The Prospectus Regulation is now fully in force

The Prospectus Regulation 2017/1129/EU (the “Prospectus Regulation”) came into full effect on 21 July 2019 and has completely repealed the Prospectus Directive 2003/71/EC (“PD”) regime that had been in place in Ireland since 2005. The Prospectus Regulation came into force on 20 July 2017, introducing a new set of European Union (“EU”) rules relating to prospectuses on a phased basis in 2017, 2018 and finally in 2019. Please see our previous update on the earlier Prospectus Regulation provisions in force.

A prospectus is a document required to be published by a company in certain circumstances where it is offering transferable securities to the public in the EU or where it is admitting transferable securities to trading on an EU regulated market. It obliges market participants and issuers of debt instruments to provide key information about an investment in order to assist potential investors in making informed investment decisions. Across the EU, each prospectus must be approved by a competent authority, which is the Central Bank in Ireland, before the security can be made available to retail investors.

Key provisions with effect from 21 July 2019

• Universal Registration DocumentA universal registration document (“URD”), similar to the US SEC “shelf registration”, has been introduced to provide five-day approval for frequent issuers of securities admitted to trading on a regulated market or a multi-lateral trading facility. The URD outline issuer-level disclosures such as the company’s organisation, business, financial position, earnings and prospects, governance and shareholding structure. Issuers who maintain an updated URD can avail of accelerated approval and access to the capital markets. 
• Disclosure RegimeThe Prospectus Regulation has made the secondary issue market a more streamlined process as an issuer that is already trading on a regulated market or an SME growth market can issue a simplified prospectus with reduced disclosure requirements for a secondary issue.
• Risk FactorsUnder the PD, issuers had to disclose potential risks to the investor. The Prospectus Regulation stipulates that only risk factors (max. 15) considered material to the investor should be disclosed. What is perceived as material by the regulators will be based on the likelihood of occurrence of an event and the expected magnitude of negative impact the event would have. This risk factor approach could result in delays for the issuers getting approval for their prospectuses as the Prospectus Regulation increase the possibilities of increased negotiations between the issuers and competent authorities in determining what the relevant material risks are. The European Securities and Markets Authority (“ESMA”) has published guidelines on how competent authorities should review risk factors.
• Prospectus SummaryProspectuses have a new and more prescriptive summary that is modelled on the existing key information document (“KID”) required under the PRIIPs Regulation (1286/2014). The Regulation restricts the length of the summary to 7 pages and place an emphasis on the layout of the summary  being of a clear and concise nature. The new summary requirements will require issuers to once again assess the materiality of the information they are inputting. This more prescriptive approach may result in delays for issuers.

National measures

The Prospectus Regulation has direct effect across the EU which means that Ireland does not have to enact any implementing legislation, and the same rules will apply to all EU countries in the hope of having a consistent approach across the EU. A number of national measures however have been introduced or are in the pipeline in order to situate the Prospectus Regulation rules within the Irish legal and regulatory landscape:

• The Minister for Finance has commenced the European Union (Prospectus) Regulations 2019 (SI 380/2019), which replace the preceding prospectus regulations issued under the PD regime. These regulations deal with those matters left to the discretion of member states, such as the powers of the Central Bank as the national competent authority, enforcement and fees.  
• The Central Bank, as the regulator for securities markets in Ireland, has also issued updated the preceding Prospectus Rules, along with the Transparency Rules and Market Abuse Rules, and consolidated all of its primary market requirements in the Central Bank (Investment Market Conduct) Rules (SI No 366 of 2019) and has published updated Guidance on Prospectus Regulatory Framework.
• Finally, the Finance (Tax Appeals and Prospectus Regulation) Bill 2019 is currently being considered by the Houses of the Oireachtas. The bill proposes to update references to the PD regime in the Companies Act 2014 and align them with the Prospectus Regulation. It would also transpose Article 11 of the Prospectus Regulation which restricts civil liability in certain circumstances in the security offering, and increase the local offer threshold, currently €5 million, which would exempt offers of securities up to a total consideration of €8 million from the requirement to publish a prospectus.

Next Steps

Prospectuses approved before 21 July 2019 will be ‘grandfathered’ which means that these prospectuses will continue to be governed by the preceding PD regime until the end of their validity or until 21 July 2020, whichever date arrives first. Advertisements published in relation to securities in a prospectus, however, are not included in the grandfathering provisions as they are not considered to be part of the prospectus. The Prospectus Regulation will apply to advertisements published after 21 July 2019 even if the advertisement relates to a prospectus that was approved under the PD.

As well as the national measures listed above, recognised stock exchanges are also updating their rules relating to securities trading. For example, the London-based growth market, AIM, has published updated rules and the updated rules for EuroNext Dublin’s growth market are expected imminently.

For more information or general advice on what the new Prospectus Regulation might mean for you and your business, please contact any member of the ByrneWallace Capital Markets team.

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The above information is intended as a guide for reference purposes only and does not purport to be legal advice. Readers are advised to seek independent professional advice before acting on anything contained in these materials.