Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (Prospectus Directive) was published in December 2003 and was required to be implemented in Member States by 1 July 2005.
The main aim of the Prospective Directive is to improve market efficiency by enabling companies to gain access to financial markets across the EU by introducing a single harmonised passport regime for issuers of securities in the EU. The cornerstone of the Directive is the requirement to publish a prospectus where either an offer of securities is made to the public or securities are admitted to trading on a regulated market.
All prospectuses must meet specified disclosure standards and be approved by the issuer’s relevant competent authority. By ensuring that adequate and equivalent disclosure standards are in place in all EU countries, investors can benefit from the same level of information.
Once a prospectus is approved by a competent authority in the relevant Member State, it can be used in the other Member States without the need to meet further disclosure requirements.
The Directive introduces a definition of offer of securities to the public for the first time and a new regime of exemption from the obligation to publish a prospectus, which will be common to all Member States.
Revision of the Prospectus Directive
The rules underwent a major revision in 2010, with the adoption of Amending Directive 2010/73/EU which required implementation by 1 July 2012. The Amending Directive made changes inter alia in the following areas:
- pre-emptive offers subject to proportionate disclosure regime
- the summary
- the supplementary prospectus and right of withdrawal
- certain definitions aligned with MiFID
In 2015 the European Commission conducted a consultation which identified shortcomings in the current directive. As part of its capital markets union action plan, in November 2015 the Commission put forward a proposal for a regulation to improve the prospectus regime. A key objective of the Capital Markets Union is to facilitate raising on capital markets. The main objective of the Regulation is to simplify the existing rules for the drawing up, approval and distribution of prospectuses, thereby reducing the costs and burdens associated with their production.
Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC was published in the Official Journal of the EU on 30 June 2017.
The Regulation aims to:
- make it easier and cheaper for smaller companies to access capital
- introduce simplification and flexibility for all types of issuers, in particular for secondary issuances and frequent issuers which are already known to capital markets
- improve prospectuses for investors by introducing a retail investor-friendly summary of key information, catering for the specific information and protection needs of investors
The new prospectus regime will ensure that appropriate rules cover the full life-cycle of companies from start-up until maturity as frequent issuers on regulated markets. Key areas of revision include:
- Exempting the smallest capital raisings: The threshold at which the requirement to publish a prospectus should be increased from €100,000 to €500,000.
- Creating a lighter prospectus for smaller companies and certain secondary issuers
- Shorter prospectuses and better investor information: Prospectuses should be shorter and clearer, written in a way which is more beneficial to investors.
- Fast track and simplified frequent issuer regime: Companies that frequently tap into capital markets will be able to use an annual "Universal Registration Document" for fast-track approvals.
- Single access point for all EU prospectuses: The European Securities and Markets Authority (ESMA) will provide free and searchable online access to all prospectuses approved in the European Economic Area.
The Regulation enters into force on 21 July 2017 and will apply from 21 July 2019 with a few exceptions.