Special Considerations for Non- EU Issuers
| Jurisdiction | United Kingdom |
| Pages | 441-516 |
| Author | Raj Panasar,Philip Boeckman |
7
Special Considerations for
Non- EU Issuers*
7.1 Introduction 7.01
7.2 Choosing a Home Member State 7.04
7.2.1 Choice of home member state under
the Prospectus Regulation 7.06
7.2.2 Choice of home member state under
the Transparency Directive 7.24
7.3 Co ordinating Offering Aspects 7.27
7.3.1 Overview 7.27
7.3.2 Oering or admission to trading on
a regulated market with an approved
prospectus 7.35
7.3.3 Oering without an approved
prospectus in the EEA 7.117
7.3.4 Merger and acquisition transactions 7.126
7.3.5 Rights oerings 7.141
7.3.6 Equity share schemes for employees
in the EEA 7.146
7.3.7 Stabilization activities 7.155
7.4 Coordinating Ongoing Disclosure
Requirements 7.161
7.4.1 Transparency Directive 7.163
7.1 Introduction
is Chapter covers considerations of particular importance to issuers organized under the
laws of a jurisdiction other than a member state1 in connection with securities oerings and
admissions to trading in one or more member states. e Chapter focuses on the applicable
requirements under the Prospectus Regulation,2 Transparency Directive3 and the Market
* e author is a partner of Cravath, Swaine & Moore LLP and is admitted only in NewYork. e views ex-
pressed in this Chapter are those of the author and not necessarily the views of Cravath, Swaine & Moore LLP. e
author acknowledges the assistance of Darien Pun and Samyel Lee, associates at the rm admitted in NewYork, in
connection with the preparation of this Chapter.
1 roughout this Chapter, references to a ‘member state’ means a country that is a member of the European
Economic Area (the ‘EEA’), and references to a ‘non- EU issuer’ mean an issuer organized under the laws of a juris-
diction other than a member state, excluding an asset- backed issuer and government issuers.
2 Regulation (EU) 2017/ 1129 of the European Parliament and Council of 14 June 2017 on the prospectus to be
published when securities are oered to the public or admitted to trading on a regulated market, and repealing
Directive 2003/ 71/ EC (the ‘Prospectus Directive’). e Prospectus Regulation became eective on 20 July 2017
and applies on a rolling basis, with full application on 21 July 2019 and was amended and corrected on 4 June 2020
by the amending and correcting Commission Delegated Regulation (EU) 2019/ 979 supplementing Regulation
(EU) 2017/ 1129 of the European Parliament and of the Council with regard to regulatory technical standards
on key nancial information in the summary of a prospectus, the publication and classication of prospectuses,
advertisements for securities, supplements to a prospectus, and the notication portal. For the latest updates
with respect to implementing and delegated acts for the Prospectus Regulation, see ‘Implementing and delegated
acts’, European Commission, available at
amending- and- supplementary- acts/ implementing- and- delegated- acts_ en>.
3 Directive 2013/ 50/ EU of the European Parliament and Council of 22 October 2013 amending Directive 2004/
109/ EC of the European Parliament and of the Council on the harmonization of transparency requirements in
relation to information about issuers whose securities are admitted to trading on a regulated market, Directive
2003/ 71/ EC of the European Parliament and of the Council on the prospectus to be published when securities are
7.01
442 -
Abuse Regulation.4 Certain requirements of certain exchange- regulated markets5 are also
addressed as they are an alternative for a non- EU issuer to consider in listing securities
within the EEA.
In particular, the following principal topics are covered:
• the rules and considerations relating to the choice by an issuer of a home member state,
which will act as the principal regulator within the EEA with respect to securities oer-
ings and applicable ongoing reporting requirements;
• Prospectus Regulation and Market Abuse Regulation requirements applicable to secur-
ities oerings and the application of those requirements (including coordination with
non- EU regulation) in multi- jurisdictional oerings; and
• ongoing reporting requirements under the Transparency Directive and Market Abuse
Regulation and coordination of those requirements with applicable non- EU disclosure
requirements.
Although this Chapter generally focuses on the provisions of the regulations and directives
described in paragraph 7.01, one should note that the directives, unlike the regulations, do
not in and of themselves apply directly to issuers of securities.6 Instead, the directives require
member states to enact laws implementing (or ‘transposing’) those directives in the relevant
member state. As a result, there are variations in how the member states have transposed
and interpreted the directives (even in the case of directives that are intended to promote
maximum harmonization among the member states). erefore, in practice it is neces-
sary to conrm in the relevant member state(s) exactly how the relevant directive provision
has been transposed and interpreted, notably with respect to the Transparency Directive,
as was the case with respect to the Prospectus Directive in the interim period before the
Prospectus Regulation took full eect on 21 July 2019.7 Both the Prospectus Regulation and
the Market Abuse Regulation have replaced their respective directive predecessors; accord-
ingly, their respective provisions will be directly applicable to issuers of securities without
the need for member state implementation. However, although the regulations do not re-
quire member state implementation, it is still necessary for issuers to conrm whether the
oered to the public or admitted to trading and Commission Directive 2007/ 14/ EC establishing detailed rules for
the implementation of certain provisions of Directive 2004/ 109/ EC.
4 Regulation (EU) No 596/ 2014 of the European Parliament and Council of 16 April 2014 on market abuse (the
‘Market Abuse Regulation’) and repealing Directive 2003/ 6/ EC of the European Parliament and of the Council
(the ‘Market Abuse Directive’) and Commission Directives 2003/ 124/ EC, 2003/ 125/ EC and 2004/ 72/ EC.
5 Unlike regulated markets, exchange- regulated markets fall outside of MiFID II (as dened below) and the ob-
ligations under the Prospectus Regulation and the Transparency Directive are not required to be met. e applic-
able rules and regulations are instead maintained by the corresponding exchange.
6 Regulations, unlike directives, have the direct force of law without the need for member state transposition.
7 Ahistorically useful resource with respect to the Transparency Directive is a survey undertaken by the
Committee of European Securities Regulators (‘CESR’) on the transposition of the Transparency Directive. See
‘Summary of Responses to Questionnaire on Transposition of the Transparency Directive’, September 2008 con-
ducted by CESR (the ‘CESR TD Transposition Study’), available at www.esma.europa.eu/ sites/ default/
les/ library/ 2015/ 11/ 08_ 514b.pdf>. For a more recent resource, see also Annex II to the CESR TD Transposition
Study, available at a.europa.eu/ system/ les_ force/ library/ 2015/ 11/ 08_ 514b_ annex_ ii.pdf>,
which summarizes the responses from each member state that responded to CESR. On 7 July 2011, the European
Securities and Markets Authority (‘ESMA’) published a ‘Mapping of the Transparency Directive— Options,
Discretions and “Gold- plating” ’ that is partially based on the ndings of the CESR TD Transposition Study (the
‘ESMA TD Transposition Study’), available at
2011_ 194.pdf>.
7.02
7.03
443
applicable member state has a particular interpretation of those regulations. Additionally,
the Luxembourg Stock Exchange launched its Securities Ocial List (the ‘LuxSE SOL’) plat-
form on 12 January 2018, which provides issuers with the ability to register their securities
without admission to trading.8 e LuxSE SOL may prove to be an attractive option for some
issuers, as it can provide visibility for the issuer’s securities, but, because it does not pro-
vide admission to trading, may not trigger obligations discussed in this Chapter, such as the
7.2 Choosing a Home MemberState
For an issuer that is not organized under the laws of a member state that wishes to oer se-
curities in one or more member states or have its securities admitted to trading on certain
markets within the EEA, choosing a home member state for purposes of the Prospectus
Regulation or the Transparency Directive is a decision to be considered at the outset.
is Section discusses the role of the home member state under the Prospectus Regulation,
the rules and processes for a non- EU issuer choosing a home member state and key consid-
erations that a non- EU issuer should take into account in making a choice. It concludes with
a brief discussion of the choice of a home member state under the Transparency Directive,
which is frequently (but not always) driven by the same choice under the Prospectus
Regulation.
7.2.1 Choice ofhome member state underthe Prospectus
Regulation
e Prospectus Regulation is intended to establish a consistent regulatory regime across
the EEA. is unied regulatory regime provides that the competent authority in a single
member state9 (the home member state) has authority to approve prospectuses, applying
the Prospectus Regulation with respect to ‘oers of securities to the public’10 in the EEA and
8 See ‘Securities Ocial List (SOL)’, Luxembourg Stock Exchange, available at
sol>. For more details regarding the rules governing the LuxSE SOL, see ‘Rulebook— LuxSE Securities Ocial List
(SOL)’, Luxembourg Stock Exchange, available at ttps:// www.bourse.lu/ documents/ legislation- LISTING- SOL-
rulebook.pdf>.
9 For the duration of the transition period described in the Agreement on the Withdrawal of the United
Kingdom from the European Union dated 19 October 2019 (the ‘Brexit Transition Period’), the United Kingdom
remained subject to the Prospectus Regulation in substantively the same manner as member states of the EEA.
10 An ‘oer of securities to the public’ means ‘a communication to persons in any form and by any means,
presenting sucient information on the terms of the oer and the securities to be oered, so as to enable an in-
vestor to decide to purchase or subscribe for those securities. is denition also applies to the placing of secur-
ities through nancial intermediaries’. Prospectus Regulation Article 2(d). As discussed in paragraph 7.33, certain
oers are exempt from the requirement to publish a prospectus, such as oers addressed to ‘qualied investors’
(as dened in Prospectus Regulation Article 2(e)), oers made to fewer than 150 persons (other than qualied
investors) in each member state and oers with a minimum total consideration per investor of at least €100,000
or minimum denomination per security of at least €100,000 (which is only available for non- equity securities).
Prospectus Regulation Article 1.4. Additionally, oers of securities to the public of less than €1,000,000 in the
EU, over a period of 12months, fall outside of the Prospectus Regulation, and member states are not permitted to
extend the obligations of the Prospectus Regulation to such oerings (although member states are permitted to
require other disclosure requirements so long as they do not present a ‘disproportionate or unnecessary burden’).
7.04
7.05
7.06
444 -
admissions to trading of securities on any regulated market11 located in the EEA. For equity
securities12 and low- denomination non- equity securities,13 the Prospectus Regulation con-
templates a single home member state for all issues by an issuer. For high- denomination
non- equity securities,14 the issuer of the securities has the ability to select a dierent home
member state for each issue of securities.15 Depositary receipts and certicates are explicitly
covered by the Prospectus Regulation and are treated for the purposes of the Prospectus
Regulation as non- equity securities.16
e distinction in treatment between low- denomination non- equity securities and high-
denomination non- equity securities, included in the Prospectus Directive and subsequently
in the Prospectus Regulation, has created some complications in connection with debt is-
suance programmes. For instance, a base prospectus for a debt issuance programme that
contemplates both low- denomination non- equity securities and high- denomination non-
equity securities could only be approved by the competent authority of the issuer’s home
member state for low- denomination non- equity securities.17 However, if the issuer intended
to oer non- equity securities only in another member state or have non- equity securities
under the programme admitted to trading on a regulated market in another member state,
it would be required to passport the base prospectus to those other member states.18 Issuers
can avoid this concern by having separate debt issuance programmes for low- denomination
non- equity securities and high- denomination non- equity securities.
Prospectus Regulation Article 1.3. Member states are also permitted to establish exemptions from the obligation
to publish a prospectus under the Prospectus Regulation if (i)such oers are not otherwise subject to notication
under Article 25 of the Prospectus Regulation and (ii) the total consideration for such oer is less than €8,000,000
over a period of 12months. Prospectus Regulation Article 3.2.
11 A‘regulated market’ is dened in point (21) of Article 4.1 of Directive 2014/ 65/ EU of the European
Parliament and of the Council of 15 May 2014 on markets in nancial instruments and amending Directive 2002/
92/ EC and Directive 2011/ 61/ EU (‘MiFID II’), available at opa.eu/ legal- content/ EN/ TXT/
PDF/ ?uri=CELEX:32014L0065&from=EN> and refers to a multilateral system operated and/ or managed by a
market operator, which brings together or facilitates the bringing together of multiple third- party buying and
selling interests in nancial instruments— in the system and in accordance with its non- discretionary rules— in a
way that results in a contract, in respect of the nancial instruments admitted to trading under its rules and/ or sys-
tems, and which is authorized and functions regularly and in accordance with Title III of MiFID II.
12 ‘Equity securities’ means ‘shares and other transferable securities equivalent to shares in companies, as well
as any other type of transferable securities giving the right to acquire any of the aforementioned securities as a con-
sequence of their being converted or the rights conferred by them being exercised, provided that securities of the
latter type are issued by the issuer of the underlying shares or by an entity belonging to the group of the said issuer’.
Prospectus Regulation Article 2(b).
13 ‘Low- denomination non- equity securities’ are non- equity securities with a minimum denomination of
less than €1,000 per security (or, if denominated in a currency other than euro, its equivalent in that currency).
Prospectus Regulation Article 2(m). Similar language under the Prospectus Directive was interpreted such that
the equivalent of €1,000 should be determined at the time the dra prospectus is submitted to the competent au-
thority in the home member state. Question 13 of the ‘Questions and Answers— Prospectuses’, 30th updated ver-
sion, April 2019 (the ‘ESMA Q&As’) published by ESMA, available at www.esma.europa.eu/ sites/ default/
les/ library/ esma31- 62- 780_ qa_ on_ prospectus_ related_ topics.pdf>. e ESMA Q&As represent the views of the
ESMA members on the questions addressed regarding the Prospectus Directive and do not bind the European
Commission as an institution, and the European Commission is entitled to take positions dierent to the posi-
tions contained in the ESMA Q&As in any future judicial proceedings concerning the relevant provisions under
similar provisions in the Prospectus Regulation. However, note that as the Prospectus Regulation has direct force
in member states, a member state’s interpretation is not relevant to this analysis under the Prospectus Regulation.
14 ‘High- denomination non- equity securities’ are non- equity securities with a minimum denomination of
at least €1,000 per security (or, if denominated in a currency other than euro, its equivalent in that currency).
Prospectus Regulation Article 2(m).
15 Prospectus Regulation Article 2(m)(ii).
16 Prospectus Regulation Recital 10.
17 Question 46(a) of the ESMA Q&As.
18 Question 46(a) of the ESMA Q&As.
7.07
445
Another complication that has arisen in practice relates to certain types of structured prod-
ucts that are non- equity securities and do not have denominations (for example, ‘cer ticate’
structures that have been used in the German market for retail investors).
In light of these complications, the European Commission had included in its 2009 pro-
posal for the review of the Prospectus Directive the elimination of the distinction between
low- denomination non- equity securities and high- denomination non- equity secur-
ities.19 e elimination of this distinction was supported by, among others, the European
Securities Markets Expert Group (‘ESME’).20 However, the measure was not adopted under
the Prospectus Directive, and remains a relevant distinction that has continued under the
Prospectus Regulation.
7.2.1.1 Role ofthe home memberstate
The competent authority of the home member state under the Prospectus Regulation
is the entity responsible for reviewing and approving the prospectus.21 In addition,
the home member state is generally the member state in which a prospectus is first
published.22
e Prospectus Regulation is a ‘maximum harmonization’ measure with direct eect in
member states, meaning that member states cannot impose higher standards (so- called
‘super- equivalent’ standards) for the disclosure contained in the actual prospectus. However,
a home member state may impose additional requirements for admission to trading on a
regulated market in that member state (including continuing disclosure obligations and cor-
porate governance requirements) that would not have been required under the Prospectus
Regulation alone.23 For example, obligations arising out of the implementation of other
measures such as the Consolidated Admissions and Reporting Directive.24 Part3 provides
greater detail on the additional obligations and requirements imposed by particular member
states.
Once approved by the home member state, a prospectus is permitted to be used in other
member states under the passporting regime provided for in Article 26 of the Prospectus
Regulation. Given the maximum harmonization nature of the Prospectus Regulation,
other member states generally do not have latitude to impose additional requirements on
an issuer that wishes simply to use a passported prospectus in that member state (as op-
posed to the ability to impose additional obligations for admitting securities to trading on
a regulated market in that member state).25 Host member states into which a prospectus
is passported under the Prospectus Regulation do not have the ability to intervene in the
19 Proposal for a directive of the European Parliament and of the Council amending Directive 2003/ 71/ EC
on the prospectus to be published when securities are oered to the public or admitted to trading and Directive
2004/ 109/ EC on the harmonization of transparency requirements in relation to information about issuers whose
securities are admitted to trading on a regulated market (Prospectus Directive), 23 September 2009 (‘PD Review
Proposal’), available at
m=EN>.
20 European Securities Markets Expert Group Report (the ‘ESME Prospectus Report’) on the Prospectus
Directive, 5 September 2007, Section 3.2 available at ec.europa.eu/ internal_ market/ securities/ do cs/ esme/
05092007_ report_ en.pdf>.
21 Prospectus Regulation Recital 11.
22 is topic is discussed in more detail in Section 7.2.1.2.
23 Prospectus Regulation Recital 8.
24 Directive 2001/ 34/ EC of the European Parliament and of the Council of 28 May 2001 on the admission of
securities to ocial stock exchange listing and on information to be published on those securities.
25 Prospectus Regulation Article 24.1.
7.08
7.09
7.10
7.11
7.12
446 -
publication of the prospectus, although they do have the authority to enforce compliance
with the advertising requirements of the Prospectus Regulation.26 Under similar language
in the Prospectus Directive, host member states did not have the ability to require publi-
cation of a notice of passporting of a prospectus into that member state,27 and under the
Prospectus Regulation competent authorities of host member states may not undertake
any administrative procedures, presumably including imposing a requirement to publish
notice of passporting, relating to prospectuses approved by competent authorities of other
member states.28
7.2.1.2 Rules governing choice ofhome memberstate
Non- EU issuers29 have the ability to choose their home member state for purposes of
making oers of securities to the public and admission to trading on a regulated market for
their equity securities and low- denomination non- equity securities.30 By contrast, the home
member state for equity securities and low- denomination non- equity securities for an EU
issuer is the member state in which its registered oce is located.31 Both EU and non- EU
issuers have exibility to choose a home member state for issues of high- denomination non-
equity securities.32
For a non- EU issuer that has not previously made an oer to the public33 of its equity secur-
ities or low- denomination non- equity securities in any member state or had its equity secur-
ities or low- denomination non- equity securities admitted to trading on a regulated market
in a member state, its home member state for the purposes of the Prospectus Regulation will
be either:
• the member state in which its equity securities or low- denomination non- equity
securities are intended to be offered in an offering to the public for the first
time;34 or
• the member state in which the rst application for admission to trading on a regulated
market of its equity securities or low- denomination non- equity securities on a regu-
lated market is made.
e issuer of the securities or the person requesting admission to trading has the right to
choose between the two alternatives described in paragraph 7.14. In the event that a person
other than an issuer chooses a home member state with respect to such issuer’s equity se-
curities or low- denomination non- equity securities as part of seeking admission of those
securities to trading on a regulated market without the issuer’s involvement and the issuer
has not previously chosen a home member state, then the issuer will have the ability to over-
ride that choice of a home member state and select between the two alternatives described
26 Prospectus Regulation Article 22.6.
27 See question 2 of the ESMA Q&As for a discussion of this subject under the Prospectus Directive.
28 Prospectus Regulation Article 24.1.
29 As of January 1, 2021, issuers incorporated in the United Kingdom are considered non- EU issuers.
30 Prospectus Regulation Article 2(m)(iii).
31 Prospectus Regulation Article 2(m)(i).
32 Prospectus Regulation Article 2(m)(ii).
33 For purposes of selection by a non- EU issuer of its home member state for equity securities or low-
denomination non- equity securities, a previous oer will only be an ‘oer of securities to the public’ if it would
have been treated as such under the legislation in force in the country where the oer was made at the relevant date.
34 If there is a simultaneous oer to the public in multiple member states, the issuer would have the ability to
choose among those member states.
7.13
7.14
7.15
447
in paragraph7.14 when it rst makes an oer of securities to the public or requests the ad-
mission of its securities to trading on a regulated market.35 Since the Prospectus Regulation
does not provide for an issuer to change its home member state with respect to equity and
low- denomination non- equity securities, non- EU issuers that still have the ability to choose
a home member state for equity or low- denomination non- equity securities should make an
informed decision regarding its home member state.
Non- EU issuers that have previously oered equity securities or low- denomination non-
equity securities to the public in a member state have already eectively chosen their
home member state based on the criteria described in paragraph 7.14 with respect to such
securities.36
Apublic oering of high- denomination non- equity securities, on the other hand, will not
result in an issuer choosing a home member state for future issuances of securities. e home
member state for purposes of that particular issue of securities will be the home member
state in which those securities were rst oered to the public.
Similarly, the admission of securities, whether equity or non- equity, to trading only on an
exchange- regulated market will not result in a choice of home member state. As a practical
matter, the familiarity of an issuer with securities admitted to trading on an exchange-
regulated market may lead the issuer to choose the member state in which the exchange-
regulated market is located as its home member state in a future oering.
For ease of reference, the following table summarizes the possible home member states of a
non- EU issuer, based on certain characteristics:
35 e ability of non- EU issuers to make a subsequent overriding selection in this situation is provided for
in Prospectus Regulation Article 2(m)(iii), although the Prospectus Regulation does not specify a procedure for
making such selection.
36 Non- EU issuers should consider the fact that an employee share oering for which a prospectus (including
a short- form prospectus for an employee share scheme) was previously approved (subject to the expanded excep-
tion eective 21July2019) constitutes an ‘oer to the public’, which would have had the eect of xing the issuer’s
home member state. For further discussion of employee share schemes and the expanded exception for employee
share schemes that will be available under the Prospectus Regulation, please refer to Section 7.3.6.
Table7.1 Summary ofHome Member State Choices
Characteristics Possible home member states
No previous public oer in a member state and no
equity or low- denomination non- equity securities
previously admitted to trading on a regulated market
in a member state.
Issuer choice:member state in which
public oer of such securities is rst made
or member state in which such securities
are rst admitted to trading.
Previous public oer of equity or low- denomination
non- equity securities in a member state and securities
previously admitted to trading on a regulated market
in a dierent member state.
Issuer choice:member state in which
public oer was rst made or member
state in which securities admitted to
trading.
Previous public oer of equity or low- denomination
non- equity securities in a member state but no
securities of that type previously admitted to trading
on a regulated market in a member state.
Automatic:member state in which public
oer was rst made.
7.16
7.17
7.18
7.19
448 -
7.2.1.3 Key considerations inchoosing a home memberstate
e Prospectus Regulation imposes limits on an issuer’s choice of a home member state to
a member state in which the issuer intends to make an oer of securities to the public or to
have its securities admitted to trading on a regulated market.37 In an oer of securities to
the public in multiple member states (including a global oering), this would not become
a meaningful limitation. However, if the rst oer to the public of equity securities or low-
denomination non- equity securities in the EEA occurs only in a single member state, the
issuer will generally not have the ability to choose another member state as its home member
state for those securities. Such a situation could also arise in a global oering of equity secur-
ities in which securities are only oered to the public or admitted to trading on a regulated
market in a single member state.
In choosing a home member state, an issuer should also recognize that the designation of a
home member state occurs on an issuer- by- issuer basis. For issuers that intend to use a spe-
cial purpose vehicle or nance subsidiary to issue securities, that vehicle will have its own
home member state, which could dier from the home member state of the parent entity.
Choice of a home member state by an issuer that issues non- equity securities guaranteed
by another entity does not result in a choice of home member state for the guarantor. For
example, for a non- EU issuer that sets up a debt issuance programme with a Luxembourg
nance subsidiary, Luxembourg will be the home member state for the nance subsidiary
(since that is the member state in which its registered oce is located) and the home member
state for the parent, if it is also an issuer under the programme, would be determined separ-
ately as described in paragraph 7.14.
With respect to high- denomination non- equity securities, these considerations are somewhat
less signicant because the choice will relate only to a single issue of these securities. However,
from a practical perspective it would be desirable for an issuer to minimize the number of
home member states for high- denomination non- equity securities (i.e., the number of com-
petent authorities with which it needs to interact), absent specic reasons to do so.
37 An issuer that selects a home member state for a prospectus under Article 2(m)(iii) of the Prospectus
Regulation needs to have an intent to oer securities to the public in that member state or have those securities
admitted to trading on a regulated market in that member state. Otherwise, that issuer may face the possibility of
action (including sanctions pursuant to Article 39 of the Prospectus Regulation) by the competent authority of that
member state if it fails to do so during the period that a prospectus is valid.
Characteristics Possible home member states
No previous public oer of equity or low-
denomination non- equity securities in a member state
but such securities previously admitted to trading on a
regulated market in a member state.
Automatic:member state in which such
regulated market is located.
Previous public oer of equity or low- denomination
non- equity securities in a member state and securities
of that type previously admitted to trading on a
regulated market in the member state in which the
public oer was rst made.
Automatic:member state in which public
oer was rst made.
Table7.1 Continued
7.20
7.21
7.22
449
Set forth below is a summary of some of the key considerations non- EU issuers should take
account in choosing a home member state.
• Review process of competent authority in the member state. What has been the review
practice of the competent authority under the Prospectus Regulation and, historically,
its implementation of the Prospectus Directive? How extended and dicult has the
process been to obtain approval of prospectuses by that competent authority? Does the
competent authority have a ‘fast track’ procedure that may be available to the issuer?
• Frequency of dealing with non- EU issuers. If a competent authority has more experi-
ence dealing with non- EU issuers, including issuers organized in the jurisdiction in
which the issuer is organized, then it is more likely to have already identied potential
issues and have established views on them.
• Additional requirements and obligations. As described in further detail in Part 3,
various member states have imposed additional requirements for admission to trading
on a regulated market in that member state. In particular, consider if any particular
corporate governance requirements may apply— for example, as a result of the member
state’s implementation of other measures such as the Consolidated Admissions and
Reporting Directive— if a p articular home member state is chosen.38
• Language. In what language(s) does the competent authority in the member state permit
a prospectus to be prepared? In what language(s) will the competent authority accept a
prospectus for purposes of the review process? Under the Prospectus Regulation, the
competent authority in an issuer’s home member state determines the language in
which an issuer can prepare prospectuses.39
• Liability. Who is liable for the contents of the prospectus under the member state’s le-
gislation? e Prospectus Regulation requires member states to ensure that responsi-
bility for the information given in a prospectus attaches to a clearly identied person,
and at least to the issuer or its administrative, management, or supervisory bodies, the
oeror, the person asking for admission to trading on a regulated market or the guar-
antor, as the case may be.40 However, the Prospectus Regulation does not create a har-
monized liability regime, which can result in the same information being subject to
dierent liability regimes, depending on the home member state where the prospectus
is approved, and possibly also on the member state where it is being used.41 ere can
also be dierences in the extent to which selling securityholders and guarantors may be
liable for the contents of a prospectus.42
38 Of particular note in this regard is the requirement under Chapter X of Directive 2014/ 56/ EU of the European
Parliament and of the Council of 16 April 2014 amending Directive 2006/ 43/ EC on statutory audits of annual
accounts and consolidated accounts (the ‘Statutory Audit Directive’) for all public- interest entities (including entities
whose transferable securities are admitted to trading on a regulated market and entities designated by a member state
of signicant public relevance due to the nature of their business, their size, or the number of their employees) to have
an audit committee. e Statutory Audit Directive does not specify whether a member state can impose this require-
ment only on issuers incorporated in that member state or whether a member state can impose this requirement on
all issuers for which that member state is the home member state. However, Article 34 of the Statutory Audit Directive
provides that member states are required to respect the principle of home- country regulation and oversight by the
member state in which the audit rm is approved and the audited entity has its registered oce.
39 Prospectus Regulation Article 27.
40 Prospectus Regulation Article 11.1.
41 See Comparison of liability regimes in Member States in relation to the Prospectus Directive, 30 May
2013, available at ult/ les/ library/ 2015/ 11/ 2013- 619_ report_ liability_
regimes_ under_ the_ prospectus_ directive_ published_ on_ website.pdf>. (As of writing, there has not been a sub-
sequent report relating to the Prospectus Regulation.)
