Explanatory Memorandum to COM(2001)280 - Prospectus to be published when securities are offered to the public or admitted to trading - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2001)280 - Prospectus to be published when securities are offered to the public or admitted to trading. |
|---|---|
| source | COM(2001)280  |
| date | 30-05-2001 |
In the context of an integrated European capital market, the Commission attaches great importance to improving the framework for investing and raising capital on an EU wide basis. A single financial market will promote the competitiveness of the European economy, lowering the cost of raising capital for all types of companies. It will bring major benefits for consumers and investors.
This objective also responds to the Lisbon European Council's request to introduce a single passport for issuers in the European Union.
Facilitating the widest possible access to investment capital, including for SMEs, requires a complete overhaul of the two existing prospectus Directives, the first of which is 20 years old (80/390/EEC of 17 March 1980 co-ordinating the requirements for the drawing up, scrutiny and distribution of the listing particulars to be published for the admission of securities to official stock exchange listing and 89/298/EEC of 17 April 1989 co-ordinating the requirements for the drawing up, scrutiny and distribution of the prospectus to be published when transferable securities are offered to the public).
The need to upgrade these Directives has been listed as a top priority in the Financial Services Action Plan and the Risk Capital Action Plan.
FESCO (the Forum of European Securities Commissions) has published for public consultation in May 2000 a paper on European Public Offer. After this consultation, and as a result of the process, FESCO published on 17 January 2001 a document titled 'A European Passport for Issuers - A report to the EU Commission' calling, also, for an urgent overhaul of the existing regulation, and suggesting possible new approaches.
In view of the urgency of a new framework , and in view of the extensive consultation on the issue already carried out with Member State governments, regulators and supervisors, and other interested parties, the Commission has decided to come forward with the proposal now rather than delay it through recourse to a more formal consultation process as foreseen in the Lamfalussy Report. There are currently many different practices and differing interpretations based on distinct traditions within the European Union regarding the content and the layout of prospectuses. The methods used and the time required for checking the information given therein are also different. Unless reform is undertaken, inconsistencies will continue. The European financial market will remain fragmented. And cross border capital raising will remain the exception, rather than the rule - the antithesis of the logic of the single currency.
The current complex and partial mutual recognition mechanism is unable to ensure the objective of providing a single passport for issuers. There is a need for modernisation and more flexibility. To achieve this objective, harmonisation of the information contained in each prospectus is necessary in order to provide equivalent protection for investors at Community level.
The European passport for issuers is also an unique opportunity to simplify regulatory compliance for issuers without their having to produce duplicative sets of documentation or respond to numerous additional national requirements.
The key features of the new system are based on the following:
- Introduction of enhanced disclosure standards in line with international standards for public offer of securities and admission to trading;
- Introduction of the registration document system for issuers whose securities are admitted to trading on regulated markets in order to ensure a yearly update of the key information concerning the issuer;
- Possibility to offer or admit securities to trading on the basis of a simple notification of the prospectus approved by the home competent authority;
- Concentration of the responsibilities in the home administrative competent authority;
- Extensive use of comitology process, following the Stockholm European Council's broad endorsement of the Lamfalussy Report in the Resolution adopted by Heads of State and Governments on more effective securities markets regulation in the European Union.
Contents
- The need for enhanced European disclosure standards for publicly offered securities
- A simple and efficient notification system in order to ensure the possibility of using a single set of disclosure document in the case of multinational offering or admission to trading
- The need for best practice in the content of financial disclosure
- The need for a single prospectus format and easy availability of information
- 2. DESCRIPTION OF ARTICLES
- Article 2 - Definitions
- Article 3- Conditions for offer of securities to the public
- Article 4 - Conditions for admission of securities to trading on regulated market
- Article 5 - Content of the prospectus
- Article 7 - Language and format of the prospectus
- Article 8 - Use of registration document, securities note and summary note
- Article 9 - Annual updating of the registration document
- Article 10 - Incorporation of information by reference
- Article 11 -Approval and publication of the prospectus
- Article 12 - Availability of the prospectus
- Article 13 -Advertising
- Article 14 -Supplement to the prospectus
- Article 15 - Mutual recognition
- Article 16 - Language regime
- Article 17 - Notification to the host competent authority
- Article 18 - Issuers incorporated in third countries
- Article 19 - Powers of the competent Authorities
- Article 20 - Professional secrecy
- Article 21 - Precautionary measures
- Article 22 - Committee
- Article 23 - Penalties
- Article 24 - Right of appeal
- Article 25 - Transposition
- Article 26 - Repeal
- Article 27 Transitional Provisions
- Article 28 - Entry into force
Adequate and equivalent disclosure standards should be in place in all European Member States when securities are offered to the public or traded on regulated markets.
