Our Legal and Primary Markets Expert Groups contributed to our response to ESMA's consultation on the draft regulatory technical standards under the new Prospectus Regulation.
We commented that key financial information (KFI) extracted from the issuer's historical financial information should not be sign-posted as this would bring limited value to the information disclosed. Only relevant KFI should be disclosed.
We disagreed that cash flow from financing activities and cash flow from investing activities were not so relevant for investors in equity securities. We encouraged issuers to be given flexibility to decide whether KFI extracted from the cash flow statement are or are not relevant to include in the summary of the prospectus.
We commented that there should be no limit on the inclusion of historical financial information in the summary and that there was no one specific piece of information that would be most useful for retail investors. We stressed that all information that an issuer includes in a summary is useful for the reader to make an investment decision and should be treated equally. We remarked that as the requirements of the Prospectus Regulation regarding the maximum length of the summary ensured the summary remained short and user-friendly, there was no need to impose a maximum number of KFIs, such as alternative performance measures.
Although we agreed that advertisements (except oral advertisements) should contain a hyperlink to the specific page of the website where the prospectus was published or will be published, we did not agree that ‘communication’ should be interpreted as widely as ESMA suggests. We commented that extending the advertisements regime to written and oral bilateral communications would place a disproportionate burden on issuers and their advisers without any clear benefits. We encouraged ESMA to interpret 'communications' as only communications that are publicly or otherwise widely disseminated and that should be reflected in the RTSs.
Regarding publication, we agreed that only Article 6(1)(c) and 6(3) of the Second Commission Delegated Regulation need be carried over to Level 2 under the new regime. We added that guidance from ESMA will be important as to how to reconcile restrictions on publication in foreign jurisdictions which are currently used in practice to avoid breaches of local securities laws and regulations with the requirement to publish electronically and not to restrict access to such publications.