The Financial Services Authority is looking at slashing the amount of paperwork proposed in a European Union directive for small transactions between institutional clients. The move would be a U.K. amendment to the E.U. prospectus directive, which comes into force in April and will enable issuers to sell listed securities, including structured products, across Europe on the basis of a single prospectus.
The directive will require more disclosure for public deals with sophisticated financial professionals for deals of less than EUR50,000 (USD62,931). Lawyers say the paperwork requirements for smaller deals, which would be the same for retail investors and institutional clients, are unreasonable for qualified investors and could curtail that part of the market.
The FSA suggests in its consultation paper that if the client is buying a listed security, but will not trade this on a regulated market, the counterparties will be able to work under a lighter disclosure regime even if the size of the deal is less than EUR50,000. Pauline Ashall, partner at Linklaters in London, explained institutional investors often require listed paper, which has to be issued under the disclosure regime of the E.U. prospectus directive. "There is not a great deal of flexibility [in the directive]," commented Ashall. Few jurisdictions have started to implement the directive and only the FSA has proposed an alternative option for banks selling products to professional investors.