42 Questions 47 and 48 of the ESMA Q&As.
7.23
450 -
• Likelihood of future oerings/ listings. What is the likelihood that the issuer will make
further oers of securities to the public or seek admission of securities to trading on
a regulated market in a member state? is is particularly relevant in the context of
high- denomination non- equity securities where there is a likelihood of multiple oers
of dierent securities to the public over time. e principal consideration is that using
the same home member state repeatedly allows the issuer to establish an ongoing rela-
tionship with the competent authority and build up experience in understanding how
the competent authority approaches the relevant questions.
• Transparency Directive considerations. How does the member state approach non- EU
issuers under the Transparency Directive? Does the member state impose any (super-
equivalent) reporting requirements on issuers for which it is the home member state?
What reporting does the member state require from debt- only issuers?
• Experience with securities of the relevant type. If making a choice in the context of a
particular issue of high- denomination non- equity securities with unique features (such
as derivative securities and other structured products), does the competent authority
have experience in reviewing prospectuses for securities of that type?
7.2.2 Choice ofhome member state underthe
TransparencyDirective
e triggering event for the application of the Transparency Directive to an issuer is the ad-
mission of its securities to trading on a regulated market in a member state.43 While the
admission of debt securities to trading on a regulated market triggers ongoing reporting
obligations, an issuer that exclusively has wholesale debt securities (i.e., debt securities with
a minimum denomination in excess of €100,000 per unit44 (or a nearly equivalent amount in
another currency)) admitted to trading on a regulated market is not subject to the periodic
reporting obligations provided for in the Transparency Directive.45
Anon- EU issuer that has equity securities or low denomination non- equity securities ad-
mitted to trading on a regulated market may choose its home member state for purposes
of the Transparency Directive from among the member states in which it has securities ad-
mitted to trading on a regulated market.46 For a non- EU issuer that only has high denomin-
ation non- equity securities admitted to trading on regulated markets in the EEA, the issuer
has the ability to choose its home member state for purposes of the Transparency Directive
from among the member states in which it has securities admitted to trading or the member
state where the issuer has its registered oce, if applicable.47 An issuer’s choice of a home
member state under the Transparency Directive will remain valid for at least three years
43 Transparency Directive Article 2.1(d).
44 Note that, for securities denominated in another currency, this minimum denomination per unit threshold is
calculated at the date of the issue. Transparency Directive Articles 8.1(b) and 18.3.
45 Transparency Directive Article 8.1(b). As discussed in Section 7.4.1.3, this exemption does not exempt such
an issuer from the informational requirements contained in the Transparency Directive.
46 Transparency Directive Article 2.1(i)(i).
47 Transparency Directive Article 2.1(i)(ii).
7.24
7.25
451
unless the issuer’s securities are no longer admitted to trading on a regulated market.48 An
issuer is required to disclose its choice of home member state for Transparency Directive
purposes and must do so to each of (a)the competent authority of the member state where it
has its registered oce (b),where applicable, the competent authority of the home member
state, and (c)the competent authorities of all host member states.49 Note that for an issuer
who fails to make this disclosure within a period of three months from the date the issuer’s
securities are rst admitted to trading on a regulated market, the member state where the
issuer’s securities are admitted to trading on a regulated market will be its home member
state. Further, where the issuer’s securities are admitted to trading on regulated markets
situated or operating within more than one member state, those member states shall be the
issuer’s home member states until a subsequent choice of a single home member state is
made and disclosed by the issuer.
e Transparency Directive is a ‘minimum harmonization’ measure, meaning that member
states are free to impose additional requirements on the issuers for which they are the home
member state. However, the Transparency Directive does not provide host member states the
same authority to impose more onerous requirements on issuers. e extent to which dierent
member states have imposed various super- equivalent requirements are described in Part3.
7.3 Coordinating OeringAspects
7.3.1 Overview
Non- EU issuers that wish to oer securities both outside the EEA and in one or more
member states will inevitably need to confront the question of how to coordinate compli-
ance with the multiple regulatory regimes that may be applicable to the oering. Sections
7.3.2 and 7.3.3 of the Prospectus Regulation address the requirements in a situation in which
an issuer includes one or more member states in its oering and uses a prospectus approved
under the Prospectus Regulation or on a private placement basis. Sections 7.3.4 and 7.3.5,
respectively, address the implications with respect to merger and acquisition transactions
and rights oerings involving non- EU issuers. Issues relating to employee share schemes
are addressed in Section 7.3.6. Finally, the impact of the Market Abuse Regulation on stabil-
ization activities in connection with an oering is addressed in Section 7.3.7.
is Section is intended to highlight certain issues that may arise for a non- EU issuer in con-
nection with various types of oerings but is not a comprehensive discussion of the oering
process in the EEA. For further details regarding the basic mechanics of equity oerings or
debt oerings, please refer to Chapters2 and 3 of this Part2.
Anon- EU issuer contemplating an oer of securities to the public or having its securities ad-
mitted to trading on a regulated market in the EEA needs to consider a series of questions at
the outset of the process. How these questions are answered will determine the appropriate
approach to the prospectus regulatory regime.
48 Transparency Directive Article 2.1(i)(ii).
49 Transparency Directive Article 2.1(i)(iii).
7.26
7.27
7.28
7.29
452 -
ese questions include:
• Existing presence in the EEA:Has the issuer previously issued a prospectus under the
Prospectus Directive or under the Prospectus Regulation? Does the issuer already have
securities admitted to trading on a regulated market in the EEA? Is the issuer, or the ap-
plicable nancial institution with which the issuer contracts, familiar with the require-
documents)? Does the issuer have employees in the EEA to whom it is likely to wish to
grant equity- based compensation?
• Nature of transaction:Will securities be oered to the public as part of the transaction
or is it a secondary listing only? e competent authorities in certain member states
have established a ‘fast path’ procedure for secondary listing by issuers that are obligated
to le reports with the US Securities and Exchange Commission (the ‘US SEC’) under
US reporting standards (including foreign private issuers reporting on Form 20- F).
• Type of securities:What type of securities are involved? Are the securities equity, debt
or something else? If the securities are not equity, then what is the desired minimum de-
nomination of the securities?
• Breadth of target market:How broad is the target market for the issuer’s securities? Are
the securities intended for institutional purchasers only or is there likely to be signi-
cant retail demand as well? Is the transaction targeted to potential purchasers in one or
a small handful of member states or is there a desire to market broadly? In the case of a
listing, what types of investors already hold the issuer’s securities?
• Nature of oering and likelihood of future oerings:What is the expected length
and frequency of oerings? Is the issuer likely to undertake other transactions in the
future? Is it a continuous or shelf oering that will extend over a signicant period
of time?
• Listing of secur ities:Is there a desire to list the securities? If so, is there a market reason
to choose a regulated market over an exchange- regulated market? Listing securities on
an exchange- regulated market generally does not implicate the Transparency Directive
but would subject the issuer to whatever requirements are imposed by the market on
which the securities are listed and the member state in which such market is located.
• GAAP: What is the issuer’s home country GAAP? Does the issuer report in any
other GAAP?
Before discussing the approach to oering documentation, it is necessary to be aware of the
types of transactions to which the Prospectus Regulation does not apply52 and the types of
transactions which are exempt from the obligation to publish a prospectus.53 ese are rele-
vant as an alternative to compliance with the Prospectus Regulation.
50 Directive 2014/ 65/ EU of the European Parliament and of the Council of 15 May 2014 on markets in nancial
instruments and amending Directive 2002/ 92/ EC and Directive 2011/ 61/ EU Text with EEA relevance (‘MiFID
II’). See Section 4 of Part Ifor a discussion of MiFID II generally.
51 Regulation (EU) No 1286/ 2014 of the European Parliament and of the Council of 26 November 2014 on key
information documents for packaged retail and insurance- based investment products (‘PRIIPs’). See Chapter8 for
a discussion of the PRIIPs regime generally.
52 Prospectus Regulation Articles 1.2 and 1.3 exclude certain types of securities entirely from the scope of the
Prospectus Regulation. An issuer relying on an exclusion will need to consider what non- Prospectus Regulation
legislation is applicable in the member states in which it is oering securities.
53 Prospectus Regulation Articles 1.4 and 3 provide for exemptions from the obligation to publish a prospectus,
however the issuer remains subject to the Prospectus Regulation generally. If an exemption applies, then no pro-
spectus is required and compliance with non- Prospectus Regulation legislation should not be required.
7.30
7.31
453
Below is a summary of nancial instruments that are excluded from the Prospectus
Regulation regime:
• units issued by collective investment undertakings, other than the closed- end type;
• non- equity securities issued by a member state, legal or regional authorities of a member
state, public international bodies of which one or more member states are members, the
European Central Bank or the central bank of a member state;
• shares in the capital of a central bank of a member state;
• securities unconditionally and irrevocably guaranteed by a member state or one of its
local or regional authorities;
• securities issued by non- prot- making bo dies or associations with non- prot- making
legal status (in each case as recognized by a member state) for the purposes of obtaining
the funding necessary to achieve their non- prot- making objective;
• non- fungible shares of capital the main purpose of which is to provide the holder with
the right to occupy an apartment or other immovable property that cannot be sold
without losing such right; and
• securities included in an oer to the public in which the total consideration raised in the
EEA is less than €1,000,000, calculated over a period of 12months.54
Set forth below is a summary of the types of oerings of securities to the public covered by
the exemptions in Article 1.4 of the Prospectus Regulation:
• an oer of securities addressed solely to ‘qualie d investors’;55
• an oer of securities addressed to fewer than 150 natural or legal persons per member
state, other than qualied investors;
• an oer of securities addressed to investors who acquire securities in a single transac-
tion for a total consideration of at least €100,000 per investor;
• an oer of securities whose denomination per unit amounts to at least €100,000;
• an issuance of shares in substitution for shares of the same class already issued, if the
issuing of such new shares does not involve any increase in the issued capital;
• an oer or allotment of securities in connection with a takeover by means of an exchange
oer, provided that a document equivalent to a prospectus and containing information
describing the transaction and its impact on the issuer is made available to investors;
• an oer or allotment of securities in connection with a merger, provided that a docu-
ment equivalent to a prospectus and containing information describing the transaction
and its impact on the issuer is made available to investors;
• a payment of dividends to existing shareholders in the form of shares of the same class
as the shares in respect of which such dividends are paid, provided that a document is
made available containing information on the number and nature of the shares and the
reasons for and details of the oer;
54 Prospectus Regulation Article 1.3. Note that member states may increase this threshold to €8,000,000 for the
same 12- month period pursuant to Prospectus Regulation Article 3.2(b).
55 e term ‘qualied investor’ is dened in Prospectus Regulation Article 2(e) to mean ‘persons or entities that
are listed in points (1)to (4)of Section Iof Annex II to Directive 2014/ 65/ EU, and persons or entities who are, on
request, treated as professional clients in accordance with Section II of that Annex, or recognised as eligible coun-
terparties in accordance with Article 30 of Directive 2014/ 65/ EU unless they have entered into an agreement to
be treated as non- professional clients in accordance with the fourth paragraph of Section Iof that Annex. For the
purposes of applying the rst sentence of this point, investment rms and credit institutions shall, upon request
from the issuer, communicate the classication of their clients to the issuer subject to compliance with the relevant
laws on data protection’.
7.32
7.33
454 -
• an oer or allotment of securities to existing or former directors or employees by their
employer which has securities already admitted to trading on a regulated market or by
an aliated undertaking, provided that a document is made available containing infor-
mation on the number and nature of the securities and the reasons for and details of the
oer; and
• certain issuances of non- equity securities by credit institutions in a continuous or re-
peated manner.
Set forth below is a summary of the types of admissions to trading on a regulated market
covered by the Article 1.5 exemptions:
• shares fungible with shares already admitted to trading on the same regulated market,
provided that they represent, over a period of 12months, less than 20% of the number
of shares of the same class already admitted to trading on the same regulated market;56
• shares resulting from the conversion or exchange of other securities or from the ex-
ercise of the rights conferred by other securities, where the resulting shares are of the
same class as the shares already admitted to trading on the same regulated market, pro-
vided that the resulting shares represent, over a period of 12months, less than 20% of
the number of shares of the same class already admitted to trading on the same regu-
lated market;
• securities resulting from the conversion or exchange of certain other securities, own
funds, or eligible liabilities by a resolution authority due to the exercise of a power re-
ferred to in Article 53(2), 59(2) or Article 63(1) or 63(2) of Directive 2014/ 59/ EU;
• shares issued in substitution for shares of the same class already admitted to trading on
the same regulated market, if the issuance of such new shares does not involve any in-
crease in the issued capital;
• securities oered or allotted in connection with an exchange oer, provided that a
document equivalent to a prospectus and containing information describing the trans-
action and its impact on the issuer is made available to investors;
• securities oered or allotted in connection with a merger, provided that a document
equivalent to a prospectus and containing information describing the transaction and
its impact on the issuer is made available to investors;
• shares oered or allotted free of charge to existing shareholders and share dividends of
the same class as the shares in respect of which such dividends are paid, provided that
such shares are of the same class as shares already admitted to trading on the same regu-
lated market and a document is made available containing information on the number
and nature of the shares and the reasons for and details of the oer;
• securities oered, allotted, or to be allotted to existing or former directors or employees
by their employer or an aliated undertaking, provided that such securities are of the
same class as the securities already admitted to trading on the same regulated market
and that a document is made available containing information on the number and na-
ture of the securities and the reasons for and details of the oer or allotment;
• certain non- equity securities issued by credit institutions in a continuous or repeated
manner; and
56 Note that, under Article 1.5(b) of the Prospectus Regulation, shares resulting from convertible bonds which
are in the same class as shares already admitted to trading on the same regulated market are required to publish a
prospectus if the shares represent more than 20% of the total shares over a 12- month period, whereas under the
Prospectus Directive all shares resulting from convertible bonds were exempted.
7.34
455
• securities already admitted to trading on another regulated market, subject to certain
conditions, including that the securities have been admitted to trading on that other
regulated market for at least 18months.57
7.3.2 Oering or admission totrading ona regulated market
withan approvedprospectus
Anon- EU issuer that wishes to conduct an oering that includes investors in one or more
member states pursuant to an approved prospectus will need to plan in advance in order to
be able to conduct a well- functioning oering process. is Section outlines some of the
issues that such an issuer will need to address in order to be able to undertake an oering of
this type. is Section also addresses technical listing transactions.
7.3.2.1 Overall approach tooeringdocumentation
Unless the Prospectus Regulation does not apply or there is an available exemption under
it, an issuer will need to prepare a prospectus that complies with the requirements of the
Prospectus Regulation for the type of securities to be oered and the type of issuer (including,
for example, frequent issuers or issuers whose securities have been admitted to trading on an
‘SME growth market’) in order to be able to oer securities to the public in the EEA.
7.3.2.1.1 Single oering document or multiple oeringdocuments
One of the initial questions to be considered is how to structure the oering documents that will
be used in the various jurisdictions in which securities will be oered. As discussed in Section
7.3.2.1.2, the approach to structuring the oering document will be inuenced by a combin-
ation of legal, regulatory,58 practical, and marketing considerations. Because the approach to
the structure of the oering document can inuence the entire draing process and there is no
single correct approach to the question, the issuer, the underwriters and their respective counsel
should agree on the approach to these questions early on in the process. In particular, if there are
to be multiple versions of the prospectus, it is important to determine what version will function
as the controlling document and the stage of the draing process at which other versions will be
created from the controlling document (later is typically better than sooner).
e Prospectus Regulation provides for delegated acts to be passed by the European
Commission to supplement the Prospectus Regulation by prescribing the order in which
information is to appear in a prospectus (i.e., table of contents, summary,59 risk factors, and
the schedules dening specic information to be included in a prospectus).60 Note that the
order of information decided on by the European Commission in its delegated acts may
dier from the typical oering document structure in another jurisdiction. Note also that
Article 20.2 of the Prospectus Regulation requires a cross- reference list to be provided in the
57 See Prospectus Regulation Article 1.5(j).
58 Note, for example, that as of 1 July 2018 an issuer in the United Kingdom is required to publish a prospectus
or registration document before it may publish research reports, which may inuence an issuer to utilize a pro-
spectus comprised of separate documents. See Policy Statement for PS17/ 23:Reforming the availability of infor-
mation in the UK equity IPO process, available at www.fca.org.uk/ publication/ policy/ ps17- 23.pdf>.
59 Note that, eective 21 July 2019, the maximum length of the prospectus summary has been decreased from
15 pages or 7% of the length of the prospectus under the Prospectus Directive to seven sides of A- 4 sized p aper
when printed. Prospectus Regulation Article 13.1.
60 Prospectus Regulation Article 13.1.
7.35
7.36
7.37
7.38
456 -
prospectus, and also requires that the prospectus contain hyperlinks to all documents con-
taining information which is incorporated by reference.61 While a cross- reference list is not
an inordinate burden to prepare, this requirement should be kept in mind when thinking
about how best to organize a document to be used in the EEA and elsewhere. As discussed
above, the Prospectus Regulation provides for delegated acts to supplement the Prospectus
Regulation regarding the format of the prospectus, the base prospectus, and the nal terms
(including the schedules dening specic information to be included in a prospectus).62
Issuers should consult these delegated acts, once available, in connection with a prospectus
to be published under the Prospectus Regulation.
An initial consideration for a non- EU issuer in preparing an oering document is the pos-
sibility that the laws of the jurisdictions outside the EEA in which the oering will be con-
ducted may require the inclusion of information that diers from the information required
by the Prospectus Regulation (or vice versa). Assuming that is the case, the issuer and the
underwriters will need to make a judgment about whether it is preferable to use a single of-
fering document for all jurisdictions (subject to the discussion of language requirements in
Section 7.3.2.3) or confront the practical headaches of producing multiple versions of the
oering document for use in the EEA and elsewhere.63
If an issuer is contemplating using multiple oering documents in order to address diering
disclosure requirements, a question that will naturally arise is whether providing dierent
disclosures to investors in dierent jurisdictions increases the likelihood of a claim that one
of the oering documents is misleading because it omits material information. Oering par-
ticipants will need to consider this question carefully in the context of the specic infor-
mation that is omitted from one of the versions of the oering document. ese concerns
typically result in only minor dierences between the various versions of an oering docu-
ment (for example, dierences in order or format), leaving aside language. One common
structure is to prepare a common oering document for use in all jurisdictions and then pre-
pare one or more ‘wrappers’ for use in connection with the common oering document in
jurisdictions that require additional immaterial information that oering participants wish
not to include in the common oering document.
If the issuer chooses to prepare multiple oering documents, then it should include a legend
in each version of the oering document explaining where that oering document can
be used and advising recipients of the fact that the oering is being conducted with other
oering documentation in other jurisdictions and, if applicable, that such oering docu-
mentation is in a dierent format and may contain dierent information. However, in this
situation, an issuer should still ensure that there are not material dierences between the dif-
ferent versions of the oering document.
7.3.2.1.2 Structure ofprospectus
e Prospectus Regulation contemplates the possibility of either a single prospectus (in-
tended to be used for a single oering) or a prospectus comprised of separate documents— a
61 Prospectus Regulation Article 20.2.
62 Prospectus Regulation Article 13.1.
63 Note that in global oerings that include registration under the US Securities Act of 1933 (the ‘US Securities
Act’), it may be desirable for US legal reasons to have a separate yet essentially identical prospectus that is used only
for oers and sales in the United States and to US persons.
7.39
7.40
7.41
7.42
457
summary, registration document, and securities note.64 Such a structure may be useful for
circumstances in which an issuer wishes to undertake multiple oerings of securities over
a period of time.65 Another type of oering in which a prospectus comprised of multiple
documents may be useful is an oering with a substantial retail component in which there
may be a desire to be able to send the summary to retail investors separate from the full regis-
tration document. If the oering is to be conducted outside the EEA as well, these two ap-
proaches give some exibility to structure a consistent oering document in all jurisdictions.
For an oering of non- equity securities (including warrants), the Prospectus Regulation
also provides for a base prospectus/ nal terms oering structure.66 is structure allows
an issuer to le a base prospectus that includes all information other than the terms of
specic oerings of securities, which would be included in nal terms made publicly avail-
able, prepared in an easily analysable and comprehensible form and led with the com-
petent authority of the home member state. e base prospectus structure is available for
repeated oerings under debt issuance programmes in which dierent series of non- equity
securities with dierent economic terms are oered in separate oerings over an extended
period of time. Only the base prospectus (and any supplements thereto) would be subject
to approval by the competent authority of the home member state. Under the Prospectus
Directive, a base prospectus was not required to specify a maximum amount of securities
to be oered,67 and, under the Prospectus Regulation, the maximum amount of securities
to be oered need only be disclosed in the prospectus ‘as far as they are available’.68 Ap ro-
spectus remains valid (assuming it is updated as needed through supplemental prospec-
tuses) for 12months.69
Article 13 of the Prospectus Regulation outlines the basic requirements with respect to the
information to be contained in the base prospectus and the information to be contained
in the nal terms. As a general matter, the base prospectus is intended to include informa-
tion about the issuer and the risks and considerations common to all securities to which
that base prospectus relates, while nal terms should contain information about the terms
of a specic issue of securities. Final terms are not intended to be used to include material
updates, which should instead be disclosed through a supplemental prospectus (subject to
review and approval by the competent authority of the home member state) under Article
23 of the Prospectus Regulation. Eective 21 July 2019, in preparing the prospectus, the
64 Prospectus Regulation Article 6.3. Although it is common for large issuers to use shelf registration state-
ments for equity oerings in the US market, historically it has been fairly uncommon in the EEA. One reason may
be that in the US system an issuer’s registration statement is constantly updated by periodic lings under the US
Securities Exchange Act of 1934 (the ‘US Exchange Act’) without the need for regulatory approval, while under the
Prospectus Directive a supplemental prospectus, which required the approval of the competent authority of the
home member state, was oen required to update a registration document. Article 9 of the Prospectus Regulation
contemplates the availability to issuers of a universal registration document similar to a US shelf registration,
which may increase the use of shelf registration oering structures in the EEA.
65 is structure is somewhat similar to shelf registration in the United States, although it diers in that the
summary and securities note are required to be approved by the competent authority and periodic lings under the
Transparency Directive do not update the registration document. Material changes that occur between approval
of a registration document and an oering of securities would need to be included in a supplemental prospectus
under Prospectus Regulation Article 23. In the case of a prospectus consisting of separate documents, material
changes that occur between approval of a registration document and an oering of securities would need to be
included by the time the securities note and the summary are led. Prospectus Regulation Article 10.1; Prospectus
Regulation Article 6.3.
66 See Prospectus Regulation Article 8.
67 Question 36 of the ESMA Q&As.
68 Prospectus Regulation Article 17.1(b)(i).
69 Prospectus Regulation Article 12.1.
7.43
7.44
458 -
issuer, the oeror, or the person asking for admission to trading on a regulated market is
required to assess the materiality of the risk factors, only 15 of which may be contained in
the prospectus summary,70 limited to risks that are specic to the issuer and/ or to the se-
curities and that are material for making an informed investment decision, based on the
probability of their occurrence and the expected magnitude of their negative impact.71
e limitation on the number of risk factors that may be disclosed and the requirement
that risks be material and specic to the issuer and its securities will likely prevent issuers
from including numerous generic risk factors. e European Commission is empowered
to adopt delegated acts to specify criteria for the assessment of the specicity and ma-
teriality of risk factors,72 and ESMA is required to develop guidelines to assist competent
authorities in reviewing risk factors based upon such criteria.73 It remains to be seen how
Article 16 of the Prospectus Regulation will impact the presentation of risk factors by is-
suers once eective.
In addition to the prospectus structure described above, the Prospectus Regulation allows
for a new oering structure akin to a shelf registration statement in the US. e Prospectus
Regulation provides that an issuer whose securities are admitted to trading on a regulated
market or on a multilateral trading facility may prepare each nancial year a registration
document in the form of a universal registration document (‘URD’) describing the issuer’s
organization, business, nancial position, earnings and prospects, governance and share-
holding structure.74 Subject to certain terms and conditions, issuers making use of a URD
benet from a faster approval process of ve business days.75 An issuer that has had a URD
approved by the relevant competent authority for two consecutive years may le subsequent
URDs without prior approval, however note that the failure to le a URD for one nancial
year will result in the loss of this preferred status.76 Once approved or led without prior
approval, the URD must be made available to the public without undue delay.77 Issuers may
also le amendments to URDs to be made available to the public, the ling of which does not
require approval by the competent authority, but which may be reviewed at the election of
the competent authority.78
Under the Prospectus Regulation, certain issuers are permitted to prepare a simplied pro-
spectus under the simplied disclosure regime for secondary issuances, in the case of an
oer of securities to the public or of an admission to trading of securities on a regulated
market.79 ese issuers include:
70 Prospectus Regulation Article 7.10.
71 Prospectus Regulation Articles 16.1 and 16.2. Note that the Prospectus Directive did not contain require-
ments pertaining to the presentation of risk factors in the prospectus.
72 Prospectus Regulation Article 16.5.
73 Prospectus Regulation Article 16.4.
74 Prospectus Regulation Article 9.1. Note that information may be incorporated by reference into a URD, and
note further that in certain circumstances, the integration of the issuer’s annual and half- yearly reports into its
URD will satisfy the issuer’s requirement to le an annual report under the Transparency Directive. Prospectus
Regulation Article 9.6.
75 Prospectus Regulation Article 9.11. Note that this time frame has been shortened from ten days provided
that the competent authority receives ve days’ notice prior to ling.
76 Prospectus Regulation Article 9.2. Note that the competent authority retains the right to, at any time, review
the content of any URD led without prior approval, as well as any amendment thereto. Prospectus Regulation
Article 9.8.
77 Prospectus Regulation Article 9.6.
78 Prospectus Regulation Article 9.7.
79 e simplied disclosure regime replaced the proportionate disclosure regime that existed under the
Prospectus Directive.
7.45
7.46
459
• issuers whose securities have been admitted to trading on a regulated market or an
‘SME growth market’80 continuously for at least the preceding 18months and who issue
securities fungible with those securities;
• issuers whose equity securities have been admitted to trading on a regulated market or
an SME growth market continuously for at least the preceding 18months and who issue
non- equity securities; and
• oerors of securities admitted to trading on a regulated market or an SME growth
market continuously for at least the preceding 18months.81
e simplied prospectus contemplated by the Prospectus Regulation will consist of a sum-
mary in accordance with Article 7 thereof, a specic registration document, and a specic
securities note.82 e European Commission was required to supplement the Prospectus
Regulation by setting out schedules specifying the reduced information to be included
under this regime, including in particular nancial information, prot forecasts and esti-
mates, risk factors, and certain pro forma nancial information.83 e purpose of this sim-
plied disclosure regime is to enable investors to understand the prospects of the issuer and
the signicant changes in the business and nancial position of the issuer and the guarantor
that have occurred since the end of the last nancial year, if any, the rights attaching to the
securities, and the reasons for the issuance and its impact on the issuer, including on cap-
ital structure and use of proceeds.84 Aer technical advice was solicited from ESMA,85 a
Commission Delegated Regulation was subsequently adopted in March 2019 outlining the
various requirements under the Prospectus Regulation for registration documents and se-
curities notes in connection with secondary issuances.86
e Prospectus Regulation also provides for an EU Growth Prospectus, another prospectus
structure, eective 21 July 2019, which allows certain issuers to utilize a proportionate dis-
closure regime in the case of an oer of securities to the public provided that the issuer has no
securities admitted to trading on a regulated market. Issuers that may utilize the EU Growth
Prospectus include:
• ‘small and medium- sized enterprises’87 (‘SMEs’), or oerors of securities issued
by SMEs;
80 Dened as a multilateral trading facility that is registered as an SME growth market in accordance with
Article 33 of MiFID II.
