Documents considered by the Committee on 25 January 2017 Contents

9Financial services: requirements for a prospectus

Committee’s assessment

Legally and politically important

Committee’s decision

Cleared from scrutiny

Document details

(a) Proposed Regulation on requirements for a prospectus; (b) European Central Bank Opinion on the proposed Regulation.

Legal base

(a) Article 114 TFEU, ordinary legislative procedure, QMV; (b) —


HM Treasury

Document Numbers

(a) (37356), 14890/15 + ADDs 1–3, COM(15) 583; (b) (37610), 7283/16, —

Summary and Committee’s conclusions

9.1For some time we have held under scrutiny a proposed Regulation to replace the 2003 Prospectus Directive, which concerns disclosure requirements for securities being admitted to an EU regulated market or being offered to the public, together with a European Central Bank Opinion on the proposal.

9.2When we last considered this proposal, earlier this month, we declined a Government request to clear the documents from scrutiny. Rather, while recognising a satisfactory outcome to the negotiation of the proposal, we wished to know first:

9.3The Government now:

9.4Given the fuller information we now have, we clear the documents from scrutiny.

9.5We note the Government’s apology for the scrutiny lapse and will hold it to its undertaking about its scrutiny responsibilities pre-Brexit.

9.6As for the Justice and Home Affairs issue we note that the Government continues to purport to have an opt-in option for this proposal, even though the relevant provision would have no practical effect for the UK. However, the Minister makes clear that the Government will lay a minute statement setting out its position when the proposal is adopted.

Full details of the documents

(a) Proposed Regulation on the prospectus to be published when securities are offered to the public or admitted to trading: (37356), 14890/15 + ADDs 1–3, COM(15) 583; (b) European Central Bank Opinion on a proposed Regulation on the prospectus to be published when securities are offered to the public or admitted to trading: (37610), 7283/16, —.


9.7The 2003 Prospectus Directive sets out disclosure requirements which apply, in broad terms, whenever an issuer seeks to admit securities to a regulated market in the EU or to offer securities to the public. The Commission has proposed, in the context of the developing Capital Markets Union, a new Regulation to replace the Prospectus Directive. The European Central Bank has issued an Opinion on the proposed Regulation, in which it generally welcomed and supported the aims of the proposal.

9.8The Government has told us that it welcomed the Commission’s text as a step in the right direction and that it agreed with the policy intentions. It has also said that the European Central Bank’s Opinion is broadly consistent with its position.

9.9When, earlier this month, we last considered this matter, not having heard from the Government since April 2016, we were told that trilogue discussions of the proposed Regulation had concluded and that an agreed text was due to go for adoption by the ECOFIN Council later this month. The Government commented that it welcomed the agreement reached in trilogues as a positive outcome of the negotiations and asked us to clear the file from scrutiny. The Government also said that it had informed the Council that it considered that a provision concerning criminal sanctions for breaches of some elements of the proposal (which the UK would not be using) fell under the scope of Part Three, Title V TFEU concerning an Area of Freedom Security and Justice and that it intended not to exercise its right to opt-in.

9.10We recognised that the Government had achieved a satisfactory outcome to the negotiation of this proposed Regulation and that it had abstained from the Council vote on the General Approach on scrutiny grounds. However, we were very concerned that it had singularly failed to keep us informed of important developments in the negotiation, for instance, adoption in June 2016 of a General Approach by the Council. We said that this undermined the scrutiny process, even if there had been no technical breach of the scrutiny reserve. Moreover, the Government had not addressed our request for information as to how the European Central Bank’s Opinion had played into the Council working group negotiations. So we were not yet ready to clear the documents from scrutiny. Rather we would await information from the Government as to:

9.11We emphasised our concern about the Government’s scrutiny shortcomings in this case by asking our Chairman to write directly to the Minister concerned, which he did, as annexed to this chapter.

9.12As for the Government’s claim not to have opted into a Justice and Home Affairs provision, we reminded it yet again that we did not believe that the UK opt-in is engaged in the absence of a Justice and Home Affairs legal base. So we continued to consider that the proposed Regulation would apply in its entirety to the UK. However, given the Government position, we asked what steps are being taken to ensure that the legal text reflected its contention that part of the Regulation would not apply to the UK; and, if this was not achieved, its analysis of the validity of the Regulation.

The Minister’s letter of 19 January 2017

9.13The Economic Secretary to the Committee (Simon Kirby) refers first to the European Central Bank’s Opinion, saying that:

9.14On the Justice and Home Affairs issue the Minister tells us that:

9.15As for the parliamentary scrutiny issue the Minister says that:

The Minister’s letter of 23 January 2017

9.16The Minister responds separately to our Chairman’s letter, saying that:

9.17The Minister then asserts that the Treasury has a strong record on its obligations to Parliament concerning scrutiny of EU policy but says that he recognises that on this occasion the Treasury did not meet the standards it sets for itself. He says that the Government remains committed to delivering on its scrutiny responsibilities as the UK enters a new chapter in its relationship with the EU. He concludes that he understands the importance of updating the Committees regularly and will endeavour to ensure that this mistake is not repeated in the future.

Previous Committee Reports

Twenty-fifth Report HC 71–xxiii (2016–17), chapter 5 (11 January 2017), Twenty-ninth Report HC 342–xxviii (2015–16), chapter 8 (20 April 2016) and Sixteenth Report HC 342–xv (2015–16), chapter 9 (6 January 2016).

Annex: Letter from Sir William Cash

Simon Kirby MP

Economic Secretary to the Treasury

HM Treasury

1 Horse Guards Road



16 January 2017

At its meeting on 11 January, the European Scrutiny Committee directed me to write to you personally about the handling of scrutiny on the proposed Regulation on requirements for a prospectus. The Committee requested information in April 2016. We were astounded that the Government did not see fit to update us on progress, even though a General Approach was agreed in June. Trilogues had concluded before the Treasury saw fit to provide information.

We acknowledge the fact the Government avoided a breach of the scrutiny reserve by abstaining on the vote in Council, but providing the Committee with information in good time is a crucial part of the scrutiny process, and the Treasury signally failed in this. Nor, when it belatedly responded to our request, did it manage to provide all the information requested. I expect a prompt response on this occasion, so that we can consider whether to lift the scrutiny reserve before the ECOFIN Council on 27 January.

That response should cover the further point raised in our report, namely, that we do not believe the UK opt in is engaged in the absence of a Justice and Home Affairs legal base. Given this, we wish to know what steps are being taken to ensure the legal text reflects the Government’s position that part of the Regulation will not apply to the UK, and, if there is no such text, we ask you to provide an analysis of the validity of the Regulation.

27 January 2017