New EU Prospectus Regulation: more obligations for issuers or less strict rules?

The first significant change is the prospectus summary’s reduced maximum number of pages from the current fifteen prescribed by European legislation to seven. Information included in the summary should thus be more concise and more transparent for retail investors. The regulation explicitly determines that the prospectus summary must be prepared to be easy to read and should omit any technical terms.

A relief for issuers should be the simplified disclosure regime for secondary issuances. The details for secondary issuances should have been determined in January. But the anticipated implementing regulation has not yet officially been published by the commission and, at present, the internal settlement of comments is expected to take place in June. More details regarding the conditions of this interesting instrument have not yet been made available.

Apart from a standard prospectus, an alternative for smaller issuers will also be an EU growth prospectus, available not only for small and medium-size companies but also for issuers specified in the regulation. Similarly as in the case of simplified disclosure regime for secondary issuances, details should have been determined in January but the anticipated implementing regulation has not yet been published.

The regulations also plans simplifications for frequent issuers (i.e. issuers who offer securities to the public on a regular basis), introducing a universal registration document containing information about the issuer. The document can be prepared once in the issuer’s accounting period: after having it approved by the regulator, the issuer may submit for review the description of securities and the prospectus summary only. If the registration document is approved in two successive accounting periods, the issuer may subsequently submit such a document to the supervisory body without prior approval.

The involvement of the European Securities and Markets Authority (ESMA) in prospectuses is expected. Every year, the ESMA should publish a report containing prospectus statistics and analyses, offering an interesting summary of the methods of disclosing information about securities across the European Union.

The prospectus regulation reflects the needs of this particular capital market segment and introduces improvements for issuers and more user-friendly environment for investors. However, only practice will show whether and how the new concepts will actually be utilised.