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The Prospectus Regulation: A New Regime
The Prospectus Regulation ((EU) 2017/1129) (“PR”) will be fully applicable from 21 July 2019, completely repealing and replacing the previous Prospectus Directive (“PD”) regime. We have previously written on the provisions of the PR that became effective in 2017 and 2018; it is timely to now recap the further provisions in effect from July 2019.
Where securities are either offered to the public within the EU and/or admitted to trading on an EU regulated market, the PR regime requires a prospectus to be published and approved by a competent authority. Issuers may no longer make a prospectus available to the public by publishing it on the website of the Central Bank of Ireland (“CBI”). It is proposed instead that the CBI will publish links to websites where approved prospectuses can be found. Issuers will need to provide those links to the CBI prior to approval, and maintain them for 10 years after publication.
Delegated regulations taking account of ESMA’s technical guidance and clarifying certain provisions of the PR will also apply from 21 July 2019. The first of these delegated regulations regards the format, content, scrutiny and approval of a prospectus when securities are offered to the public or admitted to trading on a regulated market, and the other relates to regulatory technical standards on key financial information in the prospectus summary, publication and classification of prospectuses, advertisements for securities, prospectus supplements and the notification portal.
Exemptions from Obligation to Publish Prospectus
From 21 July 2018, Member States have been able to choose the threshold of total consideration below which a prospectus is not required for offers to the public in that Member State. In Ireland, the threshold is currently set at EUR 5,000,000.
Some PD exemptions remain, such as for open-ended UCITS and securities guaranteed by EU member states. Public offers with a minimum denomination of EUR 100,000 are still exempt from the requirement to publish a prospectus; this does not apply to the requirement for a prospectus for admission to trading on a regulated market.
Exemptions for public offers addressed solely to qualified investors and to fewer than 150 natural or legal persons per member state have also been retained.
What is New?
The summary requirements for prospectuses being offered to retail investors have changed. These requirements are closely modelled on the key information document (KID) required under the PRIIPs Regulation. Where issuers have already provided a KID, they may include it in the prospectus summary, along with further required details. The summary has a maximum length of 7 pages (including no more than 15 risk factors – see below) and contains an introduction and key information on the issuer, the securities and the offer of securities to the public and/or the admission to trading on a regulated market.
A maximum of 15 risk factors must be evaluated according to probability of occurrence and the magnitude of potential damage and must be presented by category, with the most material risk presented first in each category. Only risks that are material for making an investment decision and which are specific to the issuer should be included. Risk factors must be corroborated in the body of the prospectus.
Regular issuers of securities admitted to trading on a regulated market or a multi-lateral trading facility where a prospectus is required have the option of preparing a Universal Registration Document (“URD”) containing disclosure on the issuer’s organisation, business, financial position, earnings and prospects, governance and shareholding structure. Once the URD has been approved for two consecutive financial years by the competent authority, the issuer may file subsequent URDs without prior approval (provided that at least one URD is filed every year).
There will be a simplified disclosure regime for issuers with securities already admitted to trading on a regulated market or an SME growth market for 18 months. Such issuers have the option of publishing a simplified prospectus instead of a full prospectus, which must include annual financial statements, together with a summary of any relevant market abuse information.
For further information, please contact Turlough Galvin or your usual Matheson contact.