On 4 December 2024 a significant change occurred for the capital markets of the European Union as the new Listing Act came into effect. Aimed at making the markets more attractive and accessible, the Listing Act introduces important changes to the Prospectus Regulation and the Market Abuse Regulation. The changes are intended to reduce bureaucracy and facilitate for companies, especially small and medium-sized enterprises, in entering public markets. But what do these changes mean in practice, and how will they affect issuers and investors? In this article, we explore the most critical aspects of the new legislation and what they may mean for the future.
On 14 November 2024, the EU legislative acts collectively known as the ‘EU Listing Act’ were published in the Official Journal of the EU. The legislative package entered into force on 4 December 2024 and introduced changes to the EU Prospectus Regulation, the EU Market Abuse Regulation and the EU Markets in Financial Instruments Regulation and Directive (MiFIR and MiFID). The legislative package also repeals the EU Listing Directive and introduces a new directive harmonising rules on structures of shares with a higher voting power. Many of the changes will not apply until 5 March 2026 and 5 June 2026 respectively, but some already apply as of 4 December 2024.
Below we briefly review the background of the legislative package and describe the changes in general terms. Thereafter, we focus on the changes to the Prospectus Regulation and the Market Abuse Regulation, applicable as of 4 December 2024. Finally, we briefly mention important changes that will start to apply in 2026 and present some concluding reflections.
Background and overview of the legislative changes
As part of the EU’s post-COVID pandemic Capital Markets Recovery Package, the Commission committed to developing a legislative initiative to make markets in the Union more attractive by removing significant barriers that are holding back companies, including SMEs, seeking access to markets.
To achieve these objectives, the aim was to develop a broad legislative product addressing all barriers affecting companies’ access to public markets, before, during and after the IPO. In particular, the legislative initiative would address burdensome disclosure requirements to seek admission admission to trading on public markets, as set out in the Prospectus Regulation, and the burdensome ongoing disclosure requirements laid down in the Market Abuse Regulation.
The legislative package, known as the ‘Listing Act’, was approved by the European Parliament and the Council in October 2024 and published in the Official Journal of the EU on 14 November 2024.
The Listing Act actually consists of three different parts of EU legislation: Regulation (EU) 2024/2809 amending the Prospectus Regulation, the Market Abuse Regulation and MiFIR, Directive (EU) 2024/2810 on multiple-vote share structures in companies that seek admission to trading of their shares on a multilateral trading facility (i.e. an MTF, such as Nasdaq First North Growth Market) and Directive (EU) 2024/2811 amending MiFID.
In the following, we focus on changes to the Prospectus Regulation and the Market Abuse Regulation, i.e. the amendments introduced by Regulation (EU) 2024/2809, applicable as of 4 December 2024. The common feature of these changes is that they bring relief to market participants, not least issuers.
Changes to the Prospectus Regulation and Market Abuse Regulation applicable as of 4 December 2024
Prospectus Regulation
All offers fall within the scope of the Prospectus Regulation (Article 1(3) repealed)
One change that began to apply on 4 December 2024 is the repeal of the current Article 1(3) of the Prospectus Regulation. According to the current provision, offers of securities to the public totalling less than EUR 1 000 000, calculated over a 12-month period, are excluded from the scope of the Regulation. By this change no offers are excluded from the scope of the Regulation.
However, as far as Sweden is concerned, this does not affect the current exemption from the need to draw up a prospectus if the total consideration for the securities offered over a 12-month period is less than EUR 2.5 million (this threshold will be harmonised within the EU through amendments to the Prospectus Regulation, which will apply from 2026).
New exemptions for secondary issuances directed to the public (Article 1(4)(da) and (db)) and for securities fungible with securities already admitted to trading on a regulated market (Article 1(5))
According to the new rules in Article 1(4) (da) and (db), an issuer does not need to draw up a prospectus for certain smaller secondary issuances directed to the public provided that certain conditions are met, including that the number of shares issued during a 12-month period does not exceed 30 per cent of the number of shares already admitted to trading on the same market. If the securities have been continuously admitted to trading for 18 months preceding the offer, the issuer does not need to draw up a prospectus even if the offer exceed 30 per cent of the number of securities already admitted to trading.
