European Investors’ Association (EIA) welcomes the changes in the new Prospectus Regulation. In our response on the public consultation of the European Securities and Markets Authority (ESMA), we stressed the importance of ensuring that the overarching goals of the regulation are well reflected and developed in Level 2.
The objective of the Prospectus Regulation is twofold: making accession to capital markets easier and more attractive (especially for SME’s) and providing investors with relevant information on issuers and financial instruments to facilitate informed investment decisions.
Informed decisions
Most important is that investors are able to make informed investment decisions, which entails full disclosure of material risks, profit forecasts with audit approval, board and governance structure, other sources of financing and the attached rights thereto in respect to the interests of investors. In case the issuer or other advisors fail to be transparent on these issues, there should be consequences, both regulatory and under private law.
Balance
Overall, ESMA delivered a proportional draft technical advice and succeeded in realigning the technical requirements to the goals set out in Level 1. At the same time, it achieved continuity in the interest of supervision and market participants.
General remarks of European Investors:
- ESMA successfully balances the objective of the SME Growth Prospectus Regime against the needs of investor protection and ensuring that investors are provided with relevant and material fact to enable them to make informed decisions.
- European Investors believes that a prospectus should follow a given structure with a prominent place for risk factors to facilitate investors in gaining a quick overview of the issuance.
- However, we feel that, within the sections, content rules should not be overly prescriptive and formalistic to ensure sufficient flexibility vis-à-vis the differences in the business models of issuers as well as differences of the issuance.
- Nevertheless, European Investors stresses that there are some striking differences between equity and non-equity issuances which require to be taken into account. This applies specifically to the question whether it should be required that profit forecasts are accompanied by an accountant’s report further to ensure their reliability. An issuance of equity should always be accompanied by such a report.
For our full consultation response, please click here.