This implies that the existing disclosure standards need to be aligned in order to introduce the same standards for public offer of securities and admission to trading throughout the Union.
Clear and common definitions have to be agreed to clarify the scope of the Directive and ensure necessary harmonisation throughout Europe. As recognised by the Preliminary Report of the Wise Men (15 November 2000), the introduction of a definition of public offer is a precondition to reach the objective and to encourage firms to raise capital on a European basis under similar rules. It aims at avoiding loopholes at Community level and disparity in the treatment accorded to retail investors due to the fact that the same operation is considered as a private placement in some Members States (for which no prospectus has to be published) but not in others.
The definition is accompanied by a new regime of exemptions from the obligation to publish a prospectus. This serves the same purpose of ensuring harmonised requirements in all Member States.
The proposal extends the scope of existing measures in order to ensure that harmonised disclosure requirements are available for equity and debt securities traded on regulated markets. The scope of the existing Directive on listing particulars is, in fact, restricted to the case of securities which have been admitted to the official stock exchanges and which were known at the time when the Directive was adopted. It may be worth noting that start-ups and high tech companies are mainly traded on regulated markets outside the official listing segment. At present it is up to each Member State to decide which type of disclosure is required which has implications for the possibility of offering these securities cross border.
A simple and efficient notification system in order to ensure the possibility of using a single set of disclosure document in the case of multinational offering or admission to trading
The introduction of a true single passport for issuers requires the replacement of the existing mutual recognition system by a simple notification system, similar to the one present in the financial intermediaries Directives for the cross border provision of services. Under the new system host Member States will be deprived of the possibility of asking for additional information to be included in the prospectus.
The operation of such a system requires a great degree of trust among competent authorities in charge of approving the prospectus and supervising the issuers. The proposal therefore clarifies that the home Member State administrative competent authority shall be responsible for ensuring proper supervision for the purposes of ensuring equivalent treatment of investors and on-going disclosure of material information by the issuer.
Independent administrative authorities, i.e. authorities in charge of ensuring general good objectives, are better placed to ensure market and investor protection. In fact, exchanges which are now for-profit entities are subject to a conflict of interest and should not be in charge of ensuring any longer 'public functions', such as the approval of prospectuses. At the same time exchanges and markets, relieved of the duty to perform such functions, will be free to compete solely on the basis of commercial efficiency.
Other measures are foreseen in order to improve the functioning of the existing Community legislation. The requirement to fully translate the content of the prospectus does not encourage multinational offerings or admission to trading. The proposal provides for a new language regime: host Member States competent authorities shall only be entitled to ask for a translation of the summary of the prospectus provided that the full prospectus is drafted in a language which is customary in the sphere of finance (normally English). This provision should facilitate cross-borders operations while ensuring at the same time proper protection of retail investors. In fact, retail investors shall always receive the summary key information in their own domestic language. The purpose of the summary is, in fact, to provide, in particular to retail investors, immediate succinct information on the most relevant aspects relating to the issuer and the proposed operation in a concise format.
Disclosure requirements provided for by Directive 80/390/EC are no longer sufficient to meet the needs of investors in modern global financial markets. Increasingly investors want to make decisions on the basis of a continuum of standardised company financial and non-financial information. The current requirements need to be replaced by new European disclosure standards. Fostering best practices will enhance market confidence and attract capital. The upgrade of EU disclosure standards shall be in accordance with the International Disclosure Standards approved in 1998 by the IOSCO (International Organisation of Securities Commissions). This new approach is designed to provide key information on certain topics such as risk factors, related party transactions, corporate governance or management's discussion and analysis which are not currently dealt with at EU level.