In the case of admission of securities to trading on a regulated market, no prospectus is required if the securities represent less than 30 per cent of the number of securities already admitted to trading, according to the revised Article 1(5). When the new securities are fungible with securities that have been admitted to trading on a regulated market continuously for at least the last 18 months before the admission to trading of the new securities, the issuer does not need to draw up a prospectus even if the new securities exceed 30 per cent of the number of securities already admitted to trading.
In these cases, however, registration of a document containing information according to the new Annex IX to the Prospectus Regulation may be required. The information document can be said to constitute a simplified version of a prospectus. Registration shall be done through the Swedish Financial Supervisory Authority’s (SFSA) prospectus website. If the issuer fails to register the required document the offer or the admission to trading is no longer excluded from the obligation to draw up a prospectus.
Clarifications regarding the description of risk factors (Article 16)
An amendment to Article 16 of the Prospectus Regulation clarifies that the prospectus may not contain risk factors that are generic, that serve only as disclaimers or that do not provide a sufficiently clear picture of the specific risk factors that investors need to know. The previous wording only stated that the risk factors should be specific to the issuer. The aim is to make the prospectus more understandable and to help investors make informed decisions.
To reduce the workload of the issuer, the Union legislator has removed the requirement for the issuer to rank the most material risk factors. The amended Article 16 only requires the issuer to list the most material risk factors in a manner consistent with the issuer’s judgement, thus imposing a less strict obligation on the issuer.
A possibility to incorporate financial statements in advance in a base prospectus (Article 19(1b))
To reduce unnecessary costs and burdens for issuers and to make the incorporation of information more efficient and effective, a new Article 19(1b) of the Prospectus Regulation clarifies that the publication of a supplementary prospectus is not required for new annual or interim information in a base prospectus that is still valid. Instead, the new financial information may be incorporated by reference.
In connection to an IPO on a regulated market, the offer is only required to be open for three days after the publication of the prospectus (Article 21(1))
This deadline has been shortened from six days to three days. The purpose of the change is to promote fast processes for order book building, especially in rapidly changing markets. The change should also contribute to making it more attractive to attract non-professional investors in such offers, without negatively affecting investor protection.
Extended withdrawal period when publishing a supplementary prospectus (Article 23)
When an issuer publishes a supplementary prospectus, for example because there is a material error in the prospectus, investors who have already applied for subscription in the issue have the right, under Article 23 of the Prospectus Regulation, to withdraw their application. The deadline for doing so used to be two days but has now been extended to three days.
Extended possibility to draw up prospectuses in English in cross-border offers (Article 27(2))
In situations where securities are offered to the public in more than one Member State, there is now a possibility to draft the prospectus in “a language customary in the sphere of international finance”.
This means that the issuer can choose to write the prospectus in English in these situations, relieving the issuer of the burden of translating the prospectus into the languages of different Member States. However, there is still an obligation to provide a translation of the summary of the prospectus. Member States may not require the translation of any other part of the prospectus.
Market Abuse Regulation
New threshold for reporting transparency transactions (Article 19(8) to (9))
The amendment raises the threshold for the obligation to report insider dealing according to Article 19 of the Market Abuse Regulation, from EUR 5 000 to EUR 20 000 per calendar year. The purpose of the amendment is to avoid unnecessary requirements for persons discharging managerial responsibilities to report transactions that are of such a low value that they are irrelevant to investors.
The amendment is applicable from 4 December 2024, so for the remainder of 2024, the threshold for reporting managers’ transactions will be EUR 20,000. This means that a person who, on or after 4 December 2024, carries out a transaction that brings them up to the previous threshold of EUR 5,000 will no longer be subject to the reporting obligation. The SFSA will evaluate the new threshold in 2025 and decide whether to raise it to EUR 50 000 or lower it to EUR 10 000 per calendar year, in accordance with an authorisation in Regulation (EU) 2024/2809.
Clarifications to the rules on market soundings (Article 11)
By amending Article 11, the Union legislator has sought to provide a broad definition of market sounding for the provision to cover several different types of market sounding methods. A market sounding may require the disclosure of inside information to potential investors and expose the parties involved to legal risks.
According to recital 64 of Regulation (EU) 2024/2809, the definition should also include information that is not accompanied by a specific notification of a transaction, since inside information may also be disclosed to potential investors in such cases. Even in those situations, the issuer needs the protection against allegations of unlawful disclosure provided by Article 11. The new rules impose partially mandatory requirements, such as documenting in writing whether the sounding entails the disclosure of inside information and submitting the documentation to the SFSA.
