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European Commission legislative update

On May 24th, the EC published proposals related to the promotion of the use of small and medium sized enterprise (SME) growth markets. The proposals are designed to give more flexibility for SME growth market operators as to whether they wish to impose obligations related to the production of semi-annual reports on SME debt-only issuers.

The MiFID II Directive (2014/65/EU) created the SME growth market trading venue (a subset of MTFs) to facilitate access to capital for SMEs and the further development of specialist markets for SME issuers.

The problem is that the current definition of SMEs is not suitable for companies issuing bonds and the semi-annual financial reporting requirement was rather onerous. The EC proposals address these deficiencies.

Other EC proposals include an exemption for privately-placed bonds from the ‘market sounding regime’ (subject to conditions). Market sounding is where information is given prior to the announcement of a transaction to gauge the interest of potential investors.