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The Prospectus Regulations and FCA Consultation Paper, CP19/6, which incorporates proposed changes to the Handbook is issued

Background

  • The EU Prospectus Regulations came into effect on 20th July 2017 with a small number of provisions applying from the outset but the majority to take effect from 21st July 2019.

Impact

  • Risk Factors – the Regulation will require risk factors in a prospectus to be categorised by their nature and presented in order of their “materiality” (to be assessed based on the probability of their occurrence and the expected magnitude of their negative impact).
  • Generic risks serving only as disclaimers must not be included.
  • The prohibition on generic risk factors largely reflects current market practice.
  • Prospectus Summary – the Regulations prescribe changes to the presentation and content of a prospectus summary, including that it must not exceed seven A4 sides of paper.
  • In addition, a prospectus summary must not include summaries of more than 15 risk factors.
  • Simplified Prospectus and Growth Prospectus – the Regulation allows the use of a simplified prospectus for secondary issuances.
  • The Regulation introduces the concept of a “growth prospectus” allowing certain issuers (mainly small and medium-sized enterprises) to issue securities under a standardised prospectus that is written in simple language and easier for issuers to complete.

CP19/6 Changes to align the FCA Handbook with the EU Prospectus Regulation

  • The FCA issued their Consultation Paper on 28th January with their proposed rules changes to the Handbook to reflect the EU Prospectus Regulations coming into effect in 21st July 2019.
  • The Consultation closes on 28th March 2019 with the rules set to come into effect on 21st July 2019.

These are listed as follows:-

  • Exempting the smallest capital raisings – Members States can choose to increase the public offer threshold, below which a prospectus does not need to be published, to a maximum of €8m from July 2018. The UK put in place an €8m threshold on 20th  July 2018.
  • Admissions threshold raised – since July 2017, issuers have been able to issue up to 20% of securities of the same class already admitted to trading over a period of 12 months without needing a fresh prospectus. This is an increase from 10% of shares only under the PD. 
  • Creating a lighter prospectus for smaller companies – The aim of this measure is to allow SMEs to benefit from a new proportionate disclosure regime.
  • The SME market capitalisation threshold has also been raised, from €100m to €200m.
  • Shorter prospectuses and better investor information – The prospectus summary will become a shorter 7-page document based on a small number of key questions.
  • Simplifying secondary issuance for listed issuers – A simplified prospectus can be drawn up by issuers, who are admitted to trading on a regulated market, or who have been admitted to a SME growth market for 18 months.
  • Fast track and simplified frequent issuer regime – A new Universal Registration Document (URD) is introduced, described by the Commission as a type of ‘shelf registration’. It aims to support quicker scrutiny and approval of prospectuses. It is similar to a document already widely used by French listed companies.
  • Single access point for all EU prospectuses – Although ESMA already has a Prospectus Register, a new portal will be available to provide searchable online access to all prospectuses approved in the EEA. When a National Competent Authority (NCA) approves a prospectus, it will have to send an electronic copy, together with specified information, to ESMA.

Timeline

  • 21/07/19 – EU Prospectus Regulations come into effect