In order to accelerate the completion of a single securities market and to enhance comparability of information, the European Commission is also envisaging the updating of EU accounting rules. All EU companies admitted to trading on a regulated market should prepare their consolidated accounts in accordance with one single set of accounting standards, namely International Accounting Standards (IAS). This requirement should enter into effect, at the latest, from 2005 onwards. This policy shall ensure that securities can be traded on EU and international financial markets on the basis of a single set of accounting standards.
The proposal introduces a new format for EU prospectuses. This implements the policy described above aiming at increasing the quality and the quantity of the information to be put at the disposal of investors and the markets. It is the firm belief of the Commission that increasing investor confidence will deliver significant benefits in terms of lowering the cost of raising capital and at the end of the chain, it will improve job creation and the overall dynamism of the European economy.
According to the new model the prospectus will be split into separate documents: the registration document containing information about the issuer and the securities note containing information on the securities (as explained in detail below). A summary of the information concerning the issuer and the securities is provided in an ad hoc summary note.
The registration document system provides for, at least, a yearly updating of the information to the holders of securities, supplementing the existing ongoing disclosure obligation system (cf. 79/279/EEC; 82/121/EEC and 88/627/EEC). In addition it introduces a fast track procedure for new issues; in fact, in the case of a new issuance only the information related to the securities offered or admitted to trading has to be given. The supervisory authority will be required to approve only the securities note and therefore the time for approval will be reduced.
The introduction of the new system therefore responds to an increasing demand from multinational issuers (i.e. issuers frequently raising capital on European and world markets).
This new format, however, is intended to be mandatory for those issuers whose securities are traded on regulated markets. Issuers whose securities are simply offered to the public without admission to trading may decide to publish the prospectus as a single document using the traditional format.
In addition, incorporation by reference will be allowed. This means that information to be disclosed in a prospectus could be incorporated into that document by reference to another document, previously filed and approved by the home competent authority. This will save time and cost for companies frequently raising capital on the market. The issuer will be allowed to use a previous document or registration statement and therefore bureaucracy will be reduced. On the occasion of a new issuance or admission to trading, the issuer will publish only the securities note and a summary. As already explained as far as disclosure obligations are concerned, the issuer will access all EU markets following the notification under the sole condition of translating the summary of information into the relevant national languages.
The rapid development of information and communication technologies is changing the way financial information is disseminated. To facilitate the circulation of prospectuses (and the various documents composing a prospectus) the use of electronic means such as the Internet is encouraged. This will be less costly for companies than current requirements but would also have a number of advantages. Investors would have effective and free access to information on a real-time basis due to the new obligation to ensure availability of the prospectus on the competent authority web-site and the possibility for the issuer to publish the prospectus in electronic format.
The need for an extensive use of committee procedures to follow development in the financial sphere.
Member States' securities markets are facing dramatic changes and increasing consolidation, driven by new technologies, globalisation and the effect of the Euro. Standard setting is also evolving rapidly. Competition between securities markets calls for best practice taking into account new financial techniques and new products. On the other hands, consumers confidence has to be protected at Community level. It is important to ensure that new measures can be adopted to avoid that consumers willing to invest in innovative products are left without proper protection and proper remedies or are treated differently depending on the different understanding in each Member State.
To meet the challenge of regulating modern financial markets, new legislative techniques have to be introduced. On 17 July 2000, the Council set up the Committee of Wise Men on the Regulation of European Securities Markets. In its final report the Committee called for each Directive to be a split between framework principles and 'non-essential' technical implementing measures to be adopted by the Commission under the Union's comitology procedures. In its Resolution on more effective securities markets regulation in the European Union, the Stockholm European Council welcomed the intention of the Commission to establish a Securities Committee. The Securities Committee, acting in its advisory capacity, should be consulted on policy issues, in particular, but not only, for the kind of measures the Commission might propose at the level of framework principles. According to this Resolution, the Council added that subject to specific legislative acts proposed by the Commission and adopted by the European Parliament and the Council, the Securities Committee should function as a regulatory committee in accordance with the 1999 Decision on comitology to assist the Commission when it takes decisions on implementing measures under Article 202 of the EC Treaty. This Directive follows the line drawn up by the Stockholm European Council.