81 Prospectus Regulation Article 14.1.
82 Prospectus Regulation Article 14.1. Note that the specic securities note is not applicable to issuers whose
equity securities have been admitted to trading continuously for at least 18months and who issue non- equity
securities.
83 See Prospectus Regulation Article 14.3.
84 Prospectus Regulation Article 14.2.
85 See ‘Final Report— Technical advice under the Prospectus Regulation’, published by ESMA, 28 March 2018
(‘ESMA March 2018 Technical Advice’), available at ps:// www.esma.europa.eu/ sites/ default/ les/ library/
esma31- 62- 800_ nal_ report_ on_ technical_ advice_ under_ the_ pr.pdf>.
86 Se e Annexes to Commission Delegated Regulation of 14 March 2019, supplementing Regulation (EU) 2017/
1129 of the European Parliament and of the Council as regards the format, content, scrutiny and approval of the
prospectus to be published when securities are oered to the public or admitted to trading on a regulated market,
and repealing Commission Regulation (EC) No 809/ 2004, available at ec.europa.eu/ nance/ docs/ level- 2-
measures/ prospectus- regulation- delegated- act- 2019- 2020- annex_ en.pdf>.
87 Dened as (i)companies, which, according to their last annual or consolidated accounts, meet at least two
of the following three criteria:an average number of employees during the nancial year of less than 250, a total
balance sheet not exceeding €43,000,000 and an annual net turnover not exceeding €50,000,000 or (ii) companies
that had an average market capitalization of less than €200,000,000 on the basis of end- year quotes for the previous
three calendar years. Prospectus Regulation Article 2(f).
7.47
460 -
• issuers, other than SMEs, whose securities are traded or are to be traded on an SME
growth market, provided that those issuers had an average market capitalization of less
than €500,000,000 on the basis of end- year quotes for the previous three calendar years,
or oerors of securities issued by such an issuer; and
• issuers, other than those referred to above, where the oer of securities to the public is
of a total consideration in the EEA that does not exceed €20,000,000 calculated over
a period of 12months, and provided that such issuers have no securities traded on a
multilateral trading facility and have, on average, fewer than 500employees during the
previous nancial year.88
Similar to the simplied prospectus discussed above, the EU Growth Prospectus consists
of a specic summary based on Article 7 of the Prospectus Regulation, a specic registra-
tion document, and a specic securities note, presented in a standardized sequence.89 e
European Commission was required to supplement the Prospectus Regulation to specify this
standardized sequence and the reduced content contained therein, focusing on the informa-
tion material and relevant for investors and the need to ensure proportionality between the
size of the company and the cost of producing a prospectus, taking into account the need to
ensure that the EU Growth Prospectus is signicantly lighter than the standard prospectus,
the need to facilitate access to capital markets for SMEs, and the various types of information
relating to equity and non- equity securities needed by investors.90 Similar to the approach
taken for determining the specic requirements under the Prospectus Regulation regarding
secondary issuances, aer technical advice was solicited from ESMA,91 a Commission
Delegated Regulation was subsequently adopted in March 2019 outlining the various re-
quirements for an EU Growth Prospectus.92
7.3.2.2 Resaleprospectuses
Article 5 of the Prospectus Regulation raises the possibility that resales of securities sold in an
exempt oering (for example, to qualied investors) might constitute an oer to the public
for which a prospectus may be required unless an exemption is available. In the most typical
situation (i.e. a purchaser that at a future date wishes to resell securities it purchased in an
exempt oering to a small number of purchasers), the purchaser could rely on the fewer-
than- 150- oerees exemption in Article 1.4(b) of the Prospectus Regulation. Alternatively,
the purchaser could resell the securities into the market through a normal course broker or
dealer transaction and rely on the fact that it is not making an oer of securities to the public.
Article 5.1 of the Prospectus Regulation goes beyond simply requiring the analysis of each
subsequent resale as a separate oer and provides that a placement of securities through -
nancial intermediaries will be subject to the obligation to publish a prospectus if the nal
placement is not to an exempt oeree or the denomination per unit is less than €100,000.93 In
88 Prospectus Regulation Article 15.1. Note that this reduced disclosure obligation is only available to issuers
listing their securities on non- regulated markets.
89 Prospectus Regulation Article 15.
90 Prospectus Regulation Article 15.2.
91 See ESMA March 2018 Technical Advice.
92 See Chapter IV of Commission Delegated Regulation of 14 March 2019, supplementing Regulation (EU)
2017/ 1129 of the European Parliament and of the Council as regards the format, content, scrutiny and approval
of the prospectus to be published when securities are oered to the public or admitted to trading on a regulated
market, and repealing Commission Regulation (EC) No 809/ 2004, available at ec.europa.eu/ nance/ docs/
level- 2- measures/ prospectus- regulation- delegated- act- 2019- 2020_ en.pdf>.
93 Prospectus Regulation Article 5.1.
7.48
7.49
461
practice, similar provisions in the Prospectus Directive proved problematic in situations in
which an issuer or the primary underwriters for an oering of securities sells the securities
to one or more nancial intermediaries who in turn resell those securities to the ultimate
purchasers (typically, retail investors). In order to address possible issues arising out of this
method of distribution, the issuer and its primary underwriters should consider imposing
oering restrictions on nancial intermediaries that will function in this role. e issuer
and primary underwriters may also need to have an adequate understanding of the relevant
nancial intermediaries’ investment intent and knowledge of the applicable requirements
and exemptions. Article 5.2 of the Prospectus Regulation further provides that where a pro-
spectus relates to non- equity securities that are to be admitted to and traded only on a regu-
lated market, or a specic segment thereof, to which only qualied investors have access, the
securities may not be resold to non- qualied investors, unless a prospectus that is appro-
priate under the Prospectus Regulation for non- qualied investors is prepared.
is subject has been addressed most extensively in the context of a ‘retail cascade’ distri-
bution of debt securities. Given that oerings of debt securities by non- EU issuers are typ-
ically targeted to institutional investors, concerns about a retail cascade are unlikely to be
a particularly signicant issue for non- EU issuers. is issue could also conceivably arise
in the context of an equity oering in which there is retail distribution over an extended
period of time.94
In retail debt oerings, a common method of distribution is a so- called retail cascade in
which an issuer sells to intermediaries in an exempt oering, because such intermediaries
are typically qualied investors, and those intermediaries then distribute the purchased
securities to retail investors over a period of time ranging from days to months at varying
prices. e requirement of Article 5.1 of the Prospectus Regulation to create a prospectus
for these oers can create practical problems for both the issuer and the selling nancial
intermediaries. One such problem is that it may leave the issuer obligated to publish supple-
mental prospectuses for an indeterminate period of time until the distribution is completed.
Asecond issue is that an issuer will likely not have details at the outset of the retail cascade of
the particular oers that will be made by the selling parties in the distribution.
Pursuant to Article 5.1 of the Prospectus Regulation, another prospectus in any resale of
securities or nal placement of securities through nancial intermediaries is not required
as long as a valid prospectus is available in accordance with Article 12 of the Prospectus
Regulation and the issuer or the person responsible for preparing such prospectus consents
to its use by means of a written agreement. If such a consent is provided, the issuer or person
responsible for preparing the prospectus is liable for the information stated therein. e is-
suer or the person responsible for preparing the prospectus may attach conditions to his or
her consent.95 On the other hand, intermediaries not acting with the issuer’s consent are
required to prepare a separate prospectus, which from a practical perspective would neces-
sarily incorporate by reference from the issuer’s prospectus. In that case, the nancial inter-
mediary is liable for all information in the prospectus.
e issuer would be responsible for preparing any supplemental prospectuses required
during the period when the sub- oers from the intermediaries acting with the issuer’s
94 Unlike the US federal securities laws, the Prospectus Regulation does not impose an explicit ongoing pro-
spectus delivery requirement for a specic period of time.
95 Prospectus Regulation Recital 26.
7.50
7.51
7.52
7.53
462 -
consent are ongoing (and, therefore, the issuer would have an incentive to limit the time
period during which such oers were being made). Intermediaries not acting with the
issuer’s consent would be required to update their own prospectus. Finally, information re-
lating to the sub- oers will not be available at the time of the publication of the prospectus.
Information which relates to allocation, distribution and pricing will be provided by the
intermediaries to the ultimate investor. Such information on the subsequent sub- oers may
be omitted on the basis of Article 18.2 of the Prospectus Regulation. e intermediaries
would be expected to supply the information to the investor at the time of any sub- oer.
Issuers should insert a bold notice in a suitable place in the prospectus informing investors
that such information would be provided at the time of any sub- oers.
7.3.2.3 L anguagerequirements
Under the Prospectus Regulation, when an oer of securities to the public or admission to
trading on a regulated market is sought only in the home member state, the prospectus is re-
quired to be draed in a language accepted by the competent authority of the home member
state.96
If the prospectus is to be used in one or more host member states but not the home member
state, then it must be prepared in a language accepted by the competent authorities in the
host member states or “a language customary in the sphere of international nance”.97 In this
situation, a host member state may require that the summary of the prospectus be translated
into the ocial language(s) of that host member state.98 English is generally considered to be
a language customary in the sphere of international nance.99
For purposes of review by the competent authority of the home member state, a copy of the
prospectus in a language accepted by that competent authority or a language customary in
the sphere of international nance is required to be prepared.100 In a situation in which the
prospectus is intended to be prepared in a language that is not accepted by the competent
authority of the home member state (for example, because the prospectus is intended to be
used principally in another member state and was prepared in the ocial language of the
host member state), it may be necessary to prepare a translation of the prospectus simply for
purposes of review by the competent authority.
If the prospectus is to be used in both the home member state as well as in other member
states, then the prospectus is required to be drawn up in a language accepted by the compe-
tent authority of the home member state and shall also be made available either in a language
accepted by the competent authorities of each host member state or in a language customary
96 Prospectus Regulation Article 27.1.
97 Prospectus Regulation Article 27.2.
98 ESMA has prepared a summary of the requirements for the translation of summaries and languages ac-
cepted by competent authorities of member states for purposes of the review of prospectuses under the Prospectus
Directive, available at rary/ 2015/ 11/ 2014- esma- 342_
languages_ accepted_ for_ the_ purpose_ of_ the_ scrutiny_ of_ the_ prospectus.pdf>. ere is some variation among
the competent authorities in member states with respect to when a translation of the summary is required.
99 e Prospectus Regulation does not specify which languages are ‘customary in the sphere of international
nance’, although English has been accepted as qualifying. It is worth noting that, prior to the United Kingdom’s
withdrawal from the EU, the competent authority in the United Kingdom, the Financial Conduct Authority (the
‘UK FCA’) had identied criteria to be used in determining which languages it would regard as customary in the
sphere of international nance. See UK FCA Handbook on Prospectus Rules Section 4.1.5.A, available at
www.handbook.fca.org.uk/ handbook/ PR.pdf>.
100 Prospectus Regulation Article 27.2. In general, most (but not all) competent authorities accept prospectuses
draed in English for review.
7.54
7.55
7.56
7.57
463
in the sphere of international nance.101 e competent authority of each host member state
may only require that the summary be translated into its ocial language(s).102
Finally, in the case of admission to trading on a regulated market of non- equity securities
with a minimum denomination of at least €100,000 (i.e. wholesale debt securities) or of
non- equity securities where such securities are to be traded only on a regulated market, or
a specic segment thereof on which only qualied investors may trade such securities, the
prospectus is required to be prepared in a language accepted by the home and host member
states or a language customary in the sphere of international nance.103
It is permissible under the Prospectus Regulation to incorporate documents by reference
into a prospectus that are in a language dierent than the prospectus itself.104 In order to
do so, the incorporated document must comply with the language requirements of the
Prospectus Regulation and the competent authorities in the relevant member states. In par-
ticular, language issues with respect to incorporated documents can become a stumbling
block if the prospectus is intended to be passported into another jurisdiction and are not
prepared in a language customary in the sphere of international nance— the incorporated
document must be in a language accepted by the competent authorities of the host member
states into which the prospectus is being passported.
e Prospectus Regulation does not specify the quality of the translation in the event that a
portion of the prospectus is translated in connection with passporting. However, ESMA has
made clear its view that the persons responsible for the prospectus are responsible for the
quality of the translation and that the competent authorities in a host member state bear no
responsibility for the translation.105 ESMA’s view under the Prospectus Directive was that a
competent authority in a host member state is not permitted to hold up the passporting pro-
cess in order to permit it to check the quality of any translations.106 ESMA recommends the
insertion in a translation of a prospectus a statement that the document is a translation of the
approved prospectus made under the sole responsibility of the persons responsible for the
approved prospectus.107
Issuers that are contemplating the possibility of having a prospectus translated should not
underestimate the time that may be required to complete that exercise on a document the
size of a typical prospectus.108 In addition to the simple mechanics of having the prospectus
translated, there will need to be time allowed in the schedule for double- checking to ensure
consistency across versions of the prospectus.
Oering participants should also give careful consideration to the timing of translation of a
prospectus. ere will need to be a balance struck between translating too late, in which case
the translation holds up the timetable, and translating too early, in which case changes will
101 Prospectus Regulation Article 27.3.
102 Prospectus Regulation Articles 27.2 and 27.3.
103 Prospectus Regulation Article 27.5.
104 Prospectus Regulation Article 19.1; Question 7 of the ESMA Q&As. is question and response also indi-
cate that incorporation of a translation of a document led with the competent authority of the home member state
is permissible, subject to complying with Prospectus Regulation Articles 19 and 20.
105 Question 33 of the ESMA Q&As.
106 Question 33 of the ESMA Q&As.
107 Question 33 of the ESMA Q&As.
108 Given its limited size (i.e. 2,500 words), the requirement to translate a summary should impose a more
modest burden than translation of a prospectus running to hundreds of pages.
7.58
7.59
7.60
7.61
7.62
464 -
need to be made simultaneously in multiple versions of the prospectus (which is a practical
burden and increases the likelihood of inconsistencies).
7.3.2.4 Prospectus contentrequirements
7.3.2.4.1 Non- nancialdisclosure
In terms of the detailed content required by the Prospectus Regulation to be included in
the prospectus, the disclosure requirements are generally based on the International
Organization of Securities Commissions (‘IOSCO’) disclosure standards.109 To further fa-
cilitate common disclosure in oerings and listings that include both EEA and non- EEA jur-
isdictions, the Prospectus Regulation contemplates the possibility that competent authorities
would accept prospectuses for non- EU issuers provided that the information requirements
imposed by those non- EEA laws are equivalent to the requirements under the Prospectus
Regulation and the competent authority of the home member state has concluded cooper-
ation agreements with the relevant supervisory authorities of the non- EU country.110
If the competent authority in the home member state is, in fact, willing to accept a prospectus
prepared in accordance with the non- EEA standards, this can create signicant synergies in
preparing a prospectus that would otherwise be required to be prepared in accordance with
those standards. e most obvious benet would be for non- EU issuers whose home country
disclosure requirements are based on the IOSCO disclosure requirements.111 Another pos-
sible area of benet is that a non- EU, non- US issuer conducting a simultaneous oering in
the United States and the EEA could benet from the fact that the US disclosure standards
applicable to a registration statement by such an issuer112 are also based on the IOSCO dis-
closure standards.
Notwithstanding an equivalence determination, the authority to approve a prospectus pre-
pared in accordance with IOSCO issuer’s home country legislation still requires the com-
petent authority to review the completeness of the prospectus. is means that a full review
process by the competent authority in the home member state should still be expected. On
20 March 2013, ESMA published an opinion updating its framework for third country pro-
spectuses, which allowed a third country prospectus to have a ‘wrap’ added to it so that the
resulting document meets the EEA requirements.113 In order to determine, on a country-
by- country basis, which information must be included in the wrap, ESMA had earlier cat-
egorized all information to be included in a prospectus in the annex to the ‘Framework for
third country prospectuses under Article 20 of the Prospectus Directive’ public statement.114
Based on such categorization and upon request, ESMA can publish, if it approves such re-
quest, a further statement with respect to a specic third country which will contain a list
of the items which will need to be included in a wrap to a prospectus from such country.
For example, ESMA published an additional statement on 23 March, 2011, stating that a
109 Prospectus Regulation Article 13.3.
110 Prospectus Regulation Article 29.1.
111 e IOSCO disclosure standards are available at
pdf>.
112 Registration Statements on Form F- 1 and Form F- 3 under the US Securities Act. Form 20- F, which serves as
both a form of annual report as well as a registration statement under the US Exchange Act in connection with a
listing on an exchange in the United States, is also based on the IOSCO disclosure standards.
113 Opinion ‘Framework for the assessment of third country prospectuses under Article 20 of the Prospectus
Directive’, available at .
114 Public Statement ‘Framework for third country prospectuses under Article 20 of the Prospectus Directive’,
available at .
7.63
7.64
7.65
465
prospectus drawn up according to Israeli laws and regulations together with a wrap con-
taining the specic information set forth in the annex to such statement can constitute a
valid prospectus under the Prospectus Directive for the purpose of its approval by the home
competent authority.115 ese were subsequently updated in connection with the March
2013 opinion.116
7.3.2.4.2 Financialstatements
e requirements applicable to the nancial statements to be included in a prospectus ap-
proved under the Prospectus Regulation are a critical initial item for a non- EU issuer to
consider. Anon- EU issuer contemplating an oering or admission to trading of its securities
needs to determine up front whether and to what extent it will need to convert its existing
nancial statements into another set of generally accepted accounting principles in order
to be able to comply with the requirements of the Prospectus Regulation. e amount of
time required to convert nancial statements and have them audited is substantial, and an
issuer would not want to discover once its transaction process is underway that it needs to
undertake a costly and time- consuming exercise with respect to its nancial statements. e
Prospectus Regulation includes schedules setting forth and dening the minimum nancial
information to be included in a prospectus, and shall be aligned as much as possible with the
information required to be disclosed under the Transparency Directive.117
e annexes to the Prospectus Regulation require inclusion in a prospectus of nancial
statements prepared under International Financial Reporting Standards (‘IFRS’) as adopted
by the European Union118 or an equivalent system of accounting principles.119 Unlike the re-
gime in the United States applicable to foreign private issuers (pursuant to which foreign pri-
vate issuers can reconcile their nancial statements to US GAAP) the Prospectus Regulation
does not generally provide for reconciliations of nancial statements prepared under a dif-
ferent system of nancial accounting principles to IFRS (in lieu of requiring a restatement of
all required nancial statements into IFRS). erefore, for issuers that do not prepare nan-
cial statements in their home country in accordance with IFRS and that do not qualify to le
an EU Growth Prospectus, the requirement to convert their nancial statements into IFRS
imposes a signicant practical burden to undertaking an oering that requires approval of
a prospectus by a member state. ese nancial statement requirements apply to both cur-
rent period nancial statements as well as all historical nancial statements required to be
included in the prospectus (excluding the EU Growth Prospectus).
115 Public Statement ‘ESMA statement on Israeli laws and regulations on prospectuses’, available at
www.esma.europa.eu/ sites/ default/ les/ library/ 2015/ 11/ 11_ 37.pdf>.
116 For example, see Opinion ‘ESMA assessment of Israeli laws and regulations on prospectuses’, available
at rary/ 2015/ 11/ esma- 2015- 1015_ - _ opinion_ on_ israel_
prospectus_ framework.pdf>.
117 Prospectus Regulation Article 13.2.
118 Regulation 1606/ 2002 of the European Parliament and of the Council of 19 July 2002 on the application
of international accounting standards [2002] OJ L243/ 1 adopting the International Accounting Standards (IAS),
IFRS and related Interpretations (SIC- IFRIC interpretations), subsequent amendments to those standards and re-
lated interpretations, future standards and related interpretations issued or adopted by the IASB, to the extent con-
sistent with other directives adopted by the Commission (in particular, Article 2(3) of Directive 78/ 660/ EEC and
Article 16(3) of Directive 83/ 349/ EEC, b oth of which require that accounts disclosed by the issuer give a ‘true and
fair view’ of the ‘assets, liabilities, nancial position and prot or loss’ of the issuer) and meet the criteria of ‘under-
standability, relevance, reliability and comparability required of the nancial information needed for making eco-
nomic decisions and assessing the stewardship of management’ as required by Article 3 of Regulation 1606/ 2002.
119 Note that, pursuant to Annex IV of the Prospectus Regulation, the registration document for the EU Growth
prospectus does not require nancial statements to be prepared under IFRS. Consequently, smaller issuers may
prepare their historical nancial information either under IFRS or another national accounting standard.
7.66
7.67
466 -
Historically, issuers in a number of jurisdictions had not been subject to the requirements
to convert their nancial statements as a result of Article 35.5 of the Former Prospectus
Regulation,120 which provided that nancial statements prepared under generally accepted
accounting principles in the United States, Japan, the People’s Republic of China, Canada,
and the Republic of Korea were ‘equivalent’ for purposes of the Prospectus Directive. is
determination arose out of the ongoing process of convergence between these accounting
principles and IFRS. As a result, issuers that prepared nancial statements under these ac-
counting principles did not need to convert their nancial statements into IFRS in order
to include them in a prospectus under the Prospectus Directive.121 It remains to be seen
whether, under the implementing standards to the Prospectus Regulation, these jurisdic-
tions will continue to benet from the foregoing exemptions.
Article 35.5 of the Former Prospectus Regulation also provided that, prior to 1January 2015,
nancial statements prepared in accordance with generally accepted accounting principles
in the Republic of India would be accepted in prospectuses prepared under the Prospectus
Directive. is temporary exemption has ceased to apply, as Indian accounting standards
have substantially converged with IFRS standards122 and no longer requires reliance on an
equivalence determination as conversion is unnecessary.
Anon- US issuer that is preparing a prospectus under the US securities laws or that re-
ports under the US Exchange Act as a ‘foreign private issuer’ should be able to realize sub-
stantial practical benets from reporting in either US GAAP or IFRS. Under rule changes
implemented by the US SEC in 2008, non- US issuers have the ability to include nancial
statements prepared in accordance with IFRS as issued by the International Accounting
Standards Board (the ‘IASB’) without a reconciliation to US GAAP in US Exchange Act peri-
odic reports and registration statements under the US Securities Act. At present, IFRS as
adopted by the European Union diers from IFRS as issued by the IASB chiey with re-
spect to the approach to hedge accounting for certain nancial instruments in IAS 39,
‘Financial Instruments:Recognition and Measurement’. In this regard, IFRS as adopted by
the European Union oers greater exibility than IFRS as issued by the IASB.123
120 Commission Regulation (EC) No 809/ 2004 of 29 April 2004 implementing Directive 2003/ 71/ EC of the
European Parliament and of the Council as regards information contained in prospectuses as well as the format,
incorporation by reference and publication of such prospectuses and dissemination of advertisements [2004] OJ
L 149/ 1, as amended, inter alia, by Commission Delegated Regulation (EU) No 759/ 2013 of 30 April 2013 (the
‘Former Prospectus Regulation’).
121 e schedules to the Former Prospectus Regulation generally required issuers to include three years of his-
torical nancial statements in a prospectus for shares or depositary receipts and two years of historical nancial
statements in a prospectus for debt or derivative securities. See the Schedules to the Former Prospectus Regulation.
e nancial statements required for these periods included balance sheets, statements of comprehensive income,
statements of changes in equity and statements of cash ows. If interim nancial statements had been published
since the date of the most recent audited nancial statements, they were required to be included in a prospectus. If
the date of the registration document was more than nine months aer the end of the most recent audited nan-
cial year, then nancial statements covering at least the rst half of the nancial year were required to be included
(even if they had not otherwise been published). Interim nancial statements were not required to be audited or
reviewed. See the Schedules to the Former Prospectus Regulation. Article 7.6(b) of the Prospectus Regulation
provides that, under a sub- section entitled ‘What is the key nancial information regarding the issuer?’, the issuer
must provide a selection of historical key nancial information presented for each nancial year of the period
covered by the historical nancial information, and any subsequent interim nancial period accompanied by com-
parative data from the same period in the prior nancial year. e requirement for comparative balance sheet in-
formation may be satised by presenting the year- end balance sheet information.
122 See ‘IFRS Application Around the World Jurisdictional Prole:India’, available at
media/ feature/ around- the- world/ jurisdiction- proles/ india- ifrs- prole.pdf>, last updated 11 October 2019.
123 Note that, in its adoption of IFRS 9 (which replaced IAS 39), the European Commission noted that, in order
to ensure consistency with Union law, the consequential amendment to IAS 39, related to fair value hedge ac-
counting, has not been eected. Consequently, this distinction remains relevant under the Prospectus Regulation.
7.68
7.69
7.70
467
7.3.2.4.3 Auditorrequirements
A non- EU issuer needs to determine very early in the process of any proposed offering
or admission to trading on a regulated market in the EEA whether its existing auditor
will be able to audit financial statements to be included in the prospectus for the offering
and, if applicable, in annual reports to be filed in the future under the Transparency
Directive. This subject needs to be addressed at the outset because a change in auditors
would radically alter the timetable for an offering or listing and could lead to a modifi-
cation to the proposed transaction to eliminate the need to replace the issuer’s existing
auditors.
Under the Statutory Audit Directive, the auditors of nancial statements of non- EU issuers
that have securities (other than solely wholesale debt securities) admitted to trading on a
regulated market will be required to be registered with the competent authorities of the
issuer’s home member state. is requirement should apply only to nancial statements of
an issuer following that issuer’s admission to trading on a regulated market (i.e. not to a pro-
spectus for the admission of those securities to trading on a regulated market). Nevertheless,
a change in auditors between the initial admission to trading and the rst annual report
would be burdensome for an issuer and would expose the issuer to the risk that a new auditor
is unwilling to step in or that the auditor nds problems in its audit (and potentially exposes
the issuer to claims of misleading disclosure).
Article 46.2 of the Statutory Audit Directive requires the European Commission to assess, in
cooperation with the member states, the equivalence of the oversight and quality assurance
and enforcement systems (the ‘Audit Oversight’) in the home countries of non- EU auditors.
Once these equivalence determinations have been made, then member states can exempt
non- EU auditors from the requirements of the Statutory Audit Directive. Aer carrying out
the required assessment, the European Commission released a Decision on 15 July 2015,124
pursuant to which the Audit Oversight of certain non- EU countries125 was to be considered
equivalent to those of the member states. e European Commission also provided limited
transitional relief for auditors based in certain non- EU countries126 for nancial years
starting between 2 July 2010 and 31 July 2018,127 as the European Commission found that
these particular non- EU countries either did not have Audit Oversight systems (but com-
mitted themselves to establish such) or had Audit Oversight systems which the European
Commission deemed insucient.128
See Commission Regulation (EU) 2016/ 2067 of 22 November 2016 amending Regulation (EC) No 1126/ 2008
adopting certain international accounting standards in accordance with Regulation (EC) No 1606/ 2002 of the
European Parliament and of the Council as regards International Financial Reporting Standard 9.
124 Commission Implementing Decision (EU) 2016/ 1223 of 25 July 2016 amending Decision 2011/ 30/ EU on
the equivalence of certain third country public oversight, quality assurance, investigation and penalty systems for
auditors and audit entities and a transitional period for audit activities of certain third country auditors and audit
entities in the European Union (the ‘2016 Audit Decision’), available at p:// eur- lex.europa.eu/ lega l- content/
EN/ TXT/ PDF/ ?uri=CELEX:32016D1223&from=en>.
125 Mauritius, New Zealand, and Turkey. 2016 Audit Decision Recital 2. Additional countries with Audit
Oversight equivalent to those of the member states include Australia, Canada, China, Japan, Singapore, South
Africa, South Korea, Switzerland, the United States of America, Abu Dhabi, Brazil, Dubai International Financial
Centre, Guernsey, Indonesia, Isle of Man, Jersey, Malaysia, Taiwan, and ailand. Decision 2011/ 30/ EU, as
amended (the ‘2011 Audit Decision’).
126 Ber muda, Cayman Islands, Egypt, and Russia. 2016 Audit Decision Recital 4.
127 2016 Audit Decision Recital 5.
128 2011 Audit Decision Recitals 4– 6.
