Prospectus Regulation: ESMA consults on draft regulatory technical standards
EMSA has published a consultation on its proposed regulatory technical standards under the the new Prospectus Regulation.
On 15 December 2017, the European Securities and Markets Authority (ESMA) published a consultation on its proposed regulatory technical standards (RTS) under the new Prospectus Regulation. ESMA is proposing to preserve existing rules in certain areas where possible, but changes will be required to take account of the new regime. The closing date for feedback on the consultation is 09 March 2018.
Background
The Prospectus Regulation (2017/1129) was published in the Official Journal on 30 June 2017 and came into force on 20 July 2017, though most of its provisions will not be applicable until two years later - 21 July 2019. It repeals the Prospectus Directive with effect from that date.
In response to requests for technical advice from the European Commission on a number of prospectus related issues, ESMA published the following consultation papers in July 2017, containing draft versions of that technical advice:
- draft technical advice on format and content of the prospectus
- draft technical advice on scrutiny and approval of the prospectus, and
- draft technical advice on content and format of the EU Growth prospectus.
ESMA intends to publish final versions of its technical advice in Q1 2018.
The Prospectus Regulation also requires ESMA to submit draft RTS on various prospectus related issues to the Commission by 21 July 2018. ESMA must, however, conduct a public consultation before submitting any draft RTS to the Commission. As such, ESMA has published its December 2017 consultation seeking stakeholders’ views on its proposals for the RTS.
Consultation on draft RTS
ESMA’s draft RTS include standards on the following:
Key financial information for the prospectus summary
The Prospectus Regulation requires that the prospectus summary include a selection of historical key financial information of the issuer and, where applicable, pro-forma financial information and a description of the qualification in the audit report.
ESMA has proposed six templates setting out the minimum key financial information disclosure requirements for the following different types of issuers and securities:
- non-financial entities (equity securities)
- non-financial entities (non-equity securities)
- credit institutions (equity and non-equity securities)
- insurance companies (equity and non-equity securities)
- special purpose vehicles, and
- closed end funds.
Each template requires key financial information to be disclosed from an issuer’s income statement, balance sheet and cash flow statement (where required by the Prospectus Regulation).
The draft RTS also address how guarantors should set out their key financial information and the presentation of pro forma and complex financial information.
Advertisements
ESMA has proposed that the current requirements in relation to advertisements be carried over into the draft RTS in so far as they are compatible with the new regime. The current requirements are set out in Articles 11 and 12 of Commission Delegated Regulation 2016/301.
ESMA’s draft RTS also include some additional requirements in relation to advertisements, including that:
- all written advertisements should include the word “Advertisement” in a prominent place
- unless the advertisement contains a hyperlink to the website where the prospectus is published, it must contain information to assist investors in tracing the prospectus and the specific offer or admission to trading to which the prospectus relates, and
- advertisements circulated to retail investors should contain specified warnings and should also be of an appropriate format and length so that investors do not confuse them with a prospectus.
The draft RTS also establish a basic co-operation procedure between the competent authorities of the home and host Member States where the host authority is concerned that an advertisement may not be consistent with the relevant prospectus.
Publication of a supplement
ESMA has proposed that the current rules on publishing a supplementary prospectus (as set out in Commission Delegated Regulation 382/2014) be carried over into the draft RTS. Certain changes are required, however, to cover new elements in ESMA’s proposed technical advice on the format and content of the prospectus. For example, the draft technical advice requires any outstanding profit forecast or estimate to be included in a prospectus. As such, the publication of a profit forecast or estimate after the approval of a prospectus, but before the close of the offer or the date of admission of securities, should trigger the publication of a supplement on the basis that this is significant new information.
Publication of the prospectus
ESMA considers that the current rules on the publication of a prospectus (as set out in Commission Delegated Regulation 2016/301) should be carried over to the new regime to the extent that they have not been made redundant by changes made by the Prospectus Regulation. However, having compared the provisions of Delegated Regulation 2016/301 with the Prospectus Regulation, ESMA has proposed that only a few of the existing rules on publication need to be included in the draft RTS.
One rule that will be carried over is the prohibition on hyperlinks in an electronic version of the prospectus (with the exception of links to the electronic addresses where information incorporated by reference is available.) ESMA has proposed that this rule be relaxed, however, so that hyperlinks will be permitted provided that they are accompanied by a statement which clarifies that the information on the website to which the hyperlink leads does not form part of the prospectus and has not been subject to scrutiny or approval by the competent authority.
