Prospectus Directive: Omnibus II Directive changes: approval procedures, publication and advertisements

Background

In September 2014, the European Securities and Markets Authority (ESMA) in accordance with the mandate given to it in Directive 2014/51/EU (the Omnibus II Directive), published a consultation paper on draft Regulatory Technical Standards (RTS) on certain prospectus related issues - see elexica article ESMA publishes draft RTS on prospectus related issues under the Omnibus II Directive.

In July 2015, ESMA published a draft Delegated Regulation in the form of a final report which proposed changes to the Prospectus Directive regime - see elexica article ESMA publishes final report on draft RTS on prospectus related issues under the Omnibus II Directive.

In December 2015 the Commission adopted its Delegated Regulation in a very similar form to the text of ESMA’s draft RTS such that the proposal in ESMA’s draft RTS was substantially unchanged. In March 2016 the text of the Delegated Regulation was published in the Official Journal, again in a substantially unchanged form.

What does the Delegated Regulation cover?

The Delegated Regulation contains changes to three different aspects of the Prospectus Directive regime:

Procedure for approval of a prospectus

The Delegated Regulation codifies the prospectus review and approval process so as to ensure consistency across the practices of competent authorities. The process described in the Delegated Regulation is to a large extent already generally followed by several competent authorities such as the United Kingdom Financial Conduct Authority, Luxembourg Commission de Surveillance du Secteur Financier and Central Bank of Ireland.

Publication of a prospectus

The Delegated Regulation makes further amendments to the aspects of the Prospectus Directive and Prospectus Regulation dealing with the way in which a prospectus is permitted to be published. The key points are:

• when a prospectus is published on a website, it shall: (i) be easily accessible when entering the website (ii) be in a searchable electronic format which cannot be modified (iii) not contain hyperlinks (other than to the documents incorporated by reference), and (iv) be downloadable and printable
• a hyperlink to each document incorporated by reference shall be included in the prospectus
• in respect of public offers of securities, measures shall be taken so as to avoid targeting residents of Member States or third countries where the public offer is not taking place (eg the insertion of a disclaimer)
• users must not be required to complete a registration process, accept disclaimers limiting legal liability or pay a fee in order to access a prospectus which has been published electronically
• the method of publication selected from Article 14 of the Prospectus Directive in respect of a base prospectus does not have to be adopted in respect of each set of final terms issued under the base prospectus, and 
• each competent authority shall publish on its website a list of each prospectus approved by the competent authority and how such prospectus can be obtained.

Advertisements

The Delegated Regulation contain provisions for correcting information contained in advertisements in respect of a public offer or admission to trading of securities where a supplement has subsequently been published in respect of the securities. In such circumstances:

• an amended advertisement should be disseminated if the subject matter of the supplement renders the content of the previous advertisement inaccurate or misleading
• the amended advertisement should refer to the previous advertisement and specify that the previous advertisement has been amended due to it containing inaccurate or misleading information
• the amended advertisement should also specify the differences between the two versions of the advertisement
• the amended advertisement shall be disseminated without undue delay following the publication of the supplement, and 
• save for orally disseminated advertisements, the amended advertisement shall be disseminated at a minimum through the same means as the original advertisement.

The Delegated Regulation contains a useful clarification that the obligation to amend an advertisement shall not apply after the final closing of the public offer or after securities have been admitted to trading on the regulated market (whichever occurs later).

The Delegated Regulation also includes a general requirement that information disclosed in oral or written form regarding a public offer or admission to trading of securities (whether for advertisement purposes or otherwise) shall not:

• contradict information contained in the prospectus
• refer to information which contradicts the information contained in the prospectus
• present a materially unbalanced view of information contained in the prospectus, including by way of omission or presentation of negative aspects of such information with less prominence than the positive aspects, and
• contain alternative financial performance measures concerning the issuer unless also contained in the prospectus.

Next steps

The Delegated Regulation will enter into force on the twentieth day following publication in the Official Journal, which is understood to be 24 March 2016. As the legislation is in the form of a Delegated Regulation, the legislation will not need to be enacted in to local law by Member States.

Comment

Given the Commission’s current focus on a substantial overhaul of the Prospectus Directive regime as part of the Capital Markets Union initiative, it is unsurprising that the text of the draft RTS has been adopted by the Commission and published in the Official Journal without any substantial changes.

The Commission has published its legislative proposal to modernise the Prospectus Directive which includes the abolition of the existing Prospectus Directive and Prospectus Regulation, therefore the life of this particular Delegated Regulation is likely to be fairly short. In the Explanatory Memorandum accompanying the Delegated Regulation, the Commission notes that the text of the Delegated Regulation is consistent with the ongoing modernisation of the Prospectus Directive therefore it is possible that the content of the Delegated Regulation may be included in the future modernised regime.