7.71
7.72
7.73
468 -
7.3.2.4.4 Incorporation ofdocuments byreference
Article 19 of the Prospectus Regulation permits an issuer to incorporate in a prospectus (ex-
cept in a prospectus summary) material approved by or led with the competent authority of
the issuer’s home member state.129 Documents that may be incorporated by reference into a
prospectus include annual and interim nancial information, previously approved prospec-
tuses and regulated information.130 Eective 21 July 2019 under the Prospectus Regulation,
the categories of documents that may be incorporated into a prospectus by reference were
increased to include, among other documents, remuneration reports, management reports,
and corporate governance statements.131 Unlike in the integrated disclosure system in the
US system, information arising aer the date of the prospectus cannot be incorporated by
reference as issuers must include in the prospectus hyperlinks to all documents containing
information incorporated by reference and, where possible, submit in searchable electronic
format any information which is incorporated by reference into the prospectus, unless such
information has already been approved by or led with the competent authority approving
the prospectus.132
Issuers should note that the competent authorities of certain member states may require
copies of documents incorporated by reference into a prospectus to be distributed with
copies of the prospectus (including in the case of prospectuses passported into that member
state). e German competent authority (BaFin) previously had such a requirement but has
eliminated it.
7.3.2.4.5 Responsibility statements and duediligence
e Prospectus Regulation provides that responsibility for the information given in a pro-
spectus attaches at least to the issuer, its administrative, management and supervisory
bodies, the oeror, the person asking for the admission to trading on a regulated market
or any guarantor.133 In a situation in which a person other than the issuer is seeking to have
securities admitted to trading on a regulated market, that person seeking admission is re-
sponsible for the contents of the prospectus in connection with that admission to trading.
Each of the persons responsible for the information contained in the prospectus are required
to be clearly identied as such in the prospectus by their names and functions or, in the case
of legal persons, their names and registered oces and to make a responsibility statement to
the eect that, to the best of their knowledge, the information contained in the prospectus
is in accordance with the facts and that the prospectus makes no omission likely to aect its
import.134
Unlike most other elements of the Prospectus Regulation, the liability provisions are not
subject to maximum harmonization. is was also the case under the Prospectus Directive,
and has resulted in member states imposing liability for disclosure contained in a prospectus
on dierent persons. Oering participants (including underwriters) planning to publish a
129 Note that, where a key information document is required to be prepared under Regulation (EU) No 1286/
2014, the issuer, the oeror, or the person asking for admission to trading on a regulated market may substitute
portions of the summary with information contained in the key information document. See Prospectus Regulation
Article 7.7.
130 See Section 7.4.1.8 for a discussion of the requirements under the Transparency Directive with respect to
disclosure of ‘regulated information’.
131 Prospectus Regulation Article 19.1.
132 Prospectus Regulation Articles 19.2 and 19.3.
133 Prospectus Regulation Article 11.1.
134 Prospectus Regulation Article 11.1.
7.74
7.75
7.76
7.77
469
prospectus in a member state should investigate its approach to liability and consider appro-
priate due diligence/ verication procedures to allow the persons responsible in that member
state for the contents of the prospectus to have an appropriate degree of comfort, especially if
securities are being oered in a member state in which the underwriters have liability for the
contents of the prospectus.135 When thinking about an appropriate due diligence/ verica-
tion process, oering participants should also take into account the laws of any member state
into which the prospectus is being passported.
7.3.2.4.6 Wholesale debtsecurities
Under the applicable requirements, a non- EU issuer of wholesale debt securities could
avoid the need to publish a prospectus under the Prospectus Regulation in connection with
an oering of wholesale debt securities by having its wholesale debt securities admitted to
trading only on exchange- regulated markets.136 In practice under the Prospectus Directive,
however, a number of large non- EU issuers chose to have their wholesale debt securities
admitted to trading on regulated markets and, therefore, had been required to publish
prospectuses.
In the event that an issuer publishes a prospectus in connection with the admission to
trading of wholesale debt securities, the Prospectus Regulation permits the issuer to reduce
signicantly the amount of disclosure included in the prospectus, reecting a presumption
that wholesale debt securities are typically marketed to institutional investors.137
With the emergence of signicant exchange- regulated markets for debt issuers (for ex-
ample, the Global Exchange Market (GEM) in Dublin, Euro MTF in Luxembourg and the
Professional Securities Market in London), issuers of wholesale debt securities have the op-
tion of choosing to have their securities admitted to trading only on an exchange- regulated
market. For a non- EU issuer that does not otherwise have securities admitted to trading on a
regulated market, this approach would avoid triggering the application of the Transparency
Directive.
Issuers choosing to have their securities admitted to trading only on an exchange- regulated
market would still be subject to the requirements of those exchange- regulated markets
and any applicable requirements of national law in the jurisdiction in which the exchange-
regulated market is located, which may be equivalent (or nearly so) to obligations under
the Transparency Directive. Note further that an issuer with securities admitted to trading
only on an exchange- regulated market in the EU would still be subject to the Market Abuse
Regulation.
7.3.2.5 C oordinating approvalprocesses
Akey area of focus for oering participants when establishing an oering or listing timetable
is how to approach regulators in the relevant jurisdictions to ensure that the oering docu-
ment is approved at roughly the same time in each jurisdiction, so that sales can be made
concurrently. In addition to focusing on how long it will take to achieve nal approval of the
135 For example, Germany.
136 Prospectus Regulation Article 1.4(c).
137 For example, an issuer of wholesale debt securities or securities of any denomination that are oered only
to, and traded on a regulated market which may be accessed exclusively by, qualied investors, is not required to
prepare a summary of the prospectus. Prospectus Regulation Article 7.1(b). If these securities are not oered only
to institutional investors, the issuer will need to consider if this reduced disclosure is consistent with the target
market.
7.78
7.79
7.80
7.81
7.82
470 -
prospectus, oering participants also need to determine what regulatory approval is needed
in order to market the oering to the intended audience. In addition to approval of a pro-
spectus by the competent authority in the relevant jurisdictions, issuers will need to obtain
approval from the relevant listing authority or exchange if the securities are to be admitted to
trading on a market (whether regulated or exchange- regulated).
Oering participants will want to conduct an oering process to ensure that securities are
not sold to purchasers at dierent times in dierent jurisdictions, since the possibility of
secondary trading may adversely impact the oering process as a whole. Finally, if the secur-
ities are being listed on an exchange (whether a regulated market or an exchange- regulated
market), the issuer will also need to consider the timeline for the listing process.
7.3.2.5.1 Time periods forapproval
Under the Prospectus Regulation, the competent authority of the home member state has a
period of ten working days from the submission of a complete dra prospectus to the com-
petent authority.138 is period is extended to 20 working days in the case of an issuer that
does not have securities admitted to trading on a regulated market and has not previously
oered securities to the public.139 Notwithstanding these time periods, failure of a compe-
tent authority to give a decision within these time periods does not constitute the approval of
a prospectus.140 Upon approval of a prospectus, the competent authority of a home member
state must notify ESMA of the approval of the prospectus and any supplement thereto as
soon as possible, and in any event no later than the end of the rst working day aer such ap-
proval is notied to the applicant.141
In practice, the time periods set out in paragraph 7.84 cannot be relied upon by an issuer in
planning its oering schedule. Under the Prospectus Directive, it frequently took signi-
cantly longer to achieve nal approval for a prospectus from the date of rst submission, in
particular to deal with queries from the competent authority. e required length of time will
vary from member state to member state as well as based on the type of securities covered by
the prospectus. Oerings of wholesale debt securities and medium term note programmes
have historically moved on faster timetables than those for equity securities. It remains to be
seen how the Prospectus Regulation may impact the length of time required to achieve nal
approval for a prospectus. In light of the historical variation among member states in terms
of time necessary to receive approval of a prospectus, it is important in constructing an of-
fering timetable to get an up- to- date sense of the time periods that the competent authorities
in the relevant home member state have been taking to approve prospectuses for oerings of
the type contemplated.
7.3.2.5.2 Coordinating marketing and prospectusapproval
Under Article 20 of the Prospectus Regulation, a prospectus may not be published prior
to its approval by the home member state and is required to be published prior to the
beginning of the offer of securities to the public.142 Unlike in the United States, it is
138 Prospectus Regulation Article 20.2.
139 Prospectus Regulation Article 20.3.
140 Prospectus Regulation Article 20.2.
141 Prospectus Regulation Article 20.2.
142 Prospectus Regulation Article 21 sets forth the requirements for publication of a prospectus. In a situation
in which an oering is made on a private placement basis outside the EEA, oering participants will need to ensure
that the means of publication do not impair the ability to rely on the relevant exemption.
7.83
7.84
7.85
7.86
471
necessary to complete the regulatory approval process prior to commencing a marketing
exercise to the public. In the United States, it would be possible to undertake the marketing
exercise based upon a red herring that would not have received nal sign- o from the US
SEC and could be subject to further comment.
Within the EEA, prior to approval of the prospectus, marketing can only be undertaken on
the basis of a dra or preliminary prospectus on an exempt basis, typically only to institu-
tional investors that are qualied investors. Pre- marketing to institutional investors on the
basis of a dra prospectus (typically referred to as a ‘pathnder’ or ‘red herring’) is common,
particularly in initial public oerings of equity. If this approach is followed, then the pro-
spectus approved by the competent authority of the home member state would be the nal
prospectus for liability purposes and would be the prospectus used to market to retail in-
vestors. As discussed in Section 7.3.2.7.1, a pathnder would be subject to the advertising
requirements contained in Article 22 of the Prospectus Regulation.
In an oering in which there is a desire to extend the marketing eorts to retail investors or
to engage in broader publicity eorts, an approved prospectus needs to be obtained prior
to engaging in these eorts. is prospectus can contain a price range for the oering and
needs to contain a xed number of securities to be oered.143 e nal pricing can then be
notied to the competent authority aer the pricing of the oering without the need for
a supplemental prospectus that would trigger a new approval period or create withdrawal
rights on the part of prospective purchasers in the oering.
One question that arose under the Prospectus Directive and the former Prospectus
Regulation was what exact pricing information was required to be included in a price range
prospectus. e issue arose out of the fact that Article 8.1 of the Prospectus Directive and
Item 5.3 in Annex III of the former Prospectus Regulation (which contained the require-
ments for the securities note for shares) did not have identical disclosure requirements with
respect to pricing information. e principal question related to what information needed
to be disclosed about how the nal price for the securities being oered would be deter-
mined in a situation in which a maximum price was included in the approved prospectus.
e ESMA Q&As suggested that in such a situation information about how the nal price
would be determined would need to be included only if there was not an established and/ or
liquid market with respect to the securities being oered (for example, in an initial public
oering).144 e Prospectus Regulation has addressed this question, stating explicitly that
in a situation where the maximum price is not available, the prospectus must disclose the
valuation methods and criteria, and/ or conditions, in accordance with which the nal oer
price is to be determined and an explanation of any valuation methods used.145 e need
to disclose information about how the price would be determined diers from typical US
disclosure practice in which it is sucient simply to include a price range in a prospectus
used in marketing. Once determined, the nal oer price and the amount of securities to be
oered are required to be led with the competent authority of the home member state and
made available to the public.146
143 If the prospectus does not contain a maximum price and xed number of securities to be oered, then with-
drawal rights under Prospectus Regulation Article 17.1 would apply until and for two working days aer those
terms are nalized. See Question 58 of the ESMA Q&As for a discussion of equivalent language in the Prospectus
Directive.
144 Question 58 of the ESMA Q&As.
145 Prospectus Regulation Article 17.1(b).
146 Prospectus Regulation Article 17.2.
7.87
7.88
7.89
472 -
In an initial public oering of a class of shares not previously admitted to trading on a regu-
lated market, an approved prospectus is required to be made available to the public not less
than six working days prior to the end of the oer.147 is period runs from the date the pro-
spectus is published upon approval by the competent authority in the home member state. In
a situation in which the oering is marketed to institutional investors on the basis of a dra
prospectus and then marketed to retail investors following approval, the oering would need
to remain open for a minimum of six working days from the date of publication of the pro-
spectus following formal regulatory approval.
Issuers have at least two other potential approaches to coordinating marketing with the six-
day rule. e rst is to use a price range prospectus as described in paragraph 7.88 and have
the prospectus approved prior to the beginning of marketing. Asecond possible approach
is to limit participation in the oering to qualied investors and gain approval of the pro-
spectus for purposes of having the shares being oered admitted to trading on a regulated
market.148 Issuers facing the question of the preferred approach should discuss the issue with
their underwriters to identify any potential marketing considerations.
7.3.2.5.3 Listing authorityprocess
In an oering in which the securities being oered are intended to be traded on a market
(regardless of whether it is a regulated market or an exchange- regulated market), it is highly
advisable early in the process to get in contact with the relevant authority for that market.
is is important to get current feedback on the timeframe for completing the listing/ ad-
mission process and review process that the relevant authority would employ. While the
Prospectus Regulation restricts member states from imposing additional requirements on
the prospectus itself, authorities operating markets are permitted to impose additional re-
quirements as a condition to admission to trading.
Depending on the market, these additional requirements may be fairly time- consuming
to address and can impact the disclosure that needs to be made to oerees in the oering.
Issuers should also determine whether a nancial institution is required to act as a sponsor
for the listing and conrm with their proposed sponsor what additional work the sponsor
will need to undertake in connection with that role.149
Please refer to Part3 for additional details on additional requirements in member states.
7.3.2.6 Supplementalprospectuses
Article 23 of the Prospectus Regulation requires an issuer to supplement an approved pro-
spectus whenever a signicant new factor or material mistake or inaccuracy relating to
147 Prospectus Regulation Article 21.
148 Note that in the United Kingdom, the competent authority does not impose this six- day rule on admissions
to trading on a regulated market seeking funds only from qualied investors. See UKLA Technical Note, Public
Oers— the Six- day rule (REF:UKLA/ TN/ 603.1), available at
1.pdf>. Issuers contemplating listing on a regulated market in a member state should conrm whether the compe-
tent authority in that member state imposes this six- day rule on those transactions.
149 Prior to the UK’s withdrawal from the European Union, the UK FCA undertook a consultation that ad-
dressed, among other things, the segmentation of the listing regime in the United Kingdom with respect to depos-
itary receipts, culminating in various amendments to the listing regime including a restructuring into Premium
and Standard segments. e former denoted more stringent super- e quivalent standards; the latter, EU minimum
standards (including global depositary receipts). See Consultation Paper 09/ 24 ‘Listing regime review, Policy
statement for CP08/ 21 and further minor consultation’, available at www.lexology.com/ library/ detail.
aspx?g=35797741- bde7- 4c25- 8ba6- f1b540fa0f91>.
7.90
7.91
7.92
7.93
7.94
7.95
473
information contained in the approved prospectus, which may aect the assessment of the
securities to which the prospectus relates, arises or is noted between the approval of the pro-
spectus and the completion of the oering to which the prospectus relates or the time when
trading on a regulated market begins, whichever occurs later.150 An issuer may be called
upon to make a judgment as to whether a development or new piece of information consti-
tutes a ‘signicant new factor’ and so triggers the obligation to publish a supplemental pro-
spectus.151 If so, nancial intermediaries and managers will be obligated to inform investors
about the supplemental prospectus.152
If a supplemental prospectus is prepared, then the issuer is required to receive the approval of
the competent authority of the home member state, which has ve working days (decreased
from seven working days under the Prospectus Directive) to approve the supplemental pro-
spectus.153 If a supplemental prospectus is required in connection with an oering in which
a prospectus has been passported to other member states, then the supplemental prospectus
will also need to be similarly passported. Article 23.1 of the Prospectus Regulation requires
a supplemental prospectus to be published in the same manner as the original prospectus.154
Given the potential for a signicant delay as a result of a supplemental prospectus, an issuer
would generally wish to avoid having to prepare a supplemental prospectus if possible. For
example, an issuer could time its oering to avoid the occurrence of an event (such as the
scheduled publication of an updated prot forecast) during the pendency of an oering that
would require a supplemental prospectus.
In the context of a continuous oering (for example, in connection with an oering pro-
gramme), a supplemental prospectus is the intended method of updating the base prospectus
or registration document to reect material changes. Practically, the need for approval by the
competent authority of the home member state can result in the issuer being unable to use
the oering programme for a period of time while that approval is obtained. For large well-
known issuers, the Prospectus Directive provided less exibility than the current US system
in which approval by the US SEC of the supplemental disclosure contained in a periodic
ling would not be required. e Prospectus Regulation also provides less exibility than
the US system, as regulatory approval continues to be required for prospectus supplements,
including those to the URD (however note that, as discussed above, the URD benets from
a faster approval process of ve business days) between the time when the prospectus is ap-
proved and the nal closing of the oer of the underlying securities to the public or, as the
case may be, the time when trading on a regulated market begins.155
Afurther consequence of a supplement to the prospectus is that it creates withdrawal rights,
the availability of such rights to be prominently stated in the supplement,156 exercisable for at
least two working days aer the publication of the supplement, provided that the supplement
150 Prospectus Regulation Article 23.1.
151 e publication of a prot forecast by an issuer was presumed to require a supplemental prospectus, at least
in the context of an equity oering under the Prospectus Directive. Question 20 of the ESMA Q&As. On the other
hand, the correction of mistakes and inaccuracies that are not material did not require publication of a supple-
mental prospectus under the Prospectus Directive.
152 Prospectus Regulation Article 23.3.
153 Prospectus Regulation Article 23.1.
154 Prospectus Regulation Article 23.1.
155 Prospectus Regulation Article 9.10. Note however that amendments to the URD do not require pre- approval
by the relevant competent authority. Prospectus Regulation Article 9.7.
156 Prospectus Regulation Article 23.2.
7.96
7.97
7.98
7.99
474 -
triggering event arose or was noted before the closing of the oer period or the delivery of
the securities, whichever occurs rst.157 In a situation in which a supplemental prospectus is
required during the oering period, these withdrawal rights may have little practical signi-
cance. For example, in a registered oering in the United States by an issuer that is required
to amend its prospectus during the roadshow for a material event, market practice is to re-
quire a period of time for potential purchasers to digest the information prior to pricing.
erefore, the issuer can accommodate the required period for withdrawal rights prior to
the pricing of the oering. As discussed in Sections 7.3.4 and 7.3.5, these withdrawal rights
can cause signicantly more problems in the context of merger and acquisition transactions
and rights oerings.
7.3.2.7 Publicityrestrictions
7.3.2.7.1 Advertising
Article 22 of the Prospectus Regulation imposes certain limitations on the publication of
advertisements in connection with an oer of securities to the public or an admission to
trading on a regulated market.158 In particular, advertisements in connection with an oer
of securities to the public are required to be clearly recognizable as such and contain a prom-
inent statement that the advertisement is not a prospectus and that a prospectus has been
or will be published and indicate where investors are or will be able to obtain a copy of the
prospectus.159 Article 22.9 of the Prospectus Regulation provides that ESMA shall develop
regulatory standards to specify the means by which advertisements may be disseminated to
the public and establish procedures on the cooperation between the competent authorities of
the home member state and the member state where the advertisements are disseminated.160
In addition, all written and oral information concerning an oer of securities to the public
or admission to trading on a regulated market (whether or not for advertising purposes) is
required to be consistent with the information contained in the prospectus.161
ese broad requirements are in contrast to the publicity in connection with securities of-
ferings in the United States in which there has traditionally been quite limited advertising
and publicity based on a concern that advertising or publicity constituted an impermissible
oer of securities. Revisions to these rules as part of the Securities Oering Reform in 2005
have signicantly increased the ability of issuers, especially well- known seasoned issuers (re-
ferred to as ‘WKSIs’), to engage in publicity in connection with an oering in the form of
free- writing prospectuses, although issuers are still subject to prospectus liability under the
US Securities Act for these communications.162
Potentially of more signicance to issuers and underwriters is an obligation to ensure that
all material information conveyed to investors is included in the prospectus. In particular,
Article 22.5 of the Prospectus Regulation requires that material information addressed to
investors, including information disclosed in roadshow presentations and sales meetings, is
157 Prospectus Regulation Article 23.2. e withdrawal period may be extended by the issuer or the oeror. e
nal date of the right of withdrawal must be stated in the supplement.
158 e term ‘advertisements’ is dened in Prospectus Regulation Article 2(k) as ‘a communication with both
of the following characteristics:(i) relating to a specic oer to the public of securities or to an admission to
trading on a regulated market; and (ii) aiming to specically promote the potential subscription or acquisition of
securities’.
159 Prospectus Regulation Articles 22.2 and 22.3.
160 Prospectus Regulation Article 22.9.
161 Prospectus Regulation Article 22.3.
162 See Rules 163 and 164 under the US Securities Act, 17 CFR § 230.163 and 17 CFR § 230.164.
7.100
7.101
7.102
475
required to be disclosed to all other investors to whom the oer is addressed or included in
the prospectus or a supplemental prospectus. Even absent this specic requirement, issuers
and underwriters have had reason to take care to limit the extent to which information is
disclosed in roadshows that goes beyond the information contained in the prospectus. In
light of this express requirement, issuers and underwriters need to take special care to ensure
that all material information discussed in roadshows and sales meetings is contained in the
prospectus as approved by the competent authority of the home member state. e poten-
tial consequence under the Prospectus Regulation if there is a discrepancy that is discovered
during the oering and aer approval of the prospectus is that the issuer will need to publish
a supplemental prospectus that will need to be approved by the competent authority, which
may have the eect of delaying the oering process.
One further issue that issuers and nancial intermediaries participating in an oering will
need to be cognizant of in connection with marketing materials is the application of MiFID
II to information provided by nancial intermediaries. Article 24.3 of MiFID II requires that
information provided by nancial intermediaries to clients and potential clients be fair, clear
and not misleading. is general rule is applied specically in the context of marketing com-
munications, and requires that it be identiable as such and must be clearly distinguished
from other general information provided to the public.163 In practice, marketing communi-
cations distributed by nancial intermediaries in connection with an oering will need to be
vetted to ensure that they comply with MiFID II.
In the event that an oering in the EEA is part of a global oering that is not being registered
under the US securities laws (for example, an oering with a prospectus in the EEA com-
bined with a distribution to qualied institutional buyers in the US in reliance on Rule 144A),
the issuer and underwriters will need to ensure that any advertising undertaken in the EEA
complies with the advertising safe harbours under the US Securities Act.164 Practically, press
releases and advertising relating to the oering will need to be bifurcated between limited
versions for release in the United States and more expansive versions used outside the United
States. Non- US, non- EU issuers should also consider any applicable restrictions on adver-
tising under home country law.
7.3.2.7.2 Pre- marketingdocuments
Dra prospectuses used in the pre- marketing of oerings constitute advertising (since they
are communications ‘aiming to specically promote the potential subscription or acquisi-
tion of securities’) and, therefore, should contain legends and otherwise comply with the
advertising requirements described in Section 7.3.2.7.1.
7.3.2.7.3 Research
In contrast to concerns arising under the US securities laws, research by nancial intermedi-
aries participating in an oering is generally considered not to be a prospectus. While re-
search of this type was considered not to be an oer of securities to the public under the
Prospectus Directive, it was required to comply with certain independence procedures and
to prominently disclose the involvement in the oering of the institution preparing the
163 MiFID II Article 24.3.
164 Rule 135c under the US Securities Act creates a safe harbour for limited press releases in connection with
unregistered oerings. 17 CFR § 230.135c. Rule 135e under the US Securities Act provides a safe harbour for press
releases and other advertising made outside the US in connection with an exempt oering. 17 CFR § 230.135e.
7.103
7.104
7.105
7.106
476 -
research.165 Appropriate independence procedures include maintaining an ‘ethical wall’ be-
tween analysts preparing research reports and persons involved in the oering to ensure that
analysts do not receive material non- public or price- sensitive information about the issuer
in the oering. ese rules were superseded by the Market Abuse Regulation, which requires
that persons who produce information recommending or suggesting an investment strategy
take reasonable care to ensure such information is objectively presented and to disclose their
interests or indicate conicts of interest concerning the nancial instruments to which that
information relates.166 Investment rms also typically have internal compliance guidelines
that may impose additional restrictions.
Prudent issuers should limit their involvement in research so as to avoid being seen as having
adopted that research, which could result in that research constituting advertising by the is-
suer. Issuers should also avoid providing prospective investors with analyst projections and
other information not included in the prospectus, as that information could be seen as ad-
vertising by the issuer, which is subject to the rules described above.
Issuers and oering participants in global oerings will also need to ensure that research ac-
tivities in connection with the portion of the oering to be conducted in the EEA does not
result in an impermissible oering or solicitation either in the EEA or outside it. is has
typically been achieved by imposition by the lead underwriters of restricted and blackout
periods on research by syndicate members and strict legending and distribution require-
ments on research produced by oering participants to ensure that it is not used in ways that
constitute impermissible solicitation.167
7.3.2.8 Passporting ofprospectuses
Articles 24, 25 and 26 of the Prospectus Regulation set out the framework for the passporting
of a prospectus approved by the competent authority of the home member state into other
member states. Under Article 23 of the Prospectus Regulation, the competent authority is
obliged within one working day aer a request or, where the request is submitted together
with the dra prospectus, within one working day following the approval of the prospectus,
to provide a certicate of approval of the prospectus to each other member state into which
the prospectus is desired to be passported.168
e competent authority in each host member state into which the prospectus is being
passported will then need to respond to the certicate of approval from the competent au-
thority of the home member state, which should typically occur within a relatively short
period of time.169 e passporting timetable imposes some practical barriers to be overcome
165 Article 5 of Commission Directive 2003/ 125/ EC of 22 December 2003 implementing the Market Abuse
Directive.
166 Market Abuse Regulation Article 20.1.
167 For example, in global oerings it would be typical to limit research reports that can be distributed to in-
vestors in the United States (including qualied institutional buyers) to research that can be distributed in reliance
on the safe harbour contained in Rule 138 or 139, as applicable, under the US Securities Act. 17 CFR §§ 230.138–
230.139. Research guidelines may also include procedural requirements designed to reduce the risk of impermis-
sible distribution of research reports.
168 e issuer or the person responsible for preparing the prospectus shall also be notied of the certicate of
approval at the same time as the competent authority in the host member state. Prospectus Regulation Article 25.1.
169 For example, prior to the United Kingdom’s withdrawal from the EU, the UK FCA would informally re-
spond to passport requests from other member states within 24 hours of receipt of the approved prospectus, a
translation of the summary (if required), and the certicate of approval. See UKLA Factsheet No 4, October 2008.
7.107
7.108
7.109
7.110
477
in the case of a simultaneous oering in multiple member states in that it may take several
days from the date the home member state approves the prospectus for the prospectus to
be available for use in the other member states in which it is to be used. An issuer contem-
plating such an oering should investigate whether the competent authorities in the relevant
member states to be included in the oering would accommodate an expedited passporting
procedure, or it should allow time in its oering timetable for the passporting process to be
completed.
An alternative to passporting a prospectus into multiple home member states in connection
with an oering in multiple member states is to have a prospectus approved in the home
member state and oer the securities on an exempt basis in other member states. is avoids
the potential delay and complication of passporting into a member state if securities are only
going to be oered on an exempt basis in that member state.
