrative costs have been found to be particularly high. This did not come as a surprise - we all know that financial reporting demands substantial resources. But this must be balanced against the critical importance of clear and comprehensive information, which the recent turbulence in financial markets has again underlined.
I am nevertheless convinced that we need to keep administrative burdens to a minimum. This is why we have accelerated our work in this area. Last year already, we adopted a first "fast track" directive aimed at reducing information obligations in mergers and divisions. We have just tabled a further proposal to reduce these obligations to a minimum. Two more proposals, one on companies' publication and translation duties and one in the area of accounting, are well advanced.
Conclusion
Let me conclude. I hope to have conveyed to you the message tonight that I am a firm believer in the importance of smaller quoted companies to the European economy. We want to take care of your needs and we need you to tell us where to start. Where does bureaucracy hurt most. I do realise that many "small caps" do not usually have the weight, the resources or even the time to influence policymaking. They need to be freed up to do what they do best: running dynamic and innovative companies and providing employment to thousands of people. The work of associations such as the Quoted Companies Alliance and EuropeanIssuers is therefore particularly important to us policymakers in that they convey the shared concerns of smaller quoted companies. I want to thank them for their engagement and to encourage them to continue to work with us in our common endeavours.