This proposal indicates which are the non-essential implementing details should be dealt with by the Commission through comitology procedure. For example this will include adaptation and clarification of the definition and exemptions in order to ensure uniform application and compatibility with developments on financial markets. Adaptation of disclosure standards, of deadlines, and clarification of the rules concerning publication of the prospectus, technical details concerning advertising and marketing shall also be areas to be dealt with by the Commission under comitology procedure. The areas have been selected in order to ensure a prompt response to fast changing reality and to ensure proper functioning of the internal market (on the basis of the country approach) as well as proper protection to retail investors.
According to the Stockholm Resolution deadlines should be set for all stages of work at Level 2; this Directive provides deadlines for those measures which are necessary in order to ensure the effective operation of this Directive. In line with the report of the Wise Men, the Commission will engage in consultations, as foreseen in the Stockholm European Council Resolution, when it prepares the implementing measures in accordance with the relevant provisions of the proposed Directive.
Article 1 - Subject matter and scope
The goal of the Directive is stated in the first paragraph of Article 1. It clarifies that the purpose of this Directive is to harmonise requirements for the drawing up, scrutiny and distribution of the prospectus to be published when securities are offered to public or admitted to trading.
The Directive is applicable to the securities which are offered to the public or are admitted to trading on a regulated market as defined in the Investment Services Directive (93/22/EEC - ISD). This represents a major change from the previous system based on Directive 80/390/EEC laying down listing particulars for securities admitted to official listing on official stock exchanges and Directive 89/298/EEC on public offer of securities.
The wording 'admission to trading' has been selected in order to avoid possible loopholes in the implementation of the Directive. 'Admission to the official list' is not defined in Community legislation. In many cases it has been interpreted as admission to the official segment of the national stock exchange (in certain cases even if trading does not take place). This implies that disclosure requirements for other types of regulated markets (definition introduced by the ISD) are not fully harmonised at EU level and in several cases mutual recognition is not allowed. In other Member States the implementation of the ISD has led to the removal of the wording 'official list'. They have introduced first tier, second tier markets, etc. In any case, the ISD definition of regulated markets requires that rules should be provided for in order to ensure that certain requirements are met before the securities can be negotiated on the market (being the requirements provided for in the listing admission Directive 79/279/EEC when applicable or specific national requirements). The aim of the new Directive is to ensure, as far as initial disclosure requirements are concerned, that these are the requirement set forth in this Directive.
As called for by European Securities Regulators the two Directives are now merged and the disclosure standards required are the same. In addition certain type of securities which were left outside the old system because they were traded on regulated markets without being admitted to the official list are now included and can benefit from the single passport.
At the same time the system increases the information and the guarantees provided to investors in the European Union.
Traditional exemptions have been kept for securities of specific types (such as unit of UCITS covered by different harmonisation provisions) or issued by Member States or international bodies.
Definitions listed in Article 2 are partly drafted by reference to existing Directives and partly new. While for the definition of securities no major changes have been foreseen (but just an updating) with respect to the definition included in Directive 89/298/EEC, the introduction of a definition of public offer constitutes a major innovation. When Directive 89/298/EEC was adopted it proved to be impossible to reach an agreement on a common definition (see recital no. 7 of the said Directive). However, as recognised in the Wise Men report it is important to ensure a common approach to this subject in order to avoid disparities in investor protection in an era where through electronic communication networks investors can be reached throughout Europe (and elsewhere). Different interpretations of the 'offer to the public' requirement in the Member States may have the effect that in certain cases securities can be sold without any disclosure requirement (and this behaviour can affect the entire European capital market).
To complement this definition a new harmonised approach has been envisaged for exemptions: this includes offers targeted only to certain 'qualified' investors (holding specific professional qualifications) or to investors who are able to acquire securities for a consideration of at least 150.000 Euro. At the same time offers targeted to a small number of investors are not included.
The new system is based on the approval of the prospectus granted by the home country competent authority; therefore definitions have been provided in order to identify the home country and the host country. A definition is also provided for the case where the issuer is incorporated outside the EU and its securities are offered or admitted to trading in the EU.