7.3.2.9 Secondary listing ona regulatedmarket
Non- EU issuers with equity listings in their home country or on a market outside the EEA
may wish to have their shares admitted to trading on a regulated market in the EEA outside
the context of an oering to the public. Under the Prospectus Regulation, a listing transac-
tion of this type requires a prospectus.170
Asecond situation in which a non- EU issuer might wish to engage in a listing transaction
would be following an oering made to investors on a private placement basis. is approach
might be followed in order to facilitate a capital raising based on more limited information
than would be required in a full prospectus or on an accelerated timetable that does not re-
quire approval of the prospectus and would allow additional time for a non- EU issuer to
prepare the complete prospectus and gain approval of the competent authority in the home
member state. In this situation, the issuer and its advisers will need to be careful to ensure
that it complies with the private placement requirements and does not take actions that
would constitute an oer of the privately placed securities to the public.
e competent authorities in Belgium, France, the Netherlands and Portugal have estab-
lished a ‘fast path’ procedure for review and approval of a prospectus for a technical listing by
a non- EU issuer listed on the NewYork Stock Exchange and subject to the US Exchange Act
reporting regime either as a US domestic issuer or as a foreign private issuer.171 is fast path
procedure is available to an issuer for a pure secondary listing and a listing following a pri-
vate placement in the EEA (including in connection with a registered initial public oering
in the United States). e competent authorities of the relevant member states have under-
taken to conduct an expedited approval process of the listing prospectus. It is not available
to an issuer that already has securities admitted to trading on a regulated market in the EEA.
e fast path procedure would allow a non- EU issuer meeting the criteria described in para-
graph 7.114 to list shares on a regulated market in the EEA essentially based on US docu-
mentation (either US Exchange Act lings within the prior 12months or the issuer’s US
prospectus for its registered initial public oering) with a short wrapper (including a cross-
reference table to the Prospectus Regulation requirements).
170 Prospectus Regulation Article 3.3. Note that the exemptions contained in Prospectus Regulation Articles 1.3
and 1.4 are not applicable to a transaction in which securities are admitted to trading on a regulated market.
171 See Fast Path Factsheet prepared by NYSE Euronext, available at
international- listings/ fast- path/ procedures- obligations>.
7.111
7.112
7.113
7.114
7.115
478 -
Issuers choosing to utilize a fast path procedure should be aware that having securities admitted
to trading on a regulated market in the EEA will subject the issuer to ongoing disclosure require-
ments under the Transparency Directive and the requirements of the Market Abuse Regulation.
7.3.3 Oering withoutan approved prospectus intheEEA
ere are two principal categories of oerings that need to be considered in this connec-
tion:(a) an oering of wholesale debt; and (b)a global oering (whether debt or equity) in
which investors in the EEA only participate on a private placement basis.
7.3.3.1 Wholesale debtsecurities
An issuer is permitted to oer wholesale debt securities to the public in the EEA without
the need for a prospectus so long as those debt securities are not admitted to trading on a
regulated market. If there is a desire to list the wholesale debt securities in order to enable
a broader range of institutional investors to participate in the oering, the wholesale debt
securities can be listed on an exchange- regulated market such as the GEM in Dublin, Euro
MTF in Luxembourg and the Professional Securities Market in London. Awholesale debt
oering would have the eect of excluding the retail market in the EEA, although this is
likely to be a relatively minor concern for a non- EU issuer that is more focused on accessing
the institutional market. Afurther consideration for a non- EU issuer is whether a whole-
sale debt oering can practically be combined with an oering outside the EEA, where min-
imum denominations are typically much smaller (for example, $1,000 per note in the United
States).
An oering of wholesale debt securities in the EEA can be made using the same documen-
tation as used elsewhere in the world (for example, the prospectus from a US registration
statement) without triggering the obligation to publish a prospectus under the Prospectus
Regulation so long as those wholesale debt securities are not admitted to trading on a regu-
lated market or on a multilateral or organized trading facility in the EEA. An oering of this
type also would not trigger Transparency Directive and Market Abuse Regulation obliga-
tions and would not result in a non- EU issuer selecting a home member state for equity se-
curities and Transparency Directive purposes.
Issuers should note that listing on a multilateral or organized trading facility will trigger
the application of the Market Abuse Regulation, and also note that although listing on an
exchange- regulated market does not technically trigger the application of the Transparency
Directive, the principal exchange- regulated markets impose certain similar obligations on
issuers. For example:
• the UKLA requires annual reports and audited nancial statements of issuers on the
Professional Securities Market within six months aer the end of the scal year (al-
though those nancial statements are not required to be prepared in accordance with
IFRS, provided this is not the national accounting standard applicable to the issuer) and
requires compliance with Articles 17 and 18 of the Market Abuse Regulation relating to
disclosure of inside information and insider lists;172
172 See Listing Rule 17.3 in the UK FCA Handbook, available at
LR/ 17/ 3.html>.
7.116
7.117
7.118
7.119
7.120
479
• Euro MTF in Luxembourg imposes requirements with respect to equal treatment of
securityholders, publication of annual accounts and management reports, and requires
disclosure of material developments useful for the protection of investors or for the due
and proper operation of the market;173 and
• the GEM requires annual reports and audited nancial statements to be published no
later than the latest time required under home country law (although those nancial
statements are not required to be prepared in accordance with IFRS), imposes cer-
tain disclosure requirements relating to changes in securities and communications
with securityholders and reminds issuers of their obligations under the Market Abuse
Regulation.174
Issuers contemplating admission to trading on an exchange- regulated market should con-
sider these requirements in light of weighing these markets as an alternative to admission to
trading on a regulated market.
7.3.3.2 Global oering withEEA privateplacement
Asecond category of oerings that could be undertaken without the need for an approved
prospectus is a global oering of equity securities or debt securities with a minimum de-
nomination of less than €100,000 (or its equivalent) in which participation within the EEA
is limited in order to ensure the availability of an exemption and securities are not admitted
to trading on a regulated market. In an oering of this type, oering restrictions and re-
strictions on publicity are of critical importance because the private placement exemption is
dependent on oers not being made to impermissible oerees, even if the oering is made
outside the EEA on a basis that does not require publicity restrictions.175 For example, an
issuer that is a well- known seasoned issuer under the US Securities Act that undertakes an
oering on a registered basis under the US securities laws has a great degree of exibility to
communicate with prospective purchasers and there are eectively no restrictions on the
number or type of oerees that can be solicited.
is approach would be typical in a global equity oering in which there is a desire to sell
to institutional accounts in the EEA, which are qualied investors, and possibly to a limited
number of other investors (fewer than 150 in any member state). Asecond type of oering
in which this approach would be followed is an oering of debt securities that are not whole-
sale debt securities, which would be typical if market practice in the primary markets for
the debt oering was to use a smaller minimum denomination (for example, a US dollar-
denominated oering).
In an oering with this structure, the underwriting or purchase agreement for the inter-
mediaries selling in the EEA would typically include selling restrictions to ensure that the
underwriters or placement agents do not engage in activities that would result in the loss of
the exemption.
e oering document used worldwide should also include a legend describing these selling
restrictions.
173 See Chapters9 and 10 of the Rules and Regulations of the Luxembourg Stock Exchange, Edition 11/ 2018,
available at .
174 See Chapter5 of the Global Exchange Market Listing and Admission to Trading Rules for Debt Securities,
available at th/ procedures- obligations>.
175 See C hapter4 of this Part2 for a more detailed discussion of private placements in the EEA.
7.121
7.122
7.123
7.124
7.125
480 -
7.3.4 Merger and acquisitiontransactions
In light of the broad scope of application of the Prospectus Regulation and the denition
of the phrase ‘oer of securities to the public’, issuers engaging in merger and acquisition
transactions in which all or part of the consideration consists of securities need to consider
carefully whether the Prospectus Regulation may apply to that transaction and, if so, the
available exemptions. e likelihood of the need for compliance or an exemption from the
Prospectus Regulation would increase substantially if the company being acquired is listed
in the EEA or otherwise has a signicant number of shareholders in the EEA. is Section
does not address the Takeover Bids Directive or the issues that would arise in connection
with a merger or acquisition of an EU issuer. See Chapter6 of this Part2 for a discussion of
those issues.
7.3.4.1 Absence ofan oer ofsecurities tothepublic
e initial question to be considered is whether the transaction constitutes an oer of se-
curities to the public. In considering that question, the form of the transaction is likely to be
signicant. For example, an exchange oer extended to persons in the EEA will constitute an
oer of securities to the public, absent an exemption.176
Asituation that is less clear but would still likely constitute an oer of securities to the
public absent an exemption is a US- style merger or consolidation in which securityholders
have the right to vote on the transaction and possibly the right to exercise dissenters’ or ap-
praisal rights under applicable corporate law. e exemption contained in Article 1.4(g) of
the Prospectus Regulation, which is discussed in greater detail in paragraph 7.132, refers to,
but does not dene, a ‘merger’ or a ‘division’. In addressing this question, the ESMA Q&As
also do not answer the question of whether every stock- for- stock merger actually consti-
tutes an oer of securities to the public.177 Former versions of the ESMA Q&A178 indicated
that there is scope for exibility in interpreting what constitutes a ‘merger’ under the ex-
emptions, which suggested that competent authorities have exibility to treat other types
of business combinations (for example, an amalgamation under Canadian law, but also
de- mergers) as a ‘merger’.179 However, that question has now been deleted from the ESMA
Q&A as a reaction to the amendment of Article 4.1 of the Prospectus Directive in 2012 ac-
cording to which ‘divisions’ are, in addition to ‘mergers’, also exempted, which remains the
case under the Prospectus Regulation. Because investors are eectively making an invest-
ment decision in determining how to vote or exercise dissenters’ or appraisal rights, the
right of securityholders to vote on the transaction and the availability of dissenters’ or ap-
praisal rights would seem to increase the likelihood that competent authorities will regard
such a transaction as an oer of securities to the public that requires compliance with the
Prospectus Regulation or an exemption.
Another possible situation is a transaction involving a plan or scheme of arrangement in
which securityholders would have the right to vote but judicial approval is also required to
complete the transaction. Aplan or scheme of arrangement of this type may not constitute
an oer to the public of the securities to be oered, although under the Prospectus Directive
176 e exemption contained in Prospectus Regulation Article 1.4(f) is also available for debt- for- debt exchange
oers in addition to acquisition transactions involving shares.
177 See Q uestion 30 of the ESMA Q&As.
178 Including the 17th edition of ESMA Q&As of September 2012.
179 Question 30 of the ESMA Q&As (17th edition).
7.126
7.127
7.128
7.129
481
there appeared to be some dierence in views among the competent authorities in various
member states on that question.180
When considering these questions, it is advisable to discuss the particular form of trans-
action being considered with counsel in the member state(s) in which there are known to
be substantial numbers of securityholders because the views of the relevant competent au-
thority on the subject, to the extent known, will necessarily inform the approach to be taken.
7.3.4.2 M&A- specicexemptions
e Prospectus Regulation contains exemptions from the obligation to use an approved pro-
spectus in connection with a ‘merger or division’181 or an ‘exchange oer,182 so long as a dis-
closure document is available that contains information describing the transaction and its
impact on the issuer.183 Before this exemption entered into force, the Prospectus Directive’s
requirement for an ‘equivalent disclosure document’ continued to apply to the exemptions
for mergers, divisions, and exchange oers. ese exemptions cover both oers of securities
to the public (to the extent that the transaction is considered to involve an oer of securities
to the public) and the admission of the securities being used as consideration to trading on a
regulated market.
Under the Prospectus Directive, the scope of the relief these exemptions provided depended
on how the relevant competent authorities applied the concept of an equivalent disclosure
document. Competent authorities tended to take a fairly narrow view of equivalent dis-
closure documents and have required the documents to be all but identical to a prospectus.
Non- EU issuers that prepared an oering document that complied with the US registration
statement and proxy statement requirements under the Prospectus Directive were some-
times able to satisfy the competent authorities by simply adding a wrapper to the document
to add any additional information the competent authorities require. is was a signicantly
bigger burden for non- EU issuers preparing oering documents under the Prospectus
Directive that did not prepare nancial statements in US GAAP, IFRS, or another GAAP
‘equivalent’,184 and under applicable law were only obligated to produce a less fulsome of-
fering document.
Unlike a prospectus approved by the home member state that is passported into other
member states, under the Prospectus Directive the equivalent disclosure document for a
merger or exchange oer was required to be approved by the competent authority in each
member state in which it is to be used.185 If there were substantial numbers of target com-
pany securityholders in multiple member states, then the need to get the approval of the
competent authority in each such member state sometimes made trying to use an equivalent
oering document unattractive. Now eective, the Prospectus Regulation’s lesser threshold
180 For example, prior to the United Kingdom’s withdrawal from the EU, the UKLA’s view appeared to be that a
scheme of arrangement in which transferable securities are used as consideration did not constitute an oer to the
public. See ‘UKLA Technical Note:Exemptions from the requirement to produce a prospectus (Ref:UKLA/ TN/
602.2)’, available at tion/ ukla/ tn- 602- 2- consultation.pdf>. In addition, the UKLA
had stated that it may require a prospectus if there is any alternative form of consideration, for example a cash alter-
native or a ‘mix and match’ election. See UKLA List! 23 (December 2009), available at ww w.lexology.com/
library/ detail.aspx?g=6ac2ad0f- 9016- 48e3- b515- 4365e5a979c6>.
181 Prospectus Regulation Article 1.4(g).
182 Prospectus Regulation Article 1.4(f ).
183 Prospectus Regulation Articles 1.4(f )– (g), 1.5(e)– (f), and 21.2.
184 See S ection 7.3.2.4.2 above.
185 Question 30 of the ESMA Q&As.
7.130
7.131
7.132
7.133
482 -
of a document containing information describing the transaction and its impact of the
threshold will likely reduce the barriers to issuers engaged in merger and acquisition activity
that existed under the Prospectus Directive.
Two nal considerations that need to be taken into account in thinking about whether to use
an approved prospectus or rely on an exemption are (a)the possibility of additional with-
drawal rights as a result of the issuance of a supplemental prospectus and (b)limits on the
ability to use the prospectus prior to its approval by the competent authority of the home
member state. e extent to which these considerations are signicant will depend on the
home country law applicable to the parties involved in the transaction.
As discussed in Section 7.3.2.6, the issuance of a supplemental prospectus gives oerees the
right to withdraw their acceptance of the oer for at least two working days aer the date of
publication of the supplemental prospectus.186 In an exchange oer, additional withdrawal
rights may not be a material concern for an acquirer if there are already withdrawal rights
applicable to the oer. For example, the securityholders of a company that is the subject of
an exchange oer that is subject to the full US tender oer rules will have withdrawal rights
throughout the oer period until securities tendered are accepted for payment.187 In the
context of a merger or similar business combination in which a shareholder vote is being
obtained, these withdrawal rights should be regarded as the right to withdraw or change a
vote or a proxy prior to the time the shareholder vote is actually obtained.
As described in Section 7.3.2.5, a preliminary or dra prospectus cannot be used other than
with a limited number of investors or qualied investors. In the context of an exchange oer,
this may be more limiting than what is allowed under the law of the jurisdiction in which the
subject company of the oer is organized. For example, in the United States an exchange oer
may be commenced prior to completing the US SEC approval process although tendered se-
curities may not be accepted prior to eectiveness of the registration statement. Whether
this is a material concern will depend on the extent to which there are retail securityholders
to whom it is important to make available a prospectus quickly.
7.3.4.3 Otherexemptions
In the event that an issuer desires to avoid the need to have a prospectus approved or under-
take the process of gaining approval of equivalent disclosure documents by competent au-
thorities in one or more member states, there are other possible exemptions which may be
available in connection with a business combination transaction.
One possible approach would be limiting the participants in the transaction in the EEA to
qualied investors.188 In order to rely on this exemption, appropriate legends and selling
restriction disclosures would need to be included in the oering document, and the par-
ties to the transaction would need to take care not to engage in activities that could be seen
186 Prospectus Regulation Article 23.2.
187 By comparison, in the context of the UK Takeover Code, these withdrawal rights are understood to expire
upon the earlier of the time that the oer becomes or is declared unconditional as to acceptances, and the nal
time for lodgement of acceptances which can be taken into account in accordance with the Final Day Rule, e
Takeover CodeC de Ru e 34 available at
pdf?v=20Jul2017>.
188 Note that this type of approach would not be available if the securities being issued in the transaction were to
be admitted to trading on a regulated market unless investors other than qualied investors were paid cash rather
than receiving the securities (i.e. a vendor placement procedure), assuming such a procedure is permitted under
applicable law.
7.134
7.135
7.136
7.137
7.138
483
as extending the oer to other investors. Although this type of approach would avoid the
need to obtain approval of a prospectus or approval of an equivalent disclosure document,
it would need to be conrmed that this type of approach would be consistent with home
country laws and practice applicable to the companies involved in the transaction.189 Even
if an exclusion of investors who are not qualied investors comports with that law, exclusion
may not be feasible for practical reasons (for example, if the shares held by such investors are
needed to meet the threshold for a squeeze- out or compulsory acquisition).
Another possible exemption that non- EU issuers might consider is the exemption for oers
to fewer than 150 oerees in a single member state. In the context of a straightforward se-
curities oering, this exemption can be policed fairly easily by ensuring that communica-
tions are made only to a specied number of oerees. However, in a business combination
transaction an initial diculty will be determining the number of shareholders of the com-
pany being acquired. In addition, there are likely to be practical diculties in limiting the
number of oerees because the number of shareholders of the parties to the transaction in
each member state cannot be controlled and may uctuate during the pendency of the trans-
action.190 is problem would be exacerbated if the securities of the company to be acquired
are listed on an exchange.
7.3.4.4 L oannotes
In certain cash oers, the securityholders of the subject company have the right to elect to re-
ceive notes in lieu of all or a portion of the cash consideration payable in the oer (so- calle d
loan notes). If the loan notes are able to be transferred, then the ability of the subject com-
pany shareholders to elect to receive notes will likely constitute an oer of securities to the
public that would require a prospectus under the Prospectus Regulation. To avoid the need
for a prospectus in a situation in which a prospectus is not otherwise being prepared (since
the transaction is a cash oer), the solution seems to be to make the loan notes non- transfer-
able, so as not to constitute ‘securities’ under the Prospectus Regulation, and not to admit the
loan notes to trading on a regulated market.191
7.3.5 Rightsoerings
Acapital raising through a rights oering by a non- EU issuer is another situation in which
the Prospectus Regulation may be applicable to non- EU issuers. Historically, the competent
authorities in the EEA regarded a rights oering as an oering of the securities underlying
189 For example, a prohibition on tenders from a category of securityholders would not be permitted in an ex-
change oer subject to section 14(d) of the US Exchange Act because of the applicability of the ‘all holders’ rule
(Rule 14d- 10) thereunder. Rule 14d- 10 under the US Exchange Act, 17 CFR § 240.14d- 10. On the other hand, the
US SEC has stated that it is permissible for an oeror not to distribute tender oer materials into a jurisdiction (i.e.
the oer is not being made into the jurisdiction) and in certain circumstances it may be permissible in connection
with an exchange oer to use a vendor placement. See Commission Guidance and Revisions to the Cross- Border
Tender Oer, Exchange Oer, Rights Oerings, and Business Combination Rule and Benecial Reporting Rule
for Certain Foreign Institutions, 73 FR 60050, 9 October 2008. For an issuer engaging in a transaction in which a
shareholder vote is required, it should consider whether not soliciting proxies or votes from certain shareholders
would comply with home country law and the listing requirements of other stock exchanges on which they may be
listed.
190 is would not be the case if the company is closely held by a small number of securityholders who have
agreed not to transfer or there are otherwise eective transfer restrictions on the securities.
191 Prospectus Regulation Article 2(a).
7.139
7.140
7.141
484 -
the rights for which the former ‘free oer’ exemption contained in the Prospectus Directive
was not available.
e Prospectus Directive was amended to make clear that rights oerings trigger the ob-
ligation to publish a prospectus thereunder, whether or not the rights can be traded to any
persons other than the existing shareholders. However, rights oerings were then subject
to a proportionate disclosure regime if the shares were oered by companies whose shares
of the same class were admitted to trading on a regulated market or a multilateral trading
facility as dened in Article 4.1(15) of Directive 2004/ 39/ EC, w hich were subject to appro-
priate ongoing disclosure requirements and rules on market abuse, provided that the issuer
had not disapplied the statutory pre- emption rights.192 Consequently, those non- EU issuers
raising capital through a rights oering for shares not admitted to trading could not utilize
an exemption or a limited disclosure regime, but instead were required to comply in full with
the Prospectus Directive.
Similar to the proportionate disclosure regime under the Prospectus Directive, the
Prospectus Regulation provides for a simplied disclosure regime for follow- on issuances.
e Prospectus Regulation provides that the need for a full prospectus is less acute in cases
of subsequent oers to the public (including rights issuances to existing stockholders) or
admissions to trading on a regulated market by an issuer that already has a class of secur-
ities admitted to trading on a regulated market,193 as well as for issuers whose securities are
traded on SME growth markets due to the requirement for their operators to establish and
apply rules ensuring appropriate ongoing disclosure under MiFID II.194 For a further discus-
sion of the simplied disclosure regime, see paragraph 7.46.
Afurther issue to consider in the context of a rights oering is the possibility of withdrawal
rights arising as a result of a supplemental prospectus. Under Article 23 of the Prospectus
Regulation, potential purchasers in an oering of securities are required to have a period
of at least two working days to withdraw their subscription to the oer following the pub-
lication of a supplemental prospectus.195 In the context of a rights oering, the application
of withdrawal rights could cause substantial confusion if a supplemental prospectus is pub-
lished prior to the end of the subscription period for the rights. Issuers should consider
whether there is a need to disclose the possibility of withdrawal rights in their rights oering
timetable. Issuers should also consider the possible need for disclosure in the initial pro-
spectus with respect to whether the issuer or the underwriters bear the risk of holders of
rights exercising withdrawal rights.
e Prospectus Regulation provides that withdrawal rights are only available if the event or
factor giving rise to a supplemental prospectus arises before the closing of the oer period
or the delivery of the securities, whichever occurs rst.196 is approach avoids the potential
nightmare scenario of subscribers exercising withdrawal rights aer they have received se-
curities (and potentially traded the delivered securities into the market).
192 See Article 1(13) of Commission Delegated Regulation (EU) No 486/ 2012 of 30 March 2012 amending
Regulation (EC) No 809/ 2004 as regards the format and the content of the prospectus, the base prospectus, the
summary and the nal terms and as regards the disclosure requirements.
193 Prospectus Regulation Recital 48.
194 Prospectus Regulation Recital 48.
195 Prospectus Regulation Article 23.2.
196 Prospectus Regulation Article 23.2.
7.142
7.143
7.144
7.145
485
7.3.6 Equity share schemes foremployees intheEEA
Akey area of focus for multinational non- EU issuers that have employees in the EEA is
the extent to which they need to have an approved prospectus in connection with various
types of equity compensation schemes for those employees. Initially under the Prospectus
Directive, this was an area of great concern that led many such employers to question
whether they would have to cease oering equity- based compensation to employees in the
EEA unless they could rely on an exemption contained in the Prospectus Directive for oers
to employees by issuers admitted to trading on a regulated market.197 is exemption has
been broadened in the Prospectus Regulation and applies not only to issuers whose secur-
ities are traded on a regulated market but also to all issuers oering share- based incentive
programmes to their employees in the EEA, provided a document is made available con-
taining information on the number and nature of the securities and the reasons and details
of the oer or allotment.198 e Prospectus Regulation further provides that, to ensure equal
access to employee- share schemes for all directors and employees, independently of whether
their employer is established in or outside the EEA, no equivalence decision of third country
markets should be required, so long as the information document referred to above is made
available. us, all participants in employee- share schemes will benet from equal treatment
and information.199
7.3.6.1 Non- transferableoptions
Acommon form of equity compensation of employees is the grant of stock options with an
exercise price equal to fair market value on the date of grant. ese options are typically non-
transferable, only become exercisable aer a vesting period and are subject to forfeiture in
certain situations upon termination of employment. Except as described in paragraph 7.149,
the competent authorities in the EEA historically took the view that non- transferable options
granted to employees did not fall under the Prospectus Directive, as the Prospectus Directive
only applied to transferable securities.200 Under this interpretation, local law would govern
the grant, so advice on any local law issues relating to the grant would need to be sought.
Even if the grant itself is not subject to the Prospectus Regulation, the question would remain
whether the ability to exercise the option would constitute an oer of the underlying security
that would require a prospectus absent an exemption. ESMA has stated that the exercise
of such options by employee share schemes does not constitute an oer of securities to the
public.
Competent authorities in several member states took a dierent view with respect to the
grant and exercise of options of this type under the Prospectus Directive, reserving the right
to re- qualify the options as an oer of shares in order to overcome any circumvention of the
Prospectus Directive.201 It remains to be seen how the Prospectus Regulation will be applied
by the European Commission in this respect.
197 Prospectus Directive Article 4.1(e).
198 Prospectus Regulation Article 1.4(i).
199 Prospectus Regulation Recital 17.
200 Note that the Prospectus Regulation similarly applies only to transferable securities. Prospectus Regulation
Article 2(a).
201 Question 5 of the ESMA Q&As.
7.146
7.147
7.148
7.149
486 -
7.3.6.2 Awards ofrestrictedstock
Another common form of equity compensation is the award of equity securities to em-
ployees without the requirement to pay any consideration but subject to restrictions that
prevent the sale of such securities for a period of time and subject to forfeiture in the event
that the grantee leaves under certain circumstances prior to vesting. ese grants may either
not constitute an oer (because there is no choice on the part of the oeree)202 or may be an
exempt oer (because the consideration is zero).203 Aquestion in this regard in connection
with an employee equity compensation arrangement is whether there is ‘hidden’ compensa-
tion paid by the employee (in the form of a lower salary). ESMA and commission services of
the European Commission have stated that hidden compensation should not be found un-
less there is an express relinquishment of quantiable benets on the part of an employee.204
7.3.6.3 Other possibleexemptions
Article 1.4(i) of the Prospectus Regulation provides an exemption from the obligation to de-
liver a prospectus in connection with the oer of securities to current or former directors or
employees of an issuer, provided an information document meeting certain requirements is
delivered.205 As discussed above, under the Prospectus Regulation, in order to ensure equal
access to employee- share schemes for all directors and employees, regardless of whether
their employer is established in or outside the EEA, neither a publication of a prospectus nor
equivalence decision of third country markets is required, so long as the information docu-
ment is made available. us, all participants in employee- share schemes will benet from
equal treatment and information.206
Asecond possible exemption is to rely on the fewer than 150 oerees in any member state
exemption.207 is would be particularly attractive to an employer that does not have more
than 150 employees in any member state to whom it wishes to grant equity compensation.
7.3.6.4 Approvedprospectus
In the event that it is determined that it is necessary to have an approved prospectus in con-
nection with the granting of employee equity compensation, then presumably a non- EU is-
suer would look to whatever disclosure document it is required to prepare in connection
with employee equity compensation in the home jurisdiction. For US domestic issuers, this
would be a Registration Statement on Form S- 8 and the prospectus delivered to participants
in the equity compensation scheme to which the Form S- 8 relates. Given the limited amount
of information typically included in these documents in the United States, it would be a sub-
stantial undertaking to prepare a full prospectus based on these documents and therefore
202 Question 6 of the ESMA Q&As.
203 If the consideration for the oer is zero, then either the exclusion in Prospectus Regulation Article 1.3 or
the exemption contained in Prospectus Regulation Article 1.4(d) should be available. Note that the exclusion in
Prospectus Regulation Article 1.3 (which applies to oers of securities to the public with a total consideration in
the EEA of less than €1,000,000) is treated dierently from the exemption in Prospectus Regulation Article 1.4(e)
(which applies to oers of securities to the public where the total consideration is less than €100,000 per investor,
for each separate oer). Under the exemption, local law does not apply, while under the exclusion local law would
apply. erefore, it would be preferable for an issuer that can do so to rely on the exemption.
204 Question 6 of the ESMA Q&As.
205 Prospectus Regulation Article 1.4(i). e informational document is required to provide information on
the number and nature of the shares and the reasons for and details of the oer. It seems likely that a Registration
Statement on Form S- 8 (for a US domestic issuer or a foreign private issuer that has in place such a form) and the
related prospectus delivered to plan participants would be sucient to satisfy these requirements.
206 Prospectus Regulation Recital 17.
207 Prospectus Regulation Article 1.4(b).
7.150
7.151
7.152
7.153
487
it would be desirable to structure the employee equity compensation arrangements for em-
ployees in the EEA to t within one of the excluded or exempt methods discussed above.
