Cyprus Securities and Exchange Commission’s(CySEC) comments on the European Commission’s background and consultation documents on the review of Directive 2003/71/EC

CySEC fully agrees with CESR’s comments on the consultation document. Further to those comments please find below CySEC’s comments to some areas of the consultation document not addressed by CESR:

A. Amendments/Changes proposed by the European Commission

  1. Item 5.: Amendment of Art. 16 (2) PD:
  • In principle, CySEC agrees with the intentionof the Commission to harmonise the time frame for the ‘withdrawal right’ mentioned in Art. 16 (2) PDso as to establish a common period among the Member States. However, we have the following concerns:

The wording of the proposed amendment is not clear. We have the opinion that the phrase ’at least’ could be deleted from the proposed amendment, in order to be drafted more clearly and achieve the proposed harmonization.

Our second concern isthe case where supplements are pasported to host Member States. The issue is whether the proposed timeframe is considered enough in practice.

  • As regards the analysis provided and the conclusion reached by the Commissionthat some issues should be addressed at level 3, CySEC feels that certain issues should be addressed through an amendment of the legislation to ensure legal certainty.

One of these issues is the following:

The second paragraph in Article 16 provides that ‘Investors who have already agreed to purchase or subscribe for the securities before the supplement is published shall have the right...... to withdraw their acceptances’. The current wording leads to different interpretations as to whether:

  • the right of withdrawal is applicable in cases where a public offer of shares has been completed and the shares have been issued but not yet admitted to trading and a supplement is published in accordance with article 16.1
  • the right of withdrawal should be included in a supplement prospectus related to a prospectus for the admission to trading of securities already issued. Is the right of withdrawal applicable in such a case?

Therefore our suggestion is that the European Commission could harmonize not only the time frame of the withdrawal right but also the cases where the withdrawal right can be applied.

B. Background document, Part 4 (OTHER ISSUES IDENTIFIED):

  1. Item 4.3.:Disclosure obligations for small quoted companies

CySEC does not agree neither with the solution to raise the threshold of €2,5m nor with the suggestion to request a reduced amount of information for the cases when a small quoted company offers equity to the public. A large number of companies in Cyprus fall in to the category of small and medium-sized enterprises. If the Commission increases the above mentioned limit then a large number of offers of securities in Cyprus will fall outside the scope of the ‘harmonised regime’ of the prospectus directive and therefore no accurate information will be provided to investors.

We have the opinion that a ‘mini prospectus’ will not include all the necessary information in order to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses, and prospects of the issuer and of any guarantor, and of the rights attaching to such securities (Article 5.1 of the Prospectus Directive).

  1. Item 4.5.: Rights issues

CySEC does not agree with the Commission’s view that the offer of rights could be exempted in Article 4 of the Prospectus Directive from the obligation to publish a prospectus, as not only existing shareholders are concerned.

Trading of rights is not restricted to existing shareholders only and as a consequence rights can be sold to anyone. Therefore a full prospectus is needed for Investors’ Protection.

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