Clarifications and adaptations of definitions, if necessary, can be adopted by using the procedure foreseen in Article 22 in accordance to the suggestion to delegate to the Commission detailed technical regulations. This means that the Commission, assisted by the Securities Committee, could clarify in detail which type of actual securities can be deemed as covered by the Directive in order to ensure that the Directive is kept up to date with financial markets developments.
Article 3 clarifies that no securities can be offered in the EU unless initial disclosure requirements (a prospectus) are available to the market and the investors.
As explained for the definition of public offer a harmonised approach is required in order to avoid loopholes and disparity of treatment and investor protection within the EU. It is therefore important to introduce a common uniform regime for exemptions.
The objective has been achieved by revising the existing provisions and eliminating the flexibility that allows Member States to decide whether or not the exemptions have to be implemented into national law.
A first series of exemptions is established in order to take into account the special nature of the investors to whom the offer is addressed. These exemptions are made for securities offered to qualified investors (i.e. investors with specific 'qualifications') for their own account excluding any subsequent resale; when the offer is addressed to a restricted circle of persons the number of which is below 150 per Member State or below 1.500 in the case of a multinational offer or when the securities offered can be acquired only for a consideration of at least 150,000 Euro per investor.
A second series of exemptions relate to the fact that certain types of securities are offered in exchange for already existing securities or result from specific operations for which equivalent information is or has already been made available to the public or the shareholders.
Clarifications and adaptations of definitions and/or exemptions, if necessary, can be adopted by using the procedure foreseen in Article 22 in accordance to the suggestion to delegate to the Commission detailed technical regulations. This means that the Commission, assisted by the Securities Committee, could issue rules to indicate which actual entities can be considered as belonging to the category of 'non-profiting making bodies' which is exempted by the obligation to publish a prospectus. This to avoid that different implementation in Member States can undermine the objective pursued by the Directive of ensuring a proper investor protection.
Article 4 clarifies that securities can be admitted to trading on regulated markets only if a prospectus has been published. However, it is expressly stated that there is no need to issue a new prospectus if the issuer has already filed with the home competent authority the registration document and the securities note for public offer or for admission to trading on another regulated market. Regulated markets in Europe wishing to trade the securities are required to accept the prospectus approved by the issuer's home country competent authority. This is intended to improve the possibilities of multinational trading of securities on EU regulated markets. The issuer will not be obliged to provide a new set of initial disclosure documents on condition that all the relevant information (filed with the home competent authority) is made available.
This Article broadly reflects principles, on the function and the content of the prospectus, already present in both the listing particulars and the public offer Directives. These principles, the aim of which is to ensure that all material information is disclosed to investors, are also consistent with the international principles adopted by IOSCO (see also IOSCO Objectives and Principles for Securities Regulation).
Paragraph 2, in line with international best practices, requires that the information is presented in an easy analysable and comprehensible form and states that the prospectus can be presented as a single disclosure document or as a set of disclosure documents comprising a registration document, a securities note and a summary note. The registration document shall contain general information on the issuer as well as its financial statements. The securities note shall contains details on the securities offered to the public or admitted to trading and the modalities of this operation. The summary is a résumé of the main items included in the prospectus (or the registration document and the securities note if this is the case).
The minimum information items to be included in the prospectus as a single document or as a set of documents are laid down in the following paragraphs 3 and 4 by cross reference to the Annexes to the Directive. Annex I lists the information items to be included in the prospectus when drawn up as a single document. Annexes II, III and IV refer to the registration document, the securities note and the summary note respectively.
Paragraph 5 of the Article indicates, as in the present system, that the responsibility for ensuring that all material information is disclosed in the prospectus lies upon the administrative, management or supervisory bodies of the issuer, the offeror and the guarantor as the case may be.
Article 6 - Minimum information to be included in the prospectus.
Article 5 makes clear that all relevant information has to be disclosed. In line with the international principles and the pre-existing system it provides for a mere list of information items that have to be included in the prospectus. The detailed elements issuers should include under each item required, constitute technical measures. They are necessary in order to provide the degree of harmonisation and mutual confidence to allow Member State to recognise the home prospectus without requiring the inclusion of additional information, on the base of a simple notification.
These rules should be adopted following the procedure suggested by the Wise men Report (so called Level 2). However, the Commission will not be entirely free. The detailed disclosure standards should be in line with those adopted by IOSCO for multinational offerings and listings.