In an eort to reduce the burden on issuers that are required to prepare a prospectus in con-
nection with an issuance of shares in connection with employee share schemes, ESMA es-
tablished a short- form prospectus regime under the Prospectus Directive. is regime was
available to issuers with securities listed on a market and allowed the issuer to omit cer-
tain information in a prospectus to be used in connection with an oer to employees.208
Aprospectus would still be required to be approved by the competent authority in the home
member state and once approved could be passported into other member states.209 Acom-
petent authority still had the ability to require the issuer to include information that ESMA
had specied issuers could omit.210 Note that, eective 21July 2019 and as discussed above,
issuers now benet from an expanded exception from the requirement to publish a pro-
spectus for employee share schemes in addition to the availability of a simplied disclosure
regime for secondary issuances under the Prospectus Regulation.
7.3.7 Stabilizationactivities
Securities admitted to trading on a regulated market, on a multilateral trading facility, or on
an organized trading facility in the EEA will be subject to the provisions contained in the
Market Abuse Regulation with respect to stabilizing activities in connection with an oering
of those securities. Issuers and underwriters of oerings in such securities should be cogni-
zant that such provisions may dier from home country rules and may impact the actions
that can be taken during the pendency of an oering.
In order to benet from a safe harbour under the Market Abuse Regulation for stabilizing
activities in connection with trading in securities or associated instruments, the following
criteria must be met:
• the stabilization is carried out for a limited period;
• relevant information about the stabilization is disclosed and notied to the competent
authority of the trading venue;
• adequate limits with regard to price are complied with; and
• such trading complies with the ancillary conditions for stabilization laid down in the
regulatory technical standards by ESMA (see paragraph 7.158 below).211
e details of all stabilization transactions must be reported by issuers, oerors, or entities
undertaking the stabilization, whether or not they act on behalf of such persons, to the com-
petent authority of the trading venue no later than the end of the seventh daily market ses-
sion following the date of execution of such transactions.212 In addition, under MiFID II,
investment rms undertaking or intending to undertake hedging or stabilization strategies
208 Question 71 of the ESMA Q&As describes the short- form disclosure regime and lists the items that could
generally be omitted.
209 Question 71 of the ESMA Q&As.
210 Question 71 of the ESMA Q&As.
211 Market Abuse Regulation Article 5.4.
212 Market Abuse Regulation Article 5.5.
7.154
7.155
7.156
7.157
488 -
must inform their issuer clients of such activities or intentions and how these strategies may
aect the issuer’s interests.213
Under Article 5.6 of the Market Abuse Regulation, ESMA was required to develop regu-
latory technical standards to specify the conditions that stabilization measures must meet,
including conditions for trading, restrictions regarding time and volume, disclosure and re-
porting obligations, and price conditions.214 e limited period of time for the stabilization
referred to above was decided by ESMA to be, (a)in the case of a signicant distribution in
the form of an initial publicly announced oer, starting on the date of commencement of
trading of the securities on the trading venue concerned and ending no later than 30 calendar
days thereaer or (b)in the case of a signicant distribution in the form of a subsequent
oer, starting on the date of adequate public disclosure of the nal price of the securities and
ending no later than 30 calendar days aer the date of allotment.215 e relevant information
to be disclosed by the issuer regarding the stabilization includes:
• the fact that the stabilization may not necessarily occur and that it may cease at any time;
• the fact that the stabilization transactions aim at supporting the market price of the se-
curities during the stabilization period;
• the beginning and the end of the stabilization, during which stabilization may be
carried out;
• the identity of the entity undertaking the stabilization, unless unknown at the time of
disclosure, in which case it shall be subject to adequate public disclosure before the sta-
bilization begins;
• the existence of any overallotment facility or greenshoe option and the maximum
number of securities covered by that facility or option, the period during which the
greenshoe option may be exercised and any conditions for the use of the overallotment
facility or exercise of the greenshoe option; and
• the place where the stabilization may be undertaken, including, where relevant, the
name of the trading venue(s).216
e price conditions referred to above include that (a)in the case of an oer of shares or
other securities equivalent to shares, stabilization of the securities shall not in any circum-
stances be carried out above the oering price and (b)in the case of an oer of securitized
debt convertible or exchangeable into shares or into other securities equivalent to shares, sta-
bilization of these debt instruments shall not in any circumstances be carried out above the
market price of those instruments at the time of the public disclosure of the nal terms of the
new oer.217 e ancillary conditions include that:
• securities shall be overallotted only during the subscription period and at the oer price;
• a position resulting from the exercise of an overallotment facility by an investment rm
or credit institution which is not covered by the greenshoe option shall not exceed 5% of
the original oer;
213 Commission Delegated Regulation (EU) 2017/ 565 of 25 April 2016 supplementing Directive 2014/ 65/ EU of
the European Parliament and of the Council as regards organizational requirements and operating conditions for
investment rms and dened terms for the purposes of that Directive.
214 Market Abuse Regulation Article 5.6.
215 Commission Delegated Regulation (EU) 2016/ 1052 of 8 March 2016 supplementing Regulation (EU) No
596/ 2014 of the European Parliament and of the Council with regard to regulatory technical standards for the con-
ditions applicable to buy- back programmes and stabilization measures (the ‘MAR Supplement’) Article 5.1.
216 MAR Supplement Article 6.1.
217 MAR Supplement Article 7.
7.158
7.159
489
• the greenshoe option shall be exercised by the beneciaries of such an option only
where the securities have been overallotted;
• the greenshoe option shall not amount to more than 15% of the original oer;
• the period during which the greenshoe option may be exercised shall be the same as the
stabilization period pursuant to Article 5; and
• the exercise of the greenshoe option shall be disclosed to the public promptly, together
with all appropriate details, including in particular the date of exercise of the option and
the number and nature of securities involved.
In connection with a global oering that includes a public oering in the United States (to
which Regulation M218 under the US Exchange Act applies) and an oering of securities
admitted to trading on a regulated market, multilateral trading facility or organized trading
facility in a member state, the underwriters will need to ensure that their stabilizing activ-
ities comply with both regimes, since both have extraterritorial application. Issues that have
arisen include the time dierence between the United States and Europe making it dicult
to make pre- stabilization disclosure in the EEA (for example, in the case of debt securities
which are oered aer the close of business in Europe).
7.4 Coordinating Ongoing DisclosureRequirements
is Section discusses compliance by a non- EU issuer with ongoing disclosure requirements
under the Transparency Directive219 and the Market Abuse Regulation.
is Section does not discuss additional ongoing disclosure requirements that may be im-
posed by the listing or admission standards of regulated markets and exchange- regulated
markets on which an issuer has securities admitted to trading. erefore, non- EU issuers
would need to investigate these requirements as well when evaluating the ongoing obliga-
tions they are taking on when listing securities within the EEA.
7.4.1 TransparencyDirective
As a general matter, the Transparency Directive imposes certain minimum ongoing re-
porting obligations on non- EU issuers with securities admitted to trading on a regulated
market. As discussed in detail in Sections 7.4.1.4 and 7.4.1.6, the scope of these ongoing
reporting obligations can dier depending on whether the securities admitted to trading
are wholesale debt securities and whether another exemption from the full disclosure re-
quirements is applicable. e Transparency Directive does not as a technical matter im-
pose reporting obligations on a guarantor of debt securities that are admitted to trading on
a regulated market. In addition to ongoing issuer reporting obligations, the Transparency
Directive imposes reporting obligations on major shareholders of issuers with shares ad-
mitted to trading on a regulated market.
218 17 CFR §§ 24.100 et seq .
219 It is important to recall that the Transparency Directive is a ‘minimum harmonization’ directive and, there-
fore, member states may impose ‘super- equivalent’ requirements on issuers for which they are the home member
state. ese super- equivalent requirements are discussed in greater detail for various member states in Part3.
7.160
7.161
7.162
7.163
490 -
7.4.1.1 E quivalence ofnon- member statereporting
e Transparency Directive contemplates the possibility that member states will determine
for non- EU issuers that home country requirements or the compliance by the non- EU issuer
with requirements of the law of a third country are equivalent to the reporting obligations
under the Transparency Directive.220 Equivalence determinations would allow non- EU is-
suers that comply with those home country requirements to satisfy their Transparency
Directive obligations simply by disclosing home country reports as regulated information
under the Transparency Directive. e Transparency Implementation Directive sets forth
third- country requirements that must exist in order to be considered equivalent to the
Transparency Directive requirements.221
Prior to its withdrawal from the EU, the United Kingdom had determined that US domestic
issuers that are subject to reporting requirements under Section 13(a) of the US Exchange
Act and Canadian domestic issuers that are subject to reporting requirements under
National Instruments NI 52- 107 and NI 52- 109 satised various reporting obligations under
the Transparency Directive. e United Kingdom had reached a similar conclusion with re-
spect to issuers incorporated in Switzerland with respect to certain Transparency Directive
requirements.222 e consequence of this equivalence determination was that a listing on
a regulated market by a US domestic issuer subject to US Exchange Act reporting require-
ments or by a Canadian domestic issuer subject to National Instruments reporting require-
ments would not have required the issuer to provide annual and half- yearly nancial reports
under the UK’s implementation of the Transparency Directive, although it would have had
have other consequences (such as the Market Abuse Regulation applying to the issuer).
Non- EU issuers that are subject to US Exchange Act or Canadian National Instruments
reporting obligations with securities admitted to trading on regulated markets in other
member states should, in practice, be able to satisfy their periodic reporting obligations
under the Transparency Directive through those lings. In order to do so, the non- EU is-
suer will likely need to disclose those US Exchange Act or Canadian National Instruments
reports as regulated information (including notifying the competent authority of the home
member state) and comply with other home member state requirements.
7.4.1.2 Minimum reporting obligations underthe TransparencyDirective
As discussed in greater detail in Section 7.4.1, the Transparency Directive imposes certain
minimum ongoing reporting obligations on issuers with securities admitted to trading on a
regulated market. ese obligations include annual reports and half- yearly reports.
7.4.1.2.1 Annualreports
An issuer is required to le its annual report with its home member state223 within four
months aer the end of its scal year and must ensure that it remains publicly available for
at least 10years. is annual report is required to consist of (a)audited nancial statements
220 Commission Directive 2007/ 14/ EC of 8 March 2007 laying down detailed rules for the implementation
of certain provisions of Directive 2004/ 109/ EC on the harmonization of transparency requirements in relation
to information about issuers whose securities are admitted to trading on a regulated market (the ‘Transparency
Implementation Directive’) Article 23.1.
221 Transparency Implementation Directive Articles 13– 22.
222 For more details regarding exemptions for third country issuers with respect to nancial reporting rules
under the UK’s implementation of the Transparency Directive, see ‘Equivalence of non- EEA Regimes’, available at
223 See S ection 7.2.2 for a discussion of a home member state for purposes of the Transparency Directive.
7.164
7.165
7.166
7.167
7.168
491
prepared in accordance with IFRS or an equivalent set of accounting principles,224 (b)a
management report and (c)a responsibility statement that the nancial statements included
in such report give a true and fair view of the issuer and the undertakings consolidated with
the issuer in such report.225
7.4.1.2.1.1 Financial statements e obligation to produce the required nancial state-
ments should generally not be burdensome for non- EU issuers who report under gener-
ally accepted accounting principles considered to be equivalent to IFRS for purposes of the
Transparency Directive (which is discussed in greater detail below). For non- EU issuers who
do not otherwise report in IFRS or generally accepted accounting principles considered to
be equivalent to IFRS, the ongoing obligation to prepare such nancial statements repre-
sents a substantial and expensive undertaking and may lead such an issuer, to the extent
it is permitted to do so under home country regulation, to switch to IFRS or generally ac-
cepted accounting principles considered equivalent. e acceptance by the US SEC of IFRS
as promulgated by the International Accounting Standards Board without the need for a
reconciliation should help facilitate such a switch where such a change is permitted by the
issuer’s home country law.
e nancial statements to be included in the annual report are required to be audited by an
auditor meeting the Statutory Audit Directive requirements described in Section 7.3.2.4.226
7.4.1.2.1.2 Management report e management report required to be included in the
annual report is required to provide a fair review of the development and performance of the
issuer’s business and of its nancial position (including its undertakings taken as a whole)
and a description of the principal risks and uncertainties that it faces as well as an indication
of the following information:227
• non- nancial key performance indicators relevant to the particular business, including
information relating to environmental and employee matters;
• the issuer’s likely future development;
• a discussion of the issuer’s activities in the eld of research and development;
• certain information with respect to repurchases by the issuer of its own shares or shares
held by the issuer’s subsidiaries and related- party transactions;
• the existence of branches of the issuer; and
• in relation to the issuer’s use of nancial instruments and, where material for the assess-
ment of its assets, liabilities, nancial position and prot or loss, (a)the issuer’s nancial
risk management objectives and policies, including its policy for hedging each major
224 See Section 7.4.1.6 for a discussion of accounting principles that have been deemed equivalent to IFRS
(including US GAAP).
225 Issuers with a registered oce in the EEA with securities admitted to trading on a regulated market are also
required to make certain disclosures with respect to compliance with or departures from any corporate govern-
ance code applicable to it. Recital 10 to Directive 2006/ 46/ EC of the European Parliament and of the Council of
14 June 2006 amending Council Directives 78/ 660/ EEC on the annual accounts of certain types of companies,
83/ 349/ EEC on consolidated accounts, 86/ 635/ EEC on the annual accounts and consolidated accounts of banks
and other nancial institutions and 91/ 674/ EEC on the annual accounts and consolidated accounts of insurance
undertakings [2006] OJ L224/ 1.
226 Note that, beginning on 1 January 2020, all annual nancial reports are to be prepared in a single electronic
reporting format, pending the completion of a cost benet analysis undertaken by ESMA. Transparency Directive
Article 4.7.
227 In 10 October 2015, ESMA issued guidelines regarding Alternative Performance Measures (‘APMs’), which
set out the principles that issuers should follow when presenting APMs in regulated information. See ‘ESMA
Guidelines on Alternative Performance Measures’, available at www.esma.europa.eu/ sites/ default/ les/
library/ 2015/ 10/ 2015- esma- 1415en.pdf>.
7.169
7.170
7.171
492 -
type of forecasted transaction for which hedge accounting is used, and (b)the issuer’s
exposure to price risk, credit risk, liquidity risk, and cash ow risk.228
In practice, a non- EU issuer that prepares a US- style management’s discussion and analysis
or an operating and nancial review as contemplated by the IOSCO disclosure standards
for home country reporting purposes should be able to use that document to cover the ma-
jority of the management report requirements, possibly with the addition of a few specic
disclosures.
7.4.1.2.1.3 Responsibility statement e responsibility statement requires the responsible
persons within the issuer (whose names and functions shall be clearly indicated) to certify, to
the best of their knowledge, that:
• the nancial statements give a true and fair view of the assets, liabilities, nancial pos-
ition and prot or loss of the issuer and the undertakings included in the consolidation
taken as a whole; and
• the management report includes a fair review of the development and performance of
the business and the position of the issuer and the undertakings included in the con-
solidation taken as a whole, together with a description of the principal risks and uncer-
tainties that they face.229
e Transparency Directive does not specify which persons within an issuer are required to
give the responsibility statement. In the case of the United Kingdom, the view of the com-
petent authority was that the directors of the issuer will usually be giving the responsibility
statement. Certain member states have provided specicity about the persons required to
give responsibility statements in their transposition of the Transparency Directive.230
e substance of the responsibility statement diers somewhat from the requirements ap-
plicable to issuers that are subject to the Sarbanes- Oxley Act in the United States. In add-
ition, unlike the required management certications under the Sarbanes- Oxley Act in the
United States, the Transparency Directive is not explicit about which persons are required to
give the responsibility statement.
In order for the responsible persons within an issuer to give the required responsibility state-
ment, the issuer should establish an internal process by which the responsible persons can
gain comfort that the responsibility statement which they will be required to make is ac-
curate. For an issuer that is required to include Sarbanes- Oxley certications in its lings
with the US SEC, all that should be required is an expansion of the internal process to ensure
that the specic elements of the responsibility statement are included in the process and po-
tentially the expansion of the addressees of that process to ensure that the persons giving the
responsibility statement under the Transparency Directive have the benet of that process.
7.4.1.2.2 Half- yearlyreports
Issuers are required to publish as soon as possible and in any event no later than three
months aer the end of the half- yearly period a half- yearly report including a condensed
228 e requirements applicable to annual reports are set forth in Article 19 of Directive 2013/ 34/ EU of the
European Parliament and of the Council of 26 June 2013 on the annual nancial statements, consolidated nancial
statements and related reports of certain types of undertakings, amending Directive 2006/ 43/ EC of the European
Parliament and of the Council and repealing Council Directives 78/ 660/ EC and Directive 83/ 349/ EEC.
229 Transparency Directive Article 4.2(c).
230 See Annex II to the CESR TD Transposition Study.
7.172
7.173
7.174
7.175
7.176
7.177
493
set of nancial statements, which must be prepared in accordance with IFRS or generally
accepted accounting principles considered equivalent, a management report and a responsi-
bility statement. e issuer is required to ensure that the half- yearly nancial report remains
available to the public for at least 10years.231
7.4.1.2.2.1 Financial statements Issuers that prepare half- yearly nancial statements other
than in accordance with IFRS are subject to the following specic requirements under the
Transparency Directive:
• the balance sheet and statement of prot and loss in half- yearly reports are required
to include each heading and subtotal included in the most recent annual nancial
statements;232 and
• comparative half- year balance sheets and prot and loss statements and limited ex-
planatory notes.233
ere is no requirement that the nancial statements in a half- yearly report be audited or re-
viewed, but if an audit or review takes place, then the audit or review report is required to be
included in the half- yearly report.234 is requirement diers from the United States where
nancial statements in quarterly reports led by US issuers are reviewed (but not audited)
but a review report is included only if the issuer refers in its report to the fact that the nan-
cial statements have been reviewed.235 As a result, US issuers typically do not refer to their
quarterly nancial statements as having been reviewed. If the nancial statements have not
been audited or reviewed, that fact must be disclosed.236
7.4.1.2.2.2 Management report e management report for the half- yearly report is re-
quired to include the following information:
• an indication of important events during the rst six months of the year and their im-
pact on the condensed nancial statements; and
• a description of the principal risks and uncertainties for the remaining six months of
the year.237
7.4.1.2.2.3 Responsibility statement e responsibility statement by a responsible person
at the issuer required to be included in the half- yearly reporting is essentially equivalent in
scope to the responsibility statement that is required to be included in the annual report.238
7.4.1.2.2.4 Major related- party transaction disclosure For an issuer with shares admitted
to trading on a regulated market, the half- yearly management report is also required to in-
clude information on major related- party transactions:
• related- party transactions that have taken place during the rst six months of the cur-
rent nancial year that have materially aected the nancial position or performance of
the issuer; and
231 Transparency Implementation Directive Article 5.1.
232 Transparency Implementation Directive Article 3.2.
233 Transparency Implementation Directive Articles 3.2 and 3.3.
234 Transparency Directive Article 5.5.
235 Article 10- 01(d) of Regulation S- X, 17 CFR § 210.10- 01(d).
236 Transparency Directive Article 5.5.
237 Transparency Directive Article 5.4.
238 Transparency Directive Article 5.2(c).
7.178
7.179
7.180
7.181
7.182
494 -
• changes to related- party transactions described in the most recent annual report that
could have a material eect on the nancial position or performance of the issuer
during the rst six months of the current nancial year.239
Issuers with shares admitted to trading on a regulated market in the EEA that are not required
under home country reporting requirements to disclose related- party transactions in their in-
terim reports will need to modify their reporting procedures to ensure that these transactions
are identied for disclosure in half- yearly reports under the Transparency Directive.
7.4.1.3 Non- EEA disclosures
Non- EU issuers are required to disclose information that is disclosed outside the EEA which
may be of importance to investors within the EEA as ‘regulated information’.240 is require-
ment applies to disclosures of information, even if the information would not otherwise con-
stitute ‘regulated information’.241 For an issuer that already discloses signicant information
through mechanisms (such as news services) that include the EEA, this requirement should
not have a signicant practical impact unless disclosure through a specied mechanism or
service in the EEA is required by the home member state.
As a general rule, the issuer should disclose signicant information outside of the EEA in the
same manner it uses for regulated information within the EEA. is would include, for ex-
ample, if (1)the issuer does not typically disclose information through mechanisms that are
followed or known in the EEA, (2)the home member state requires disclosure of regulated
information through specic mechanisms or services that the issuer does not use for general
disclosures, or (3)the disclosure of signicant information is made in a regulatory ling out-
side the EEA. To illustrate, an issuer making an announcement through a newswire service
that only has subscribers located in the United States would likely not be regarded as consti-
tuting sucient dissemination of the information in the EEA. In practice, this may require
an issuer to establish a process to monitor disclosures to ensure that signicant information
disclosed elsewhere is treated as regulated information.
7.4.1.3.1 Notice of certain events
Article 16 of the Transparency Directive requires issuers to make disclosures with respect to
the following events without delay (which requirement is in addition to any disclosure obli-
gation they may have under the Market Abuse Regulation):
• for an issuer with shares admitted to trading on a regulated market, (1)changes to the
rights of the issuer’s classes of shares or to the terms of derivative securities issued by the
issuer and giving access to the issuer’s shares and (2)new loan issues and in particular
any guarantee or security in respect thereof; and
239 Transparency Directive Article 5.4.
240 Transparency Directive Article 23.3.
241 ‘Regulated information’ is dened in Transparency Directive Article 2.1(k) as ‘all information which the is-
suer, or any other person who has applied for the admission of securities to trading on a regulated market without
the issuer’s consent, is required to disclose under this Directive, under Article 6 of the Market Abuse Directive,
or under the laws, regulations or administrative provisions of a member state adopted under Article 3(1) of this
Directive’. Prospectuses are generally not considered regulated information. Note also that there is a division of
views among member states over whether information required to be disclosed by issuers with shares admitted to
trading on a regulated market is regulated information. See responses by member states to question 147 in Annex
II to the CESR TD Transposition Study.
7.183
7.184
7.185
7.186
495
• for an issuer with other securities admitted to trading on a regulated market, changes to
the rights of holders of those securities, including changes in the terms and conditions
of those securities which could indirectly aect those rights, resulting, in particular,
from a change in loan terms or in interest rates.
7.4.1.3.2 Equal treatment of securityholders
Article 17 of the Transparency Directive imposes certain equal treatment obligations on is-
suers with shares admitted to trading on a regulated market. ese obligations include a
general obligation to ensure equal treatment for all holders of shares who are in the same
position.242 ere are also specic obligations to make proxies, notices and other informa-
tion relating to shareholder meetings available to shareholders through facilities in the home
member state, the appointment of a paying agent and conveyance of information to share-
holders through electronic means, so long as the decision to use electronic communications
is approved by shareholders.243 e provisions relating to electronic communication of in-
formation to shareholders allows for deemed consent to electronic delivery of information
by shareholders to the extent they do not respond in the negative to a request for a consent
to such use.244
Article 18 imposes similar obligations on issuers whose debt securities (including issuers of
wholesale debt securities) are admitted to trading on a regulated market.245
7.4.1.4 Financial statement equivalence and exemptions
e European Commission has determined that generally accepted accounting principles
in the United States, Japan, the People’s Republic of China, Canada, and the Republic of
Korea are acceptable for purposes of annual and half- yearly reports required under the
Transparency Directive.246 e European Commission has also determined that nancial
statements prepared in accordance with generally accepted accounting principles in the
Republic of India are equivalent to IFRS for purposes of reporting under the Transparency
Directive for nancial years starting before 1 April 2016.247
ere are several temporary exemptions available to non- EU issuers, which are now of less
signicance to non- EU issuers given these equivalence determinations.248
242 Transparency Directive Article 17.1.
243 Transparency Directive Article 17.2 and 17.3.
244 Transparency Directive Article 17.3(c).
245 Transparency Directive Article 18.
246 Commission Implementing Decision 2012/ 194/ EU of 11 April 2012 amending Decision 2008/ 961/ EC
on the use by third countries’ issuers of securities of certain third country’s national accounting standards
and International Financial Reporting Standards to prepare their consolidated financial statements [2012]
OJ L 103/ 49.
247 Commission Implementing Decision (EU) 2015/ 1612 of 23 September 2015 amending Decision 2008/ 961/
EC on the use by third countries’ issuers of securities of certain third country’s national accounting standards and
International Financial Reporting Standards to prepare their consolidated nancial statements.
248 e rst is an exemption provided for in the Transparency Directive itself, which exempted non- EU is-
suers preparing nancial statements in accordance with ‘internationally accepted standards’ from the obliga-
tion to convert their nancial statements into IFRS in annual and half- yearly reports for scal years before 2007.
Transparency Directive Article 23.2. Second, the Transparency Directive permitted but did not require member
states to provide for a ten- year exemption from half- yearly reporting for issuers that as of 1 January 2005 had only
debt securities admitted to trading on a regulated market in the EEA. is exemption was not applicable to any is-
suer that had any securities admitted to trading since 1 January 2005 or issuers that had equity securities admitted
to trading. Transparency Directive Article 30.4.
7.187
7.188
7.189
7.190
496 -
ere is an exemption in the Transparency Directive from the obligation to include IFRS
nancial statements in half- yearly reports available to issuers that have only debt securities
admitted to trading on a regulated market in the EEA and issuers that have securities ad-
mitted to trading outside the EEA and in connection therewith have been using internation-
ally accepted standards since a nancial year that started prior to 19 July 2002.249
e Transparency Directive permits member states to allow non- EU issuers that only had
debt securities admitted to trading on a regulated market as of 1 January 2005 and have not
had any securities admitted to trading since that date to prepare annual nancial statements
in accordance with accounting standards other than IFRS if that member state acknow-
ledged that nancial statements prepared in accordance with those accounting standards
gave a true and fair view of the issuer’s assets and liabilities, nancial position and results.250
7.4.1.6 Wholesale debtsecurities
Non- EU issuers that only issue wholesale debt securities in the EEA and choose to have
their securities admitted to trading on an exchange- regulated market, such as Euro MTF
in Luxembourg, the Irish GEM or the Professional Securities Market, rather than a regu-
lated market, would not be subject to the Transparency Directive as a whole. e ongoing
disclosure requirements for wholesale debt issuers in this position are those imposed by the
exchange- regulated market on which those debt securities are admitted to trading. Issuers of
wholesale debt securities are also permitted to disclose any regulated information required
to be disclosed under the Transparency Directive in either a language accepted by the com-
petent authority of the issuer’s home member state or a language customary in the sphere of
international nance (at the issuer’s election).251
Non- EU issuers that choose to have their wholesale debt securities admitted to trading on a
regulated market and do not have other securities admitted to trading on a regulated market
are exempt from the obligations to produce annual or half- year nancial reports under the
Transparency Directive.252 ese issuers are, however, required to comply with the obliga-
tions under Articles 16 and 18 of the Transparency Directive described in Section 7.4.1.3.
7.4.1.7 Convertible and exchangeablesecurities
Convertible and exchangeable securities are not treated as ‘debt securities’ for purposes of
the Transparency Directive.253 On the other hand, there is no denition of the term ‘shares’
in the Transparency Directive, so these securities are not clearly covered by that term either
(unless and until there is a conversion or exchange). One could contend that, based on this
lack of clear coverage, issuers of these securities should only be required to prepare annual
reports unless the home member state has expressly provided otherwise in its transposition
of the Transparency Directive.254 Issuers of these securities should conrm the treatment in
the relevant member state.
249 Transparency Directive Article 30.1.
250 Note that this exemption ceased to be applicable as to a particular third country once the European
Commission determined the equivalence of the other accounting standards of that third country to IFRS.
Transparency Directive Article 30.3.
251 Transparency Directive Article 20.6.
252 Transparency Directive Article 8.1(b).
253 Transparency Directive Article 2.1(b).
254 For example, in the United Kingdom, issuers of convertible securities are only required to prepare annual
reports. See UK FCA Handbook on Disclosure Guidance and Transparency Rules Sourcebook Section 4.4.5, avail-
able at .
