Prospectus and transparency Q&As
On 9 November 2020, ESMA updated its Questions and Answers (Q&As) concerning Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the “Prospectus Regulation”) and its Questions and Answers (Q&As) concerning Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending (the “Transparency Directive”) in the context of the end of the UK transition period (the “Prospectus Q&As” and “Transparency Q&As” respectively). ESMA also added two new Q&As to the Prospectus Q&As relating to an exemption for admission to trading in respect of fungible issues and one regarding identification of profit forecasts in prospectuses as part of an ongoing Q&A revision exercise.
As the UK transition period with the EU ended with effect as of 31 December 2020, the relevant issuers need to take the necessary action now, if they haven’t done so already.
Brexit related updates
In Question 16.1 ESMA addressed the need for non-EU issuers that have the UK as their home Member State for the purposes of the Prospectus Regulation to choose a different home Member State at the end of the transition period. According to ESMA (applying the principles in Article 2(m)(iii) of the Prospectus Regulation), such an issuer should choose as its new home Member State either from:
- the EEA Member State in which the issuer first makes an offer after the end of the transition period (including for this purpose an offer made during the transition period which continues after the end of the transition period); or
- the EEA Member State in which the issuer first seeks admission to trading on a regulated market after the end of the transition period.
Question 16.2 of the updated Q&As on the Prospectus Regulation covers the status of a prospectus, where it has been approved by the FCA and passported into the EU prior to the end of the transition period, once the transition period ends.
It is made clear that after the end of the transition period it will no longer be possible to passport such a prospectus into an EEA Member State since the Prospectus Regulation will no longer apply to or in the UK, and the UK will no longer be covered by the passporting mechanism set out in Article 25 of the Prospectus Regulation. Additionally, these prospectuses, if passported to one or several EU 27 Member States / EEA EFTA States while the UK was a Member State or during the transition period, can no longer be supplemented.
Therefore, these prospectuses can no longer be used to offer securities to the public or admit securities to trading on a regulated market within the EEA, even if the offer period began before the end of the transition period.
The updated Q&As on the Transparency Directive contains an updated question 26 covering choice of home Member State under the Transparency Directive after the end of the UK’s transition period for leaving the EU. An issuer which has had the UK as its Transparency Directive home Member State before the end of the transition period and which has securities admitted to trading on one or several regulated markets in the EEA must determine a new Transparency Directive home Member State according to the rules laid down in Article 2(1)(i) of the Transparency Directive.
Such issuers should choose and disclose their new home Member State without delay after the end of the transition period. If the issuer does not disclose its new home Member State within a period of three months after the end of the transition period, ESMA is of the view that the Member State (or if more than one, each Member State) where the issuer’s securities are admitted to trading on a regulated market should be considered its home Member State until a subsequent choice of a single home Member State has been made and disclosed by the issuer.
The updated Q&As on the Prospectus Regulation also cover:
- the identification of profit forecasts in prospectuses (ESMA adopts a "substance over form" approach concerning what financial measures may be viewed as profit forecasts for this purpose); and
- the exemption from the obligation to produce a prospectus for the admission to trading on a regulated market of securities fungible with securities already admitted to trading on the same regulated market, provided that they represent, over a period of 12 months, less than 20% of the number of such securities already admitted to trading on the same regulated market.