There has been a recent focus, both at EU level and in the UK, on the need to improve access to capital markets finance for small and medium-sized enterprises. There are differing views on how best to achieve this: some advocate reduced, or more proportionate, standards of disclosure for SMEs, while others focus on improving the quality of the information disclosed as the key to increasing investor appetite. The two approaches could be seen as being at odds, given the former promotes greater flexibility and simpler reporting, while the latter arguably means a greater reporting burden. Either way, AIM companies, and their investors and advisers, should take note: while there is a prospect of reduced regulation at EU level, recent UK guidance emphasising the need for better quality disclosure may have a more immediate impact.
Capital Markets Union: unlocking investment through simpler and standardised reporting requirements
At the Capital Markets Union (CMU) conference in Brussels on 8 June 2015, the EU Commissioner for Financial Services, Financial Stability and Capital Markets Union made it clear that a top priority emerging from the Commission’s CMU consultation is improving Europe’s “funding escalator”, i.e. building a financial system that is better able to meet the financing needs of all businesses at different stages in their development. Part of this involves making it easier for SMEs to raise capital by issuing debt or equity on public markets, rather than having them rely, as they have done historically, on bank finance. The Commission’s green paper, published in February, suggests ways to unlock investment for smaller entities, including through simpler reporting requirements, a single market for capital and a single rulebook for financial services.
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