7.191
7.192
7.193
7.194
7.195
497
7.4.1.8 Disclosure requirements forregulatedinformation
7.4.1.8.1 Disclosuregenerally
Regulated information is required to be disclosed by the issuer or the person who applied
for admission to trading of the issuer’s securities without the issuer’s consent in a manner
ensuring that it is capable of being disseminated to as wide a public as possible as close to
simultaneously as possible in the home member state, in any host member state in which the
information is required to be disclosed255 and in the other member states.256 In particular,
regulated information is required to be communicated to the media in unedited full text.257
e competent authorities of some member states have specied mechanisms that are re-
quired to be used to disseminate regulated information. For example, Ireland258 requires the
use of a ‘Regulatory Information Service’. As a result, a non- EU issuer may be required to
disseminate information through an additional mechanism beyond that used in its home
country.
In the case of annual and half- yearly reports this obligation may be satised by posting the
information on a website in addition to the ocially appointed mechanism (for example,
the issuer’s website) and making an announcement to the media.259 Issuers are required to
ensure that annual and half- yearly reports remain publicly available for at least ten years.260
Paper- based dissemination (in addition to electronic dissemination) of certain regulated in-
formation, such as annual reports, is required in various member states.261 See Part3 for
more detailed discussion of the requirements adopted in the relevant member state.
In any event, an issuer is required to disclose regulated information to the media in a manner
which minimizes the risk of data corruption and unauthorized access and provides certainty
as to the source of that regulated information.262 To address possible issues with respect to
unauthorized communication of regulated information to the media, the issuer is required
to be able to disclose to the competent authority of the home member state certain detailed
information regarding the disclosure of regulated information, including the person who
communicated the information and security validation details.263 Given these specic re-
quirements, non- EU issuers need to ensure that they have in place a system for tracking and
recording this information to be able to respond to inquiries from the competent authority.
e obligations to disclose regulated information as described above should not impose sig-
nicant practical burdens on non- EU issuers. An issuer will need to ensure that it makes
disclosures to appropriate media sources within its home member state. In thinking about
the timing of disclosure of regulated information, issuers should be cognizant of time dier-
ences; it would be the better practice to time signicant disclosures to be made at a point in
time when the issuer’s securities are not being traded on a regulated market or in the home
255 In the case of an issuer with securities admitted to trading on a regulated market only in a host member state,
the disclosure of regulated information is required in the host member state rather than in the home member state.
Transparency Directive Article 21.3.
256 Transparency Implementation Directive Article 12.2.
257 Transparency Implementation Directive Article 12.3.
258 Global Exchange Market Listing and Admission to Trading Rules for Debt Securities Rule5.2.
259 Note that issuers are not permitted to charge investors for providing the regulated information. Transparency
Directive Article 21.1.
260 Transparency Directive Articles 4.1 and 5.1.
261 See responses to questions 122– 124 in Annex II to the CESR TD Transposition Study.
262 Transparency Implementation Directive Article 12.4.
263 Transparency Implementation Directive Article 12.5.
7.196
7.197
7.198
7.199
7.200
498 -
market. For a US issuer, that would suggest that signicant disclosures are better made aer
the close of trading in the United States.
7.4.1.8.2 Filingobligations
Regulated information is also required to be led by the issuer with the ‘ocially appointed
mechanism’ in the home member state for the central storage of information disclosed by
issuers under the Transparency Directive.264 e purpose of the ocially appointed mech-
anism is to ensure that there is widespread access throughout the EEA to regulated informa-
tion led with the home member state.
For purposes of an issuer’s disclosure to the ocially appointed mechanism, ESMA was re-
quired to specify a single electronic format for all annual nancial reporting, to be used starting
from 1 January 2020.265 In the interim, the implementation by member states of the ocially
appointed mechanism was varied somewhat and a number of member states had imple-
mented varying solutions. For example, one interim solution consists of links on the compe-
tent authority’s website to the websites of the issuers for which such member state is the home
member state,266 while other member states implemented a searchable database of lings.267
Issuers will also need to establish a mechanism for ling regulated information with the com-
petent authority and ocially appointed mechanism. In member states that require paper
lings with the competent authority and/ or the ocially appointed mechanism, this may re-
quire an issuer to think further ahead than an electronic system in which lings can easily be
made on a same- day basis. ese considerations should become less signicant upon tran-
sition to the electronic access point for regulated information to be developed by ESMA.268
From an investor and issuer perspective, an issue that has arisen is that there is currently
no central pan- European repository for regulated information. Although a formal pan-
European central depository is not yet in place, as an initial step ESMA has set up a network
of national storage mechanisms for shares listed on regulated markets through a database on
its website.269 e Transparency Directive provided for the development and operation by
ESMA of a web portal serving as an electronic access point for regulated information origin-
ally by 1 January 2018, which was to be composed of the ocially appointed mechanisms of
the member states for the central storage of regulated information and the portal serving as
the European electronic access point.270 e following search criteria will be oered on the
European electronic access point:
• the name of the issuers disclosing the regulated information;
• the unique identier of the issuers;
264 Note that the home member state is required under the Transparency Directive to ensure that the relevant
issuer properly les regulated information with its ocially appointed mechanism. See Transparency Directive
Articles 21.1 and 21.2.
265 Feedback Statement on the Consultation Paper on the Regulatory Technical Standard on the European
Single Electronic Format (ESEF), ESMA/ 2016/ 1668, 21 December 2016, available at www.esma.europa.
eu/ sites/ default/ les/ library/ 2016- 1668_ esma_ feedback_ statement_ on_ the_ rts_ on_ esef_ 0.pdf>.
266 For example, Belgium. See the Listed Companies for which Belgium is the Home Member State and Overview of
the Total Number of Voting Rights Issued, available at www.fsma.be/ en/ listed- companies- which- belgium- home-
member- state- and- overview- total- number- voting- rights- issued>.
267 For example, France, the Netherlands, Luxembourg, and Spain. See the Cómision Nacional de Mercado de
Valores website for Issuer Filings, available at www.cnmv.es/ porta l/ Consultas/ IndiceEIR.aspx>.
268 Transparency Directive Article 20.1.
269 e ESMA Registers Portal is available at
270 Transparency Directive Articles 21a.1 and 21a.2. Note, however, that the availability of the European elec-
tronic access point has been delayed. See Summary of Conclusions Management Board meeting 08/ 11/ 2016,
7.201
7.202
7.203
7.204
499
• the home member states of the issuer; and
• the classication of regulated information disclosed.
7.4.1.9 L anguagerequirements
As discussed in Section 7.3.2.3, a non- EU issuer that contemplates having securities ad-
mitted to trading on a regulated market should consider carefully the languages accepted
by the competent authority of the member state that it selects as its home member state for
Transparency Directive purposes.
If the issuer only has securities admitted to trading on a regulated market in the home
member state, then disclosure under the Transparency Directive is required to be made in a
language accepted by the competent authority of the home member state.271 In this situation,
there is variation among member states. Anumber of signicant member states allow either
all issuers or issuers incorporated outside that member state to use English or a language
customary in the sphere of international nance for disclosure of regulated information. In
particular:
• Belgium allows an issuer that does not have a place of business in Belgium to choose
from among one of its national languages and a language customary in the sphere of
international nance;
• France allows any issuer to choose between French and a language customary in the
sphere of international nance;
• Germany allows an issuer incorporated elsewhere to choose between German and
English;
• Italy and Spain each allow an issuer incorporated elsewhere to choose between
its national language(s) and a language customary in the sphere of international
finance;
• Luxembourg allows any issuer to choose from among Luxembourgish, French, German
and English; and
• e Netherlands allows the use of English by any issuer if approved by shareholders.272
If, on the other hand, an issuer has securities admitted to trading on regulated markets in
both the home member state and one or more host member states, then the issuer is required
to disclose regulated information:
• in a language accepted by the home member state; and
• at the choice of the issuer, either in a language accepted by the competent authorities in
each host member state in which the issuer has securities admitted to trading or a lan-
guage customary in the sphere of international nance.273
If an issuer has securities admitted to trading in one or more host member states but not in
its home member state, the issuer is required to disclose regulated information, at the choice
of the issuer, either in a language accepted by the competent authorities in each host member
state in which the issuer has securities admitted to trading or a language customary in the
ESMA/ 2016/ MB/ 90rev1, available at ry/ 2016- mb- 90rev1_
- _ soc_ mb_ 08112016.pdf>.
271 Transparency Directive Article 20.1.
272 See responses to questions 137- 139 in Annex II to the CESR TD Transposition Study.
273 Transparency Directive Article 20.2.
7.205
7.206
7.207
7.208
500 -
sphere of international nance.274 e home member state may also require an issuer in this
situation to disclose regulated information, at the choice of the issuer, in a language accepted
by the competent authority of the home member state or a language customary in the sphere
of international nance.275
When the issuer’s securities are admitted to trading on a regulated market without the
issuer’s consent, issuers are not required to disclose regulated information in compliance
with the above language requirements. Instead the obligation falls on the person who,
without the issuer’s consent, requested the admission.276 For debt securities with per unit
denominations of at least €100,000 (or the euro equivalent of at least €100,000 at the date of
issue) admitted to trading on a regulated market, regulated information may be disclosed
to the public either in a language accepted by the competent authorities of the home and
host member states or in a language customary in the sphere of international nance, at
the choice of the issuer or the person who, without the issuer’s consent, has requested such
admission.277
7.4.1.10 Disclosure ofmajorholdings
e Transparency Directive also imposes a reporting regime on persons that acquire voting
shares above certain thresholds and separately on persons that acquire voting rights above
similar thresholds for issuers that have shares admitted to trading on a regulated market in
a member state. For a non- EU issuer and its major holders,278 this regime may result in re-
porting obligations beyond those imposed by home country law.
Although in practice the bulk of the impact of the major holder reporting regime will be
felt by major holders of non- EU issuers, the regime does impose certain obligations on
the issuer that it may not be subject to under home country law. As discussed in para-
graph 7.212, the Transparency Directive imposes obligations on the issuer with respect to
disclosure of changes in the total number of outstanding voting rights and prompt publi-
cation of any notications it receives from a major holder that a reporting threshold has
been crossed.
If an equivalence exemption is not applicable to a non- EU issuer with shares admitted to
trading on a regulated market, the issuer should consider carefully the extent to which the
Transparency Directive regime may dier from the regime in its home country. For example,
the regime diers in several important respects from the US benecial ownership reporting
system under sections 13(d) and 13(g) of the US Exchange Act. Unlike the US system, a
holder is required to disclose a reporting threshold being crossed based on changes in the
total number of outstanding voting rights (whereas the US system only requires notication
based on an acquisition or disposition by the reporting person). e Transparency Directive
requires the issuer to make public information contained in a notication from a major
holder, while the US regime requires the major shareholder to make a public ling with the
US SEC and does not require issuer action.
274 Transparency Directive Article 20.3.
275 Transparency Directive Article 20.3.
276 Transparency Directive Article 20.4.
277 Transparency Directive Article 20.6.
278 For purposes of this discussion, the term ‘major holder’ is used to refer to shareholders and vote holders that
exceed the Transparency Directive minimum threshold.
7.209
7.210
7.211
7.212
501
In practice, a non- EU issuer that is subject to the major shareholding notication regime
will need to ensure that its public relations and investor relations sta are aware of the sig-
nicance of a notication under that regime and inform them of the need to make a public
disclosure in response to such a notication.
7.4.1.10.1 Equivalencedeterminations
As with ongoing reporting obligations, the Transparency Directive contemplates the possibility
that competent authorities in member states could conclude that home country legislation with
respect to non- EU issuers would be equivalent with respect to reporting of major sharehold-
ings.279 Prior to the United Kingdom’s withdrawal from the EU, the UK FCA made an equiva-
lence determination with respect to home country legislation for issuers organized under the
laws of the United States, Japan, Israel and Switzerland.280 erefore, an issuer incorporated in
one of those jurisdictions for which the UK was the home member state was exempt from the
major holder reporting regime under the Transparency Directive.
7.4.1.10.2 Reportingthresholds
e Transparency Directive requires disclosure by a shareholder of the acquisition or disposal
of shares of an issuer (or similar positions,281 as discussed below) that results in the shareholder
acquiring shares representing at least 5% of the voting rights applicable to the issuer’s shares,
although a handful of member states have imposed lower initial thresholds in their transpos-
ition of the Transparency Directive (historically as low as 2%).282 e Transparency Directive
species further disclosure thresholds at 10%, 15%, 20%, 25%, 30%, 50%, and 75% of the voting
rights.283
In addition to requiring disclosure of acquisitions that result in one of the disclosure thresh-
olds being reached or exceeded, the Transparency Directive also imposes a disclosure obliga-
tion if, as a result of a disposition, a major holder falls below one of the thresholds.284 Major
holders are also required to disclose if one of the reporting thresholds is crossed as a result of
events that result in changes in the proportion of voting rights or, if the issuer is incorporated in a
third country, equivalent events.285 In order to allow shareholders to determine when reporting
thresholds have been crossed, an issuer is required to disclose its total number of voting rights
and capital at the end of each calendar month in which a change in the total number of voting
rights occurred.286
For purposes of calculating voting rights, all shares of the issuer with voting rights are taken
into account (including shares in respect of which voting rights have been suspended).287
279 Transparency Directive Article 23.1.
280 See E quivalence of non- EEA Regimes.
281 Transparency Directive Article 10.
282 Transparency Directive Article. 9.1; see also CESR TD Transposition Study.
283 Transparency Directive Article. 9.1; see also CESR TD Transposition Study. Certain member states have also
adopted dierent thresholds above the initial reporting threshold. For example, prior to its withdrawal from the
EU, the United Kingdom required disclosure of each increase or decrease of 1% once an initial 3% threshold had
been exceeded for shares admitted to trading on a regulated market by an issuer whose home member state was the
United Kingdom. UK FCA Handbook on Disclosure Guidance and Transparency Rules Sourcebook Section 5.1.2.
284 Transparency Directive Article 9.1; see also CESR TD Transposition Study.
285 Transparency Directive Article 9.2. Ashareholder would be required to determine that one of the reporting
thresholds had been crossed based on information about total voting rights that the issuer is required to disclose
under Transparency Directive Article 15.
286 Transparency Directive Article 15.
287 Transparency Directive Article 9.1.
7.213
7.214
7.215
7.216
7.217
502 -
In most member states, treasury shares are also taken into account in determining voting
rights.288
In addition to acquisitions of shares with voting rights, Article 10 of the Transparency
Directive imposes similar reporting obligations on persons that are entitled to acquire, dis-
pose of or exercise the right to vote voting shares of an issuer in any of the following cases (or
combination of them):
• agreements to act in concert with respect to voting;
• temporary transfers of voting rights for consideration;
• pledges that allow the pledgee to exercise the voting rights, which the pledgee declares
an intent to exercise;
• having a life interest in shares with voting rights;
• control of an entity that holds or can exercise voting rights in a manner described above;
• deposit of shares that gives the depositary the right to exercise discretion in the absence
of specic direction by the depositor;
• voting rights held by a third party in its own name on behalf of another person; and
• being granted a proxy with respect to voting rights which the grantee may exer-
cise at its discretion in the absence of specific instruction from the grantors of the
proxies.
According to Article 13 of the Transparency Directive, the reporting requirements also apply
to persons that hold, directly or indirectly, nancial instruments (including, without limita-
tion, transferable securities, options, futures, swaps, forward rate agreements, and contracts
for dierences) that on maturity entitle them to acquire, under a formal agreement, issued
shares with voting rights of an issuer whose shares are admitted to trading on a regulated
market or nancial instruments with similar economic eects, whether or not they confer a
right to a physical settlement.
7.4.1.10.3 Notication procedures and common reportingform
e Transparency Directive contemplates a two- step notication process. In the rst step,
the holder of voting rights noties the issuer within a specied period of time that a re-
porting threshold has been crossed.289 e Transparency Directive imposes a four trading
day deadline for this notication, although historically certain member states have imposed
more stringent deadlines in transposing the Transparency Directive.290 In the second step,
an issuer that receives a notication from a holder of voting rights that a reporting threshold
has been crossed is required not later than three trading days thereaer to make all informa-
tion contained in that notication public.291
In an eort to eliminate a multiplicity of notication forms, ESMA has prepared a
common form of major shareholder notication.292 As discussed in Section 7.4.1.10.4,
the UK FCA has adopted rules that will require disclosure of certain swaps and deriva-
tives under the major shareholding notication regime, which will result in a divergence
288 See responses to questions 28 and 29 in Annex II to the CESR TD Transposition Study.
289 Transparency Directive Article 12.2.
290 ese deadlines range from immediately aer a transaction in which a reporting threshold is crossed to
within three trading days. See responses to question 48 in Annex II to the CESR TD Transposition Study.
291 Transparency Directive Article 12.6.
292 Standard Form for Major Holdings, available at
major- holdings>.
7.218
7.219
7.220
503
between the notication form in use in the UK and elsewhere, unless and until there
is a convergence between the UK and member states in the treatment of these types of
instruments.
In addition to the matters covered by the common notication form, several member states
(for example, France) require disclosure of investor objectives once voting rights in excess of
10% are reported.293
Notications under the major shareholdings regime are permitted to be made in a language
customary in the sphere of international nance.
7.4.1.10.4 Treatment ofderivativesecurities
e Transparency Directive has been amended to require inclusion of certain derivatives
relating to shares of a company (including, but not limited to, contracts for dierence) in the
determination of whether the notication threshold has been exceeded. Under these rules,
nancial instruments (including swaps) that have a similar economic eect to shares or cer-
tain other instruments that entitle the holder to acquire shares are treated as equivalent to
ownership of the underlying securities.294
e treatment of derivative securities under major holder notication regimes historically
has received a great deal of attention.295 Hedge funds and other investors acquiring owner-
ship interests through derivatives that do not convey formal ownership of the securities to
which they are referenced has been a principal reason for the focus on this subject. In par-
ticular, the treatment of cash- settled total return swaps has been an area of focus in the
United States (principally as a result of the litigation arising out of a proxy ght involving CSX
Corporation).296 On 16June 2011, the US SEC readopted Rules13d- 3 and Rule 16- a1 under
the US Exchange Act to ensure that persons who purchase or sell security- based swaps re-
main within the scope of the benecial ownership rules, rejecting the possibility of investors
using security- based swaps to acquire inuential positions in public companies without
public disclosure.297 Pursuant to Rule 13d- 3(a), to the extent a security- based swap provides
a person, directly or indirectly, with exclusive or shared voting and/ or investment power over
the equity security through a contractual term of the security- based swap or otherwise, the
person becomes a benecial owner of that equity security (even if the person may not have
acquired the underlying equity security). Similar factors contributed to the amendment of the
Transparency Directive to include derivatives in determining share ownership discussed in
paragraph7.223 above.
7.4.1.10.5 Exemptions
Article 9 of the Transparency Directive also contains various exceptions to the major
holders reporting regime for custodians, market makers (subject to satisfaction of certain
293 French Commercial Code Article L233- 7 VII, available at
fr199en.pdf>.
294 Transparency Directive Article 13.1(b).
295 See, for example, Testimony Concerning Regulation of Over- the- Counter Derivatives by Chairman Mary
L.Schapiro, US SEC before the Subcommittee on Securities, Insurance, and Investment Committee on Banking,
Housing and Urban Aairs, United States Senate, 22 June 2009, available at ttp:// www.sec.gov/ news/ testimony/
2009/ ts062209mls.htm>.
296 CSX Corp. v.Children’s Inv. Fund Management (UK) LLP, 562 F.Supp.2d (SDNY 2008).
297 SEC Release No. 34- 64628 (8 June 2011), available at
7.221
7.222
7.223
7.224
7.225
504 -
conditions) and certain shares held in the trading book of a credit institution or invest-
ment rm.298
7.4.1.10.6 Notication ofissuer acquisitions anddispositions
An issuer of shares admitted to trading on a regulated market is also required to disclose
acquisitions and dispositions of its own shares, either on its own or through a person acting
on its behalf, when the amount of shares acquired or disposed of exceeds 5% or 10% of the
issuer’s total voting rights.299 Such disclosure is required to be made as soon as possible and
in any case within four trading days of the acquisition or disposition.300 Non- EU issuers
should keep in mind this potential additional disclosure requirement in connection with
signicant buy- back programmes (such as an accelerated share repurchase programme) or a
signicant oering of shares (including treasury shares).
7.4.1.11 Liability
Article 7 of the Transparency Directive requires that the issuer or the management, super-
visory or administrative boards of an issuer take liability for the information included in
an annual nancial report, a half- yearly nancial report and all additional information
disclosed under Article 16 of the Transparency Directive.301 In the transposition of the
Transparency Directive by member states, most member states have historically imposed
liability only on the issuer for periodic reporting, although certain member states have also
imposed liability on the issuer’s management, supervisory, and/ or administrative board.302
In light of the risk of liability for errors and omissions in periodic reporting, issuers should
establish some type of due diligence or verication mechanism for periodic reports. Possible
approaches could include meetings with the relevant members of management to review the
lings and focusing in particular on any potentially sensitive disclosures. Internal certicate
‘roll- up’ procedures could also be used by senior management to get comfort on the accuracy
of disclosures contained in periodic reports. Issuers that le periodic reports with the US
SEC would very likely already have a verication regime in place. Such issuers should con-
sider whether any modications to that verication regime would be appropriate.
7.4.2 Market Abuse Regulation
7.4.2.1 Overvie w
By its terms, the Market Abuse Regulation applies to any issuer that has nancial instruments
admitted to trading on a regulated market, on a multilateral or on an organized trading fa-
cility or any other nancial instrument the price or value of which depends on or has an eect
on the price or value of a foregoing nancial instrument including credit default swaps and
298 Transparency Directive Article 9.4– 9.6.
299 Transparency Directive Article 14.1.
300 Transparency Directive Article 14.1.
301 Transparency Directive Article 7.Additional information required to be disclosed under Article 16 of the
Transparency Directive includes, for example, any change in the rights attaching to the various classes of shares,
including changes in the rights attaching to derivative securities issued by the issuer itself and giving access to the
shares of that issuer. See Article 16 of the Transparency Directive.
302 e responses to questions 115– 118 in Annex II of the CESR TD Transposition Study include details on the
persons responsible for periodic reports in a number of member states.
7.226
7.227
7.228
7.229
505
contracts for dierence, whether the conduct occurs within or without the EEA.303 Whether
a particular competent authority will in fact seek to apply the Market Abuse Regulation to
conduct entirely outside its borders but related to a security admitted to trading on a regulated
market, multilateral trading facility or organized trading facility within its borders will likely
depend on the general legal principles of the member state on the requisite nexus between
the conduct and such member state. Although it remains to be seen whether competent au-
thorities will in fact take steps to enforce the Market Abuse Regulation extraterritorially, is-
suers with nancial instruments subject to the Market Abuse Regulation need to consider the
possibility of issues arising thereunder. ese concerns become more signicant as the pro-
portion of the worldwide trading in the issuer’s nancial instruments that occurs in the EEA
increases (for example, if the principal trading market for an issuer’s nancial instruments is
in the EEA and there is only limited trading in the issuer’s home market). An enhanced pres-
ence in the EEA in terms of employees and assets also seems likely to increase the possibility
of enforcement action, even if the conduct occurred entirely outside the EEA.
Historically, the Market Abuse Directive did not apply to issuers that only had securities
admitted to trading on exchange- regulated markets. Nevertheless, such issuers may have
been made subject to similar or equivalent market abuse rules by the rules of the exchange-
regulated market to which their securities were admitted to trading or by the laws of the
jurisdiction in which such exchange- regulated market is located. For example, prior to its
withdrawal from the EU, the United Kingdom enacted super- equivalent provisions in trans-
posing the Market Abuse Directive to make it applicable to AIM.304
However, as discussed in paragraph7.229 above, the Market Abuse Regulation applies to is-
suers with nancial instruments admitted to trading on multilateral and organized trading
facilities in addition to regulated markets. e purpose of this extension was to avoid, among
other things, regulatory arbitrage among trading venues in light of the increase in trading
of nancial instruments on these multilateral and organized trading facilities.305 Under the
Market Abuse Regulation, issuers continue to be subject to the disclosure requirements of
exchange- regulated markets.
7.4.2.2 Ad hocdisclosures
e Market Abuse Regulation requires an issuer with any type of nancial instrument
trading on a regulated market, on a multilateral or on an organized trading facility or any
other nancial instrument the price or value of which depends on or has an eect on the
price or value of a foregoing nancial instrument including credit default swaps and con-
tracts for dierence to disclose publicly ‘inside information’306 that directly concerns the
303 Market Abuse Regulation Article 2.1.
304 See Section 10 of the Statutory Instrument 2005 No 381, e Financial Services and Markets Act 2000
(Market Abuse) Regulations 2005, available at ttp:// www.legislation.gov.uk/ uksi/ 2005/ 381/ introduction/
made>.
305 Proposal for a Market Abuse Regulation Recital 8 and explanatory memorandum to the Proposal for a
Market Abuse Regulation, Section 3.4.1.1; Market Abuse Regulation Recital 4.
306 ‘Inside information’ is dened for the purposes of an issuer of securities as ‘information of a precise nature,
which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more nancial
instruments, and which, if it were made public, would be likely to have a signicant eect on the prices of those
nancial instruments or on the price of related derivative nancial instruments’. Market Abuse Regulation Article
7.1(a). ere is also language in the Market Abuse Regulation dening ‘inside information’ with respect to com-
modity derivatives, emission allowances or auction products based thereon and with respect to intermediaries
charged with executing orders that are not addressed in this discussion. See Market Abuse Regulation Articles
7.1(b)– (d).
7.230
7.231
506 -
issuer as soon as possible,307 subject to a limited exception permitting issuers to delay dis-
closure of information the immediate disclosure of which is likely to prejudice the legitimate
interests of the issuer so long as the delay is not likely to mislead the public and the issuer can
maintain the information in condence.308 Relevant scenarios include ongoing negotiations
(for example, in the merger and acquisition context) where the outcome of these negoti-
ations could be aected by public disclosure. When an issuer delays disclosure subject to this
exception, it may be required to inform the relevant competent authority that disclosure of
the information was delayed and to provide a written explanation of how the conditions of
the exception were met, subject to the discretion of the relevant competent authority.309 e
reporting requirement under the Market Abuse Regulation is continuous and imposes an
exacting timeframe for disclosure (as soon as possible).
7.4.2.2.1 Inside information forissuers ofsecurities
An initial question an issuer will face is what constitutes ‘information of a precise nature’.
Information shall be deemed to be of a precise nature if it indicates a set of circumstances
which exists or which may reasonably be expected to come into existence, or an event which
has occurred or which may reasonably be expected to occur, where it is specic enough to
enable a conclusion to be drawn as to the possible eect of that set of circumstances or event
on the prices of the nancial instruments or the related derivative nancial instrument. In
the case of a protracted process that is intended to bring about, or that results in, particular
circumstances or a particular event, those future circumstances or that future event, and also
the intermediate steps of that process which are connected with bringing about or resulting
in those future circumstances or that future event, may be deemed to be precise informa-
tion.310 Despite eorts to provide clarity on how this concept should be applied in practice, it
will inevitably require an issuer and its counsel to make judgments about when information
is suciently precise (much as the determination of ‘materiality’ of information under the
US securities laws requires judgments to be made).