The decision to base the system on the IOSCO Disclosure Standards means also that the European prospectus will be in line with internationally accepted best practice and should also be acceptable for offerings or admission to trading outside Europe, in IOSCO member jurisdictions. This will provide benefits to EU issuers, which will not be obliged to duplicate disclosure documents.
The basic IOSCO disclosure requirements should be adapted to the different type of securities that are offered or admitted to trading. This adaptation shall be made by the Commission following 'comitology procedures'. Due to the fact that these measures are necessary for the single passport system to become effective, a deadline for the approval (180 days after the entry into force of the Directive) has been set. This means that the Commission, assisted by the Securities Committee, shall issue detailed technical rules about the specific information which must be included in the actual prospectuses in the form of models for the different types of securities and issuers.
The last paragraph of Article 6 also clarifies the treatment of items of information that cannot be included in the prospectus because they are not available at the time when the prospectus is drafted. This is the case of the final offer price and the amount of securities which will be allotted to the public. In this case the prospectus should contain the objective criteria according to which the final decision will be taken and the requirement that these items will be published in a supplement to the prospectus to be made available to the public according to the same arrangements as provided for the original prospectus. Also in this case detailed rules will be provided under Level 2 (comitology) procedures. The deadline set for the Commission is the same, 180 days after the entry into force of the Directive.
Article 7 provides for the language and format of the prospectus. The prospectus must be drawn up in a language accepted by the competent authority in the home Member State. Paragraph 2 clarifies which types of issuers are required to publish the prospectus as a set of disclosure documents. Issuers whose share are or shall be admitted to trading are required to drawn up the prospectus as a set of disclosure documents: registration document, securities note and summary note.
Issuers whose securities are not admitted to trading, may decide to drawn up the prospectus as a single document. In this case, it is up to the issuer to decide which format is more suitable.
This Article clarifies that the issuer who has already filed a registration document, in the case of a new issuance (or admission to trading) shall be only required to produce a summary and a securities note. This means that a new full prospectus is not required.
In order to ensure an adequate level of investor information, supplementing the existing provisions on ongoing disclosure obligations, the issuer is required each year to update (and file with the competent authority) the registration document. The issuer will update the registration document each year after the approval of the financial statements. Information will be scrutinised by the competent authority according to the general procedure.
To simplify the procedure and reduce costs the Directive allows the issuer to use the registration document for the purpose of Article 46 of Directive 78/770/EEC (fourth company law Directive) and Article 36 of Directive 83/349/EEC (seventh company law Directive).
The Directive introduces another measure in order to make life easier for the issuer and to reduce costs: the incorporation of information by reference.
Article 10 states that the prospectus may incorporate the relevant information by reference to one or more documents. Such information has to be approved by the competent authority and made available to the public according to the same arrangements envisaged for the prospectus.
Details on which documents can be incorporated by reference and the relevant modalities shall be provided according to Level 2 (comitology) procedure.
Due to the fact that these measures are necessary for the single passport system to become effective, a deadline for the approval (180 days after the entry into force of the Directive) has been set.
The prospectus must be approved by the home competent authority before being published. The previous system already required prior approval for the listing particulars and, in any case, mutual recognition was available only for prospectuses that had been pre-vetted. The Directive, however, in order to ensure a smooth operation of the system provides clear deadlines for approval taken into account also different type of issuers: issuers already known to the market and subject to supervision or issuers raising capital for the first time.
A standard deadline of 15 days (which can be interrupted if new information is needed or the documentation is incomplete) is set. However, this deadline is expanded up to 40 days in the case of an IPO (initial public offering) while it is reduced to 7 days if only the securities note has to be scrutinised.
Guidance on the scrutiny of the prospectus to ensure uniform implementation shall be provided according to the Level 2 (comitology) procedure. The same procedure should be followed to adapt the deadlines set for the approval, if necessary in light of developments in financial markets.
This means that the Commission shall issue guidance about the best practice to be implemented by the Securities Regulators when checking the actual prospectuses submitted for approval or issue guidance about the relevant deadlines.
This Article updates the rules already existing in the listing particulars and the public offer