Further exemptions for managers’ transactions in own accounts during closed periods (Article 19(12a))
Transactions or activities that do not relate to active investment decisions by a person discharging managerial responsibilities are exempted from the trading ban during the closed period. Such transactions may result from irrevocable arrangements entered outside a closed period or be the result of discretionary asset management carried out by an independent third party. Furthermore, the transactions may result from the receipt of inheritances, gifts or donations.
Amendments to Article 19(12a) exempt these types of transactions, which depend exclusively on external factors or do not involve active investment decisions by a person discharging managerial responsibilities, from the prohibition on trading during a closed period.
Some other changes to the Prospectus Regulation and Market Abuse Regulation that will apply in 2026
Above we have focused on the changes that apply as of the entry into force of the Listing Act on 4 December 2024. However, we would like to briefly mention some other important changes that will start to apply in 2026, and which we will most likely have the opportunity to return to in more detail before then.
Regarding the Prospectus Regulation, a harmonised exemption for the prospectus obligation is introduced throughout the EU, set at EUR 12 million (the limit is currently EUR 2.5 million in Sweden). However, Member States will be given the option to set the threshold at EUR 5 million. In addition, requirements are introduced for prospectuses to be drawn up in a standardised manner throughout the EU, i.e. the information in the prospectus must follow a certain order, as well as a possibility to draw up the prospectus in English even in domestic offers. Finally, simplified secondary issuance prospectuses (simplified prospectuses) will be discontinued, EU recovery prospectuses will be replaced by an EU follow-on prospectus and EU growth prospectuses will be replaced by EU growth issuance prospectuses, both of which will be limited in scope.
Regarding the Market Abuse Regulation, two very significant changes are introduced to the rules on disclosure of inside information. The first change concerns the disclosure of inside information that is an intermediate step in a protracted process. Such information will not need to be disclosed until the final stage of the process. No decision is required to delay the disclosure of the inside information related to the intermediate step. The purpose behind the amendment is to prevent the disclosure of preliminary information that could mislead investors rather than contribute to efficient price formation.
I the case of a transaction the disclosure requirement shall not cover the announcement of mere intentions, ongoing negotiations or progress in negotiations regarding the transaction. Only information relating to the specific event that the ongoing process aims to realise (a so-called “final event”) needs to be disclosed. For instance, according to the preamble to Regulation (EU) 2024/2809, in the case of a merger, disclosure should be made as soon as possible after the management has taken the decision to sign off on the merger agreement, once the core elements of the merger have been agreed upon. In general, for contractual agreements the final event should be deemed to have occurred when the core conditions of that agreement have been agreed upon. In the case of non-protracted processes related to a one-off event or set of circumstances, notably when the occurrence of that event or set of circumstances does not depend on the issuer, the disclosure should take place as soon as the issuer becomes aware of that event or set of circumstances.
As regards the delay of the disclosure of inside information, the current criterion that the delay must not mislead the public is replaced by the requirement that the information delayed must not contrast with the most recent information disclosed by the issuer relating to the subject in question. In other words, it is not a question of how the information may be perceived by the public, but of a concrete comparison between the information that is the subject of a delayed disclosure and information previously disclosed by the issuer on the same subject.
How this is to be interpreted is not entirely clear. The Commission has been authorised to adopt a delegated regulation to establish and, if necessary, revise a list of situations where the inside information that the issuer intends to delay is in contrast with the most recent public announcement on the same matter.
Concluding remarks: striking a balance between attractive markets and investor protection
The overall aim of the changes to the Prospectus Regulation and the Market Abuse Regulation is, as we mentioned in the introduction, to make the European capital markets more attractive, both for investors and for issuers. The changes are, in our view, in many respects positive, as they reduce the burden on issuers and facilitate investors’ decision-making. At the same time, there is a risk that extensive simplification of the regulatory system could lead to a deterioration in investor protection.
The legislation must balance the interest of providing an attractive market for issuers with the interest of protecting investors through good disclosure and at the same time maintaining public confidence in the capital markets. We at Moll Wendén law firm are following the developments with interest and look forward to seeing what impact the new rules will have. Please do not hesitate to contact us with your questions or concerns.
