Prospectus Directive and Prospectus Rules: recent developments 2017

Prospectus Regulation

The new Prospectus Regulation (which repeals and replaces the Prospectus Directive) was published in the Official Journal on 30 June 2017. The Prospectus Regulation will come into force on 20 July 2017 and will apply to all prospectuses approved on or after 21 July 2019. Certain of its provisions apply from an earlier date, however, including the following two revised admission to trading exemptions, which will apply from 20 July 2017:

• a new prospectus will not be required for the admission to trading of fungible shares representing less than 20% (up from 10%) of the same class of shares already admitted to trading on the same regulated market, and
• the current conversion/exchange exemption has been modified by the introduction of a cap, so that no prospectus will be required on admission of shares resulting from the conversion or exchange of other securities, provided that those shares represent less than 20% of the shares of the same class already admitted to trading (over a 12 month period.)

ESMA advice on Prospectus Regulation

On 28 February 2017, the European Commission asked the European Securities and Markets Authority (ESMA) to provide technical advice on a number of aspects of the Prospectus Regulation. An updated version of the mandate was published on 01 June 2017. The mandate to ESMA consists of two parts:

• Part 1 - to provide technical advice on the following matters within 13 months:
  • the criteria for the scrutiny and review of the universal registration document and other procedural matters relating to universal registration documents
  • the format of the prospectus, the base prospectus and the final terms and the applicable disclosure requirements (when the Regulation applies the existing Prospectus Directive disclosure requirements will be repealed)
  • the minimum information that has to be included in the universal registration document
  • the disclosure requirements applicable to simplified prospectuses (to be used for secondary issues)
  • the format and disclosure requirements applicable to EU Growth Prospectuses, and
  • the criteria for the scrutiny of prospectuses and the procedures for approval of prospectuses.
• Part 2 - to provide technical advice on measures specifying the following matters within 18 months:
  • the minimum information to be included in documents describing a merger or a takeover by way of an exchange offer, and
  • general equivalence criteria for prospectuses drawn up under the laws of non-EU states.

ESMA has to provide the technical advice in Part 1 by 31 March 2018 and in Part 2 by 31 August 2018.

See CMU: European Commission seeks technical advice from ESMA on PD3

Amendments to Prospectus Rules

As noted above, most aspects of the Prospectus Regulation will apply from 21 July 2019, however, certain provisions will apply early. The Financial Conduct Authority (FCA) consulted on those measures that will come into force in July 2017 as part of its regular quarterly consultation (CP17/6). The changes proposed by the FCA are to replace the current exemption from the requirement to publish a prospectus:

• where the annual increase of shares admitted to trading is less than 10% as the Prospectus Regulation increases the threshold to 20% and applies it to securities, not just shares, and
• for shares resulting from a conversion or exchange of other securities or from the exercise of the rights conferred by other securities, as the Prospectus Regulation limits the exemption, save in certain circumstances, to 20% of the number of shares of the same class already admitted to trading on the same regulated market over a 12 month period.

Responses were due by 03 April 2017 and the FCA intends to make these rule changes effective from the date the Prospectus Regulation comes into force.

See FCA: consultation on changes to Prospectus Rules for more information.

More information

See our PD3 feature.