IN SHORT:

The European Market Securities Regulation (“ESMA”), based on the mandate granted by the European Commission of 28 February 2017, has published the regulatory technical standards for the implementation of the Prospectus Regulation (EU 2017/1129), in force as of 21 July 2019, which regulate the drafting of prospectuses for the admission of securities to trading on a Regulated Market and the public offers.

An important step towards the process of harmonization and rationalization of the prospectuses aimed at building the Capital Markets Union.

THE FACT:

Format and content of prospectus

ESMA sets out a number of amendments aimed at reducing burdens and costs for issuers which draw up a prospectus (for instance, by removing the auditors’ report on profits forecasts) and rationalizing the information contained therein in order to make the prospectus (usually amounting to several hundred pages) more accessible to investors.

The most interesting contribution is represented by the format of the summary note which shall not exceed seven pages, compared to the current length that not exceed more than 7% of the prospectus or 15 pages, whichever is greater. ESMA reviews also the risk factors, limiting the related information only to concrete, specific and significant risks for the investment.

Moreover, ESMA has provided a minimum set of information for the various categories of issuers and financial securities, ensuring the possibility to add further information at the issuer discretion, and granting a greater flexibility for issuers in the choice of information to be included in the prospectuses.

Format and content of “EU growth prospectus”

In order to reduce the length and complexity of the contents of the prospectus, ESMA (i) identifies the minimum information requirements, the order in which they should be presented and the format and content of the specific summary note; (ii) tries to balance the amount of the information required based on the issuer’s size and the complexity of its transactions; (iii) proposes a list of more concise and specific information for the registration document and the informative note on securities, whether they are shares or bonds.

Supervisory and approval activities related to the prospectus

ESMA proposes to adopt standard criteria aimed at removing the differences among the various supervisory and approval procedures concerning the prospectus, applied by the competent authorities of Member States.

However, the national authorities of the Member States shall maintain a certain level of flexibility for supervising the necessary completeness, comprehensibility and consistency to ensure investors protection.

WHY IT IS IMPORTANT:

The prospectus is a document required by law which the issuing companies must prepare and publish for the negotiation of securities on the Market. Based on the information contained in the prospectus, investors decide whether to invest or not.

The technical standards published by ESMA for the implementation of EU Regulation No. 2017/1129 pursue the objective of:

• facilitating companies’ access to the financial Markets, by reducing the burdens and costs related to the drafting of the prospectus and simplifying the administrative procedures for the obtainment of the relevant clearance for the publication;
• increasing the level of investors protection, requiring that the prospectus shall provide a condensed, clear, specific and complete information equal in all the Member States, in order to allow the investor to better evaluate the information contained in the prospectus and to carry out a correct appreciation of the investment as a whole.

The contribution of ESMA, therefore, is an important step towards the process of harmonization and rationalization of the prospectuses aimed at building the Capital Markets Union.