The European Commission will relax a number of financial market rules to enable stock exchanges to play a greater role in the recovery from the coronavirus crisis.
The removal of the ban on the distribution of research on small stock exchange funds for free is the most striking measure. This measure, part of Mifid II, was criticised by professional investors from the very beginning. They argued that the ban on providing research for free would lead to a significant reduction of research on small listed companies, which could frustrate the financing of these companies.
Since the introduction of Mifid II in 2018, brokers and banks have had to charge money for research they provide to investors. Previously, these costs were hidden.
The measure shows the European Commission has taken the investor criticism seriously. ‘Financial markets are vital to the economic recovery, because government funding alone is not enough to get economies back on track,’ European Financial Markets Commissioner Valdis Dombrovskis said at a press conference on Friday. Analyst reports can now be distributed free of charge by banks and brokers again.
The reversal of the ban applies to companies with an average stock market value of less than €1 billion over the last 12 months. For companies with a value exceeding this figure, the Mifid ban on free research remains in force.
In addition, the European Union wants to relax the prospectus rules for the issuance of shares and bonds. For example, a shorter prospectus, which is easier to produce and read, will suffice when issuing new shares. This should reduce costs and thus increase the attractiveness of investment.