ESMA has provided guidance with respect to similar provisions pertaining to inside infor-
mation contained in the Market Abuse Directive along the lines set forth below that may be
helpful in determining how the competent authorities evaluate this determination:
• for information concerning a process which occurs in stages, each stage and the overall
process may be of a precise nature (the Market Abuse Regulation states that an issuer
may on its own responsibility delay the public disclosure of inside information relating
to this process subject to the limited exception discussed above);311
• information need not be comprehensive to be of a precise nature and information con-
cerning alternative proposals may be precise;
• information that an investor would be able to assess with condence how the infor-
mation would impact the price of an issuer’s nancial instruments is specic enough
to enable a conclusion to be drawn about its impact on prices of the issuer’s nancial
instruments; and
307 Market Abuse Regulation Article 16.1.
308 Market Abuse Regulation Article 17.4.
309 Market Abuse Regulation Article 17.4.
310 Market Abuse Regulation Article 7.2.
311 Market Abuse Regulation Article 4.
7.232
7.233
507
• information that is likely to be exploited immediately following it becoming known is
specic enough to enable a conclusion to be drawn about its impact on prices of the
issuer’s nancial instruments.312
e next question an issuer will need to consider is whether the information would be
likely to have a signicant eect on the price of the nancial instrument. In considering this
element of the denition of inside information, an issuer would need to consider how similar
pieces of information have in the past had a signicant impact on the price of the issuer’s -
nancial instruments. Issuers also should not rely on a xed threshold or quantitative criteria
alone in determining whether the anticipated impact of a piece of information on the price
of the issuer’s nancial instruments is likely to be signicant.313 Issuers might consider ap-
pointing a single contact person to whom potential inside information should be notied
and establish a procedure for the timely assessment of any information so notied. e rele-
vant procedure might also set forth responsibilities for the draing, review, and release of
disclosure announcements.
7.4.2.2.2 Delay ofdisclosure
e Market Abuse Regulation permits an issuer to delay disclosure of inside information, at
its own risk, in order not to prejudice its legitimate interests and provided that the delay is not
likely to mislead the public314 and the issuer can ensure condentiality of the information.315
An issuer’s legitimate interests may justify delaying disclosure in the following non-
exhaustive list of circumstances:
• negotiations in process where the outcome or normal process of those negotiations
would be likely to be aected by disclosure;
• decisions taken or contracts approved that are subject to further internal approvals if
the disclosure of that information prior to approval would jeopardize the correct assess-
ment of the information by the public;
• condentiality constraints relating to a competitive situation;
• product development, patents and inventions where the issuer needs to protect its
rights, except that signicant events on major product developments (such as clinical
trials) should be disclosed; and
• impending developments that could be jeopardized by premature disclosure.316
Under the Market Abuse Directive there had been some divergence among member states in
their approach to the question of whether an issuer that elected to delay disclosure of inside
information was required to disclose to the competent authority the fact that it has elected
to delay disclosure. Alimited number of member states have gone further and required that
an issuer that elects to delay disclosure must disclose to the competent authority the basis
312 Market Abuse Directive Level 3— second set of CESR guidance and information on the common operation
of the Market Abuse Directive to the market, July 2007 (the ‘Second CESR MAD Guidance’) sections 1.6– 1.8. In a
widely discussed case, the European Court of Justice (the ‘ECJ’) conrmed that under the Market Abuse Directive
any stage could have constituted inside information irrespective of the probability that the overall process will be
completed. See Markus Geltl v Daimler AG (Case C- 19/ 11).
313 Second CESR MAD Guidance sections 1.13 and 1.14.
314 CESR has stated in guidance that it does not agree with the argument that any delay in disclosure is likely to
mislead the public. Second CESR MAD Guidance section 2.12.
315 Market Abuse Regulation Article 17.4.
316 2003 MAD Implementation Directive; Second CESR MAD Guidance sections 2.8 and 2.9. Note that this list
relates to similar language contained in the replaced Market Abuse Directive.
7.234
7.235
7.236
7.237
508 -
on which it has concluded delay of disclosure is warranted.317 e Market Abuse Regulation
requires that an issuer that has delayed disclosure inform the competent authority of such
delay immediately aer the information is disclosed to the public, including a written ex-
planation of how the requirements set forth above were met, unless the relevant competent
authority has decided to require such explanation only upon its request.318
An issuer that elects to delay disclosure of inside information should implement procedures
to ensure that the information disclosure of which has been delayed is restricted to individ-
uals that need to know the information and should be prepared to issue a statement in the
event a leak is discovered.
7.4.2.2.3 Required method ofdisclosure
An issuer that concludes that it has inside information that it is required to disclose under the
Market Abuse Regulation is required to disclose that information in a manner which enables
fast access and complete, correct, and timely assessment of the information by the public
and, where applicable for nancial instruments traded on a regulated market, as ‘regulated
information’ under the Transparency Directive.319 See Section 7.4.1.8 for discussion of the
Transparency Directive disclosure mechanisms.
7.4.2.2.4 Practicalimplications
In the normal course of events, the obligation to disclose price- sensitive information as soon
as it becomes precise may not be of much practical signicance for the typical issuer. Issuers
typically make periodic disclosure of their earnings and nancial position. Assuming these
disclosures are made in a timely manner, then likely the only practical consequence of dis-
closing such information in accordance with the Market Abuse Regulation would be a re-
quirement to ensure that the information is appropriately disclosed as regulated information
under the Transparency Directive.
Issuers are likely to face far greater challenges under the Market Abuse Regulation when
there are non- routine corporate events that potentially give rise to material non- public
information, such as merger and acquisition discussions. In these situations, the Market
Abuse Regulation reporting obligations may be more stringent than home country re-
quirements and could impose greater pressures on public disclosures. Non- EU issuers
should evaluate carefully the extent to which the disclosure requirements under the
Market Abuse Regulation may require more and/ or quicker disclosure than under home
country law and ensure that they implement disclosure controls and procedures to ensure
compliance.
For example, a US domestic issuer would only be required by the US Exchange Act to pub-
licly disclose material non- public information if (a)it is subject to a specic reporting re-
quirement (for example, it is ling a periodic report or the information relates to an event
that specically requires a Current Report on Form 8- K), (b)it is choosing to disclose such
information and is required to make public disclosure to avoid concerns under Regulation
317 Section 7 of the ‘Report on CESR Members’ Powers Under the Market Abuse Directive and its Implementing
Measures’, June 2007, available at
Documents/ 7680c16174e54e12b0caa2bcef781c4507_ 383.pdf>.
318 Market Abuse Regulation Article 17.4.
319 Market Abuse Regulation Article 17.1.
7.238
7.239
7.240
7.241
7.242
509
FD320 with respect to selective disclosure of the information or (c)it is engaged in an activity
that gives rise to an armative duty to disclose (for example, a stock buy- back or securities
oering). Afurther issue for a US domestic issuer would be the timing of disclosure— the
Market Abuse Regulation contemplates disclosure as soon as possible while the deadline for
ling a Current Report on Form 8- K is most typically four business days. In order to avoid
the odd situation of disclosure of material information in the EEA preceding disclosure in
the home country, an issuer would need to accelerate the timing of its disclosure in the home
country.
7.4.2.3 Rumours
e question of what issuers were required to do under the repealed Market Abuse Directive
in response to market rumours arose naturally out of the broad obligation imposed on is-
suers to disclose price- sensitive information as soon as possible. Issuers generally are not
required to respond to speculation or market rumours which are without substance and can
implement a policy of not commenting on market rumours with respect to false rumours.321
is applied to rumours contained in publications as well as rumours spread by word of
mouth through market participants.
However, a more thorny question arose in connection with rumours that were accurate in
that they may have been evidence of a leak. CESR stated its view under the repealed Market
Abuse Directive that if a publication or rumour related explicitly to a piece of information
that is inside information within the issuer, the issuer was ‘expected’ to respond to the publi-
cation or rumour as the information was suciently precise to indicate a leak and indicated
that condentiality can no longer be maintained.322 In this situation, an issuer that followed
a ‘no comment’ policy would not have been acceptable— the issuer would have been required
to disclose the inside information.
e Market Abuse Regulation has endorsed this position, requiring disclosure in situations
where a rumour explicitly relates to inside information the disclosure of which has been de-
layed, where that rumour is suciently accurate to indicate that the condentiality of that
information is no longer ensured.323 Non- EU issuers with nancial instruments subject to
the Market Abuse Regulation need to consider carefully their approach to responding to
rumours in light of this position, as it may well contrast with practice in their home country.
is would be the case for US domestic issuers, where it is typical practice to apply a con-
sistent ‘no comment’ policy with respect to market rumours and speculation, unless there
are facts indicating that the company is suciently entangled with a leak.324
Anon- EU issuer for whom the Market Abuse Regulation imposes requirements with re-
spect to rumours dierent from those in its home jurisdiction will need to consider carefully
in light of the specic facts and circumstances how to proceed. It is likely to be a dicult
320 Regulation FD under the US Exchange Act, 17 CFR §§ 243.100, et seq. Regulation FD generally prohibits
selective disclosure of material non- public information, subject to certain limited exceptions.
321 Market Abuse Directive Level 3— third set of CESR guidance and information on the common operation of
the Market Abuse Directive to the market, July 2007 (the ‘ird CESR MAD Guidance’) paragraphs 65 and 67.
322 ird CESR MAD Guidance paragraph 69.
323 Market Abuse Regulation Article 7.
324 In the US market, many issuers adhere to a strict ‘no comment’ policy, even in the face of accurate rumours,
on the basis that the issuer has no general armative duty to disclose material non- public information. e listing
standards of both the NewYork Stock Exchange and the Nasdaq technically impose an obligation on issuers listed
thereon to make armative disclosure in response to rumours, but the consequence of violation of those listing
standards is delisting.
7.243
7.244
7.245
7.246
510 -
conclusion to reach that a non- EU issuer that only has a secondary listing of its nancial in-
struments subject to the Market Abuse Regulation in which there is limited trading is in fact
required to disclose information about condential negotiations in response to an accurate
rumour with respect to those negotiations when the issuer’s home country law would not
require such disclosure.
7.4.2.4 S electivedisclosure
e Market Abuse Regulation prohibits selective disclosure of inside information by issuers
or persons acting on their behalf to third parties in the normal course of business (including
the exercise of duties pursuant to one’s employment or profession) unless there is complete
and eective public disclosure of the information (which is required to be simultaneous if
the disclosure is intentional and prompt if it is unintentional), subject to an exception for
disclosures to parties bound by a duty of condentiality regardless of whether such duty is
based on law, regulations, articles of association, or contract.325
In general, the prohibitions on selective disclosure are consistent with the requirements ap-
plicable to US issuers subject to Regulation FD.
7.4.2.5 Share buy- backprogrammes
e Market Abuse Regulation creates a safe harbour for repurchases by issuers of their
shares326 without the need for concern that their purchases constitute market abuse. is
safe harbour is subject to a number of conditions, price and volume limitations, and other re-
quirements, including, for example, that certain details of the programme must be disclosed
prior to the start of trading and that certain details regarding trades made by the issuer must
be reported as being part of the buy- back programme. e safe harbour is non- exclusive,
and transactions by an issuer outside the safe harbour should not in themselves be deemed
to constitute market abuse.327
Non- EU issuers that have only a secondary listing of their shares in the EEA will need to
evaluate the extent to which the requirements of the safe harbour are consistent with home
country requirements and, to the extent the safe harbour requirements are more onerous,
whether compliance with the safe harbour with respect to purchases outside the EEA is war-
ranted in light of the facts and circumstances. ose facts and circumstances would include
the likelihood that the buy- backs would impact the price of the issuer’s shares in the EEA and
the number of shares held by persons in the EEA (and, therefore, the likelihood of sales into
the buy- back programme).
is safe harbour is only available to buy- backs conducted with the sole purpose of (a)re-
ducing the capital of the issuer, (b)meeting obligations arising from debt nancial instru-
ments that are exchangeable into equity instruments or (c)meeting obligations arising from
share option programmes, or other allocations of shares, to employees or to members of the
administrative, management, or supervisory bodies of the issuer or of an associated com-
pany.328 Although these are common reasons an issuer may establish a buy- back programme,
325 Market Abuse Regulation Article 5.
326 Note that although the Market Abuse Regulation allows stabilization through associated instruments, the
exemption for transactions relating to buy- back programmes is limited to actual trading in the issuer’s own shares,
not transactions in nancial derivatives. MAR Supplement Recital 2.
327 Market Abuse Regulation Recital 12.
328 Market Abuse Regulation Article 5.2.
7.247
7.248
7.249
7.250
7.251
511
non- EU issuers may not be subject to limitations of this type under home country law and,
therefore, the safe harbour may be unavailable to them. An issuer relying on the safe harbour
is also required to comply with certain maximum price329 and volume limitations330 on its
purchases under the programme.
In addition, an issuer cannot, for the duration of the buy- back programme, engage in any of the
following activities if it wishes to benet from the safe harbour:
• sell its own shares;
• trade during a closed period under the law of the member state in which the trading
occurs; or
• trade while in possession of inside information of which the issuer has elected to delay
disclosure.331
e prohibitions described in paragraph 7.252 do not apply if:(a) the issuer has in place a time-
scheduled buy- back programme; or (b)the buy- back programme is lead- managed by an invest-
ment rm or a credit institution which makes its trading decisions concerning the timing of the
purchases of the issuer's shares independently of the issuer.332
Prior to the start of trading in a buy- back programme, the issuer is required to make adequate
public disclosure of the details of the buy- back programme (including the purpose of the buy-
back programme, the maximum pecuniary amount allocated to the programme, the maximum
number of shares to be acquired and the time period for which the programme has been author-
ized).333 Subsequent changes to the programme must be subject to adequate public disclosure.334
In addition to the prior disclosure of the programme, the issuer is required to have in place
mechanisms that allow it to full reporting obligations to the competent authority and to
record each transaction related to a buy- back programme. e issuer is further required to
report to the competent authority of each trading venue on which the shares are admitted to
trading or are traded no later than by the end of the seventh daily market session following
the date of the execution of the transaction, all the transactions relating to the buy- back pro-
gramme, in both a detailed form and an aggregated form. e aggregated form must indicate
the aggregated volume and the weighted average price per day and per trading venue.335 e
issuer must also ensure adequate public disclosure of the information on the transactions re-
lating to buy- back programmes no later than by the end of the seventh daily market session
following the date of execution of such transactions. e issuer is also required to post on its
website the transactions disclosed and keep that information available to the public for at
least a ve- year period f rom the date of adequate public disclosure.336
329 e purchase price cannot be higher than the higher of the price of the last independent trade and the
highest current independent purchase bid on the trading venue where the purchase is carried out, including when
the shares are traded on dierent trading venues. MAR Supplement Article 3.2.
330 An issuer is not permitted to purchase more than 25% of the average daily volume of the shares in any one
trading day on the trading venue on which the purchase is carried out. e average daily volume is calculated
based on the average daily volume in the month preceding the month of public disclosure of that programme and
xed on that basis for the authorized period of the programme. Where the programme makes no reference to that
volume, the average daily volume gure must be based on the average daily volume traded in the 20 trading days
preceding the date of purchase. MAR Supplement Article 3.3.
331 MAR Supplement Article 4.1.
332 MAR Supplement Article 4.2.
333 MAR Supplement Article 2.1.
334 MAR Supplement Article 2.1.
335 MAR Supplement Article 2.2.
336 MAR Supplement Article 2.3.
7.252
7.253
7.254
7.255
512 -
e obligation to make public disclosure of all purchase transactions under the buy- back pro-
gramme may make the safe harbour less attractive to a non- EU issuer who is not required under
home country law to make such disclosures. For example, Rule 10b- 18 under the US Exchange
Act does not require issuers to disclose purchases and it is not customary for issuers conducting
buy- backs in the United States to make such transaction- level disclosures. Issuers that are subject
to the reporting requirements of the US Exchange Act are required in their periodic reports to
include certain specied disclosures with respect to share repurchases during the period covered
by the periodic report, although that disclosure is only required to be made quarterly (for US do-
mestic issuers) or annually (for foreign private issuers) and then only a summary of purchases on
a monthly basis during the relevant period is required to be disclosed.337
For purposes of the Market Abuse Regulation, ‘adequate public disclosure’ means making in-
formation public in a manner which enables fast access and complete, correct, and timely as-
sessment of the information by the public in accordance with Public Disclosure Implementing
Regulation338 and, where applicable, in the ocially appointed mechanism referred to in
Article 21 of the Transparency Directive.339 e Public Disclosure Implementing Regulation
provides that inside information is to be disseminated (i)to as wide a public as possible on
a non- discriminatory basis, (ii) free of charge, and (iii) simultaneously throughout the EEA.
Further, that inside information must be communicated to the media reasonably relied upon
by the public using electronic means that ensure the completeness, integrity, and condenti-
ality of that information and shall clearly identify (i)that the information is inside informa-
tion, (ii) the full legal name of the issuer, (iii) the identity of the person making the notication
(including name, surname, and position), and (iv) the subject matter of the inside information
and the date and time of the communication to the media.340
7.4.2.6 D ebt buy- backs
e regulatory safe harbour does not apply to issuer buy- backs of debt, and issuers are re-
quired to analyse the permissibility of these buy- backs under general principles relating to
market manipulation. e Market Abuse Regulation does not create hard and fast rules from
which issuers can draw comfort with respect to transactions of this type. However, market
practice for issuer buy- backs of high yield debt in the EEA has tended to follow US practice
applicable to self- tenders for debt.
7.4.2.7 Notication ofmanagers’transactions
Under the Market Abuse Regulation, ‘persons discharging managerial responsibilities’341
(‘PDMRs’) of an issuer and ‘persons closely associated’342 with PDMRs are required to
337 See Item 703 of Regulation S- K under the US Securities Act and US Exchange Act, 17 CFR § 229.703 and
item 16E of Form 20- F under the US Exchange Act.
338 Commission Implementing Regulation (EU) 2016/ 1055 of 29 June 2016 laying down implementing tech-
nical standards with regard to the technical means for appropriate public disclosure of inside information and
for delaying the public disclosure of inside information in accordance with Regulation (EU) No 596/ 2014 of the
European Parliament and of the Council.
339 Market Abuse Regulation Article 1(b).
340 Public Disclosure Implementing Regulation Article 2.1.
341 is concept is dened in Article 3.1(25) of the Market Abuse Regulation. e concept of a PDMR covers
members of administrative, management and supervisory boards of an issuer and senior executives that are not
members of such boards and that have regular access to inside information relating directly or indirectly to an is-
suer and power to take managerial decisions aecting the future developments and business prospects of an issuer.
342 is concept is dened in Article 3.1(26) of the Market Abuse Regulation and covers (i)spouses and part-
ners equivalent to spouses in accordance with national law, (ii) dependent children in accordance with national
7.256
7.257
7.258
7.259
513
promptly notify (no later than three business days aer the date of the transaction) the
issuer and the competent authority of the member state where the issuer is registered or,
if the issuer is not registered in a member state, to the competent authority of the home
member state in accordance with Article 2(1) of the Transparency Directive or, in the
absence thereof, to the competent authority of the trading venue, of every transaction
conducted on their own account relating to the shares or debt instruments of that issuer
or any derivatives or other nancial instruments linked thereto.343 ese notications
are required to be made available to the public by the issuer no later than three business
days aer the transaction.344 e Market Abuse Regulation also implements a de minimis
exclusion for each PDMR and persons closely associated with that PDMR for the rst
€5,000 of transactions in a scal year by the relevant PDMR or persons closely associated
with that PDMR.345
In concept, this regime is similar to reporting under section 16 of the US Exchange Act, al-
though the scope of persons covered is not identical. Unlike section 16 of the US Exchange
Act, the Market Abuse Regulation does not contain a short- swing prot recovery mechanism
that makes prots resulting from short- term trading recoverable by the issuer. Instead, the
notications serve as a more general reporting mechanism designed to assist competent au-
thorities in policing management proting from inside information. Unlike section 16, a
competent authority would be required to prove misuse of inside information in violation of
For issuers that are subject to section 16 reporting obligations, complying with these ob-
ligations should simply be a matter of modifying the existing system for notication of
transactions in the issuer’s securities under section 16 as needed to cover the relevant indi-
viduals. However, since relatively few non- US issuers are in fact subject to section 16 of the
US Exchange Act, compliance with these notication obligations may require creation of an
entirely new system unless home country law already imposes reporting obligations similar
to section16.
e Market Abuse Regulation implements a prohibition on PDMRs from conducting trans-
actions in the issuer’s nancial instruments during a ‘closed period’ of 30 calendar days be-
fore the announcement of an interim nancial report or a year- end report which the issuer
is obliged to make public according to the rules of the trading venue where the issuer’s shares
are admitted to trading or national law.346 However, an issuer may allow a PDMR to trade on
its own account or for the account of a third party during a closed period on a case- by- case
law, (iii) relatives living in the same household for at least one year on the date of the transaction concerned,
and (iv) a legal person, trust or partnership, the managerial responsibilities of which are discharged by a person
discharging managerial responsibilities or by a person referred to in point (i), (ii), or (iii), which is directly or in-
directly controlled by such a person, which is set up for the benet of such a person, or the economic interests of
which are substantially equivalent to those of such a person.
343 Market Abuse Regulation Article 19.
344 Market Abuse Regulation Article 19.3.
345 Market Abuse Regulation Article 19.8. Note that a competent authority may decide to increase this
threshold to €20,000. See Market Abuse Regulation Article 19.9. Note also that the transactions carried out
by a PDMR and by closely associated persons to that PDMR should not be aggregated. Question 7.3 of the
‘Questions and Answers on the Market Abuse Regulation’, Version 13, 12 November 2018 (the ‘MAR Q&As’)
published by ESMA, available at t/ files/ library/ esma70- 145- 111_
qa_ on_ mar.pdf>.
346 Market Abuse Regulation Article 11.
7.260
7.261
7.262
514 -
basis due to the existence of exceptional circumstances, such as severe nancial diculty,
which require the immediate sale of shares or due to the characteristics of the trading in-
volved for transactions made under, or related to, an employee share or saving scheme, quali-
cation or entitlement of shares, or transactions where the benecial interest in the relevant
security does not change.347
7.4.2.8 Insidertrading
7.4.2.8.1 Legal standard forinsidertrading
Non- EU issuers should be aware of the fact that, under the Market Abuse Regulation, it is
market abuse for a person to trade on a recommendation or inducement based on informa-
tion that the person knows or ought to have known constitutes inside information.348 Unlike
in the United States, the prohibition on trading on insider information under the Market
Abuse Regulation does not require a breach of a duty.
In light of the dierence in legal standards, non- EU issuers subject to the Market Abuse
Regulation should review their insider trading policies to ensure that they appropriately re-
ect the dierence in standards.
7.4.2.8.2 Insiderlists
e Market Abuse Regulation requires issuers to maintain a list of ‘all persons who have ac-
cess to inside information and who are working for them under a contract of employment,
or otherwise performing tasks through which they have access to inside information, such
as advisers, accountants or credit rating agencies’.349 is requirement applies by its terms
to persons worldwide and not just to persons located in the EEA. e issuer is required to
produce its insider list as soon as possible upon request to the competent authority in any
member state in which it has securities admitted to trading on a regulated market or on a
multilateral or organised trading facility.
is requirement to maintain lists of persons with access to material non- public informa-
tion extends to persons outside the issuer, such as legal and nancial advisers, consultants
and public relations and investor relations rms.350 ird- party service providers will need
to work with an issuer to coordinate the preparation and maintenance of insider lists for the
service provider.
To ensure the conformity of insider lists across issuers, ESMA has mandated the use of a
template insider list,351 which includes the following information:the rst name, surname,
and birth surname (if dierent from surname) of the insider; the work and personal direct
lines and mobile telephone numbers of the insider; the relevant issuer name and address;
the function and reason for being an insider; the date and time at which the person both
obtained and ceased to have access to inside information; the date of birth of the insider;
the national identication number of the insider (where applicable); and the personal full
347 Market Abuse Regulation Article 12.
348 Market Abuse Regulation Article 8.3.
349 Market Abuse Regulation Article 18.1(a).
350 Question 10.1 of the MAR Q&As.
351 Commission Implementing Regulation (EU) 2016/ 347 of 10 March 2016 laying down implementing tech-
nical standards with regard to the precise format of insider lists and for updating insider lists in accordance with
Regulation (EU) No 596/ 2014 of the European Parliament and of the Council.
7.263
7.264
7.265
7.266
7.267
515
address of the insider. e issuer is required to take all reasonable steps to ensure that any
person on the insider list acknowledges in writing the legal and regulatory duties entailed
and is aware of the sanctions applicable to insider dealing and unlawful disclosure of in-
side information.
Given the breadth of the universe of persons that may potentially need to be included on an
insider list, non- EU issuers and their outside advisers who have access to inside information
need to consider carefully whether they have an appropriate mechanism for capturing this
information. Although these lists may be maintained as a matter of practice in the home
country, there may not be a specic home country requirement to maintain these lists (as
there is not in the United States). In that situation, they are unlikely to be as far- reaching
as those required under the Market Abuse Regulation. Non- EU issuers in evaluating their
mechanisms also need to ensure that they update these lists on an ongoing basis352 and ap-
propriately maintain records of the lists.353
7.4.2.9 Shortsales
e onset of the nancial crisis in the autumn of 2008354 prompted numerous jurisdic-
tions, including various member states, to impose limits on the ability to sell short se-
curities of certain issuers.355 Within the EEA, these measures were implemented in an
uncoordinated manner and prompted questions as to whether short- selling should
be addressed across all member states and whether those limits should be addressed
through amendments to the then- existing Market Abuse Directive.356 In 2012, the Short
Selling Regulation357 was passed in an eort to ensure greater coordination with respect
to the regulation of and disclosure requirements applicable to short selling and credit de-
fault swaps. ESMA continuously evaluates to what extent the Short Selling Regulation has
achieved these original objectives, and in July 2017 issued a public consultation regarding
its technical advice to the European Commission, which consists of an exemption for
market making activities, a short- term ban on short- selling in the case of a signicant
fall in the price of a nancial instrument, and potential changes to the thresholds trig-
gering reporting disclosure requirements for net short positions,358 and a nal report
352 Issuers are required to update these lists promptly, including the date of the update, when there is a change
in the reason for including a person already on the insider list, where there is a new person who has access to inside
information and thus will be added to the insider list, and where a person ceases to have access to inside informa-
tion. Each update shall specify the date and time when the change triggering the update occurred. Market Abuse
Regulation Article 18.4.
353 Issuers are required to retain these lists for ve years aer the list is drawn up or updated. Market Abuse
Regulation Article 18.5.
354 At a time of considerable nancial instability, short selling arguably aggravated the downward spiral in the
price of shares.
355 ESMA has compiled a list of the measures adopted by various member states prior to the adoption of the
Short Selling Regulation. See ‘Update on measures adopted by competent authorities on short selling’, updated 24
July 2012, available at .
356 Review of Directive 2003/ 6/ EC on insider dealing and market manipulation (Market Abuse Directive)’,
April 2009, MAD Review Call for Evidence Section 2.3.4.
357 Regulation (EU) No 236/ 2012 of the European Parliament and of the Council of 14 March 2012 on short
selling and certain aspects of credit default swaps, available at p:// eur- lex.europa.eu/ legal- content/ EN/ T XT/
PDF/ ?uri=CELEX:32012R0236&from=EN>.
358 Consultation Paper on the evaluation of certain elements of the Short Selling Regulation, 7 July 2017, ESMA70-
145- 127, available at
on_ the_ evaluation_ of_ certain_ aspects_ of_ the_ ssr.pdf>.
7.268
7.269
516 -
was published on 21 December 2017.359 ESMA has since provided further guidance on
the Short Selling Regulation through publications such as its Q&A,360 and opinions with
respect to member states’ intentions to use their powers of intervention under the Short
Selling Regulation.361
359 Final Report— Technical Advice on the evaluation of certain elements of the Short Selling Regulation, 21
December 2017, available at:
evaluation_ of_ certain_ aspects_ of_ the_ ssr.pdf>.
360 Questions and Answers on the Regulation on short selling and certain aspects of credit default swaps (SSR),
14 November 2018, published by ESMA, available at w ww.esma.europa.eu/ sites/ default/ les/ library/
esma70- 145- 408_ qa_ on_ ssr.pdf>.
361 For example, see Opinion of the ESMA on a proposed emergency measure by BaFin under Section 1 of
Chapter V of Regulation (EU) No 236/ 2012, 18 February 2019, available at www.esma.europa.eu/ sites/
default/ les/ library/ esma70- 146- 19_ opinion_ on_ ban_ emergency_ measure_ under_ the_ ssr_ wirecard.pdf>.
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
