QCA Response to ESMA - Draft technical advice on the format and content of the prospectus

28th September 2017

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Our Legal and Primary Markets Expert Groups contributed to our response to ESMA's consultation on its draft technical advice on the format and content of the prospectus.

We did not agree that that the inclusion, format or content of a cover note should be mandated, as this would increase costs for issuers and reduce their ability to produce more comprehensible documents. We noted that it was difficult to assess whether it is appropriate for the suggested cover note to be limited to three pages without ESMA giving further indications as to what it expects to be contained within the cover note. We suggested that if the cover note was intended to provide the name of the issuer and a broad outline of the offer, then this would be difficult to extend beyond three pages. There would then be no point in specifying any page limit.

We did not support the location of risk factors in a prospectus being prescribed. We commented that issuers should be free to determine the placement of risk factors, so that the prospectus is comprehensible and includes all the necessary information.

We expressed our concern that an issuer including their website address in the prospectus might cause significant difficulties for issuers and those responsible for the prospectus, as well as confusion for investors, as this could imply that all, or parts of, the website are incorporated by reference into the prospectus and so have been prepared to the same standard as the contents of the prospectus itself and can safely be used by investors to make an investment decision. This would lead to the individuals responsible for the prospectus also being responsible, and liable, for the contents of the website. We commented that although a disclaimer could help, potential investors still could invest based on the contents of the website rather than the prospectus, which would be problematic.

We commented that requiring issuers to update their capitalisation and indebtedness table if there are material changes within the 90 day period could be onerous, as it can take some time to update all balances in table, as well as conduct due diligence on balances. We suggested including a narrative statement below the table as an alternative solution.

Regarding the secondary issuance registration document, we did not consider the proposed annexes to be sufficiently alleviated. We stressed that only information specific to the secondary issuance itself should be set out in the prospectus. In particular, we suggested that the requirement to include MAR disclosures could be problematic, as this would be significantly more burdensome requirement than to summarise such disclosures.

We remarked that secondary disclosures should differ depending on whether an issuer is listed on a regulated market or an SME growth market; the regime for secondary issuances on SME growth markets should be proportionate version of the EU Growth Prospectus and not of the full prospectus.

Click here to download our response (pdf)

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