SME growth market

The Market Abuse Regulation is what is known as a “universal guideline”. Almost all its requirements apply equally to all issuers, regardless of their size or trading venue. The Market Abuse Regulation currently only provides for two restricted exemptions for issuers listed on so-called SME growth markets. SME growth markets constitute a new category of multilateral trading facilities (MTFs) introduced in January 2018 (open market trading segments are examples of MTFs). An issuer listed on an SME growth market can report inside information on the trading venue’s website (instead of on the issuer’s website), for example, and only has to draw up insider lists under certain circumstances if requested to do so by the national authority responsible.

The company operating the stock exchange can have an open market trading segment registered as an SME growth market with the stock market regulator (the same applies to operators of an MTF which have to address their application to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin – German Federal Financial Supervisory Authority) if certain requirements are met. At least 50% of the issuers have to be small- and medium-sized enterprises (SMEs), for instance, and the company operating the stock exchange must ensure, among other things, that suitable regular financial reporting by the issuer takes place on the market, particularly through audited annual reports. There is no SME growth market registered in Germany at present.

On 28 November 2017, the European Commission organized a technical workshop in Brussels attended by some 30 representatives from issuers, investors, brokers and other financial intermediaries. The author of this article was Germany’s only representative. The focus of the workshop was to reduce regulatory hurdles for SME listing and in doing so particularly the consequences of the Market Abuse Regulation for small- and medium-sized issuers.

From 18 December 2017 to 26 February 2018, the European Commission subsequently held a “public consultation on building a proportionate regulatory environment to support SME listing”. Interessenverband Kapitalmarkt KMU was also one of few representatives from Germany to take part in this consultation.

Planned exemptions for SME growth markets from the Market Abuse Regulation

From 25 May 2018 to 25 July 2018, the European Commission consulted on a concrete proposal for a regulation to promote the use of SME growth markets. Interessenverband Kapitalmarkt KMU also participated in this consultation.

The exemptions provided for under the new draft regulation for SME growth markets include:

- Exemptions in the case of directors’ dealings

Under this, the issuer is to have two additional business days after being notified by the director or an individual closely related to him/her to publish the notification (to date the deadlines ran in parallel which meant that if the individual subject to the disclosure requirement did not provide notification until the third day following the dealing, the issuer would have to publish without delay on the same day).

- Restriction of the insider list to permanent insiders

Under this, an insider list no longer needs to be kept with regard to transaction-specific or event-based inside information.

- Exemptions in the case of postponement of inside information

- Exemption of negotiated privately placed bonds with institutional investors from the market sounding regime and from unlawful disclosure of inside information if an alternative wall-crossing procedure applies

- Creation of a lighter “transfer prospectus” for issuers on SME growth markets that have been listed for at least three years if they wish to move into a regulated market

- Creation of a European system for liquidity provision contracts for issuers in SME growth markets

As much as exemptions for SMEs from the Market Abuse Regulation are to be welcomed, the European Commission’s concept for SME growth markets has also been subject to criticism. Interessenverband Kapitalmarkt KMU has also criticized the concept for SME growth markets repeatedly in its statements of opinion. Readers interested can find the association’s detailed statements of opinion under http://www.kapitalmarkt-kmu.de/stellungnahmen/.

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Read more about the Interessenverband Kapitalmarkt KMU association on its website: http://www.kapitalmarkt-kmu.de/

The purpose of the association is to promote the interests of capital market-financed SMEs. It is especially committed to improving the key capital market funding conditions for SMEs and actively seeks to bring the concerns of capital market-financed SMEs to policymakers, legislative bodies and the public. It offers its members expert support and encourages regular dialogue. Members of the association primarily include SMEs, service providers, financial institutions and media.

Join our initiative!

“Join our initiative! The association naturally carries much more weight and is more likely to be heard if it has more members. Visit our website, download the application form and become a member of the association – it is about a common goal: capital market-financed SMEs.”

Vote collection for prospectus-free rights issues

Interessenverband Kapitalmarkt KMU is currently collecting votes for prospectus-free rights issues of up to €8 million to submit a petition for a legislative amendment. 100 capital market-financed enterprises are already supporting the initiative. This gives the capital market-financed SMEs in Germany a voice that channels their issues for the first time.

The form can be found at: http://www.kapitalmarkt-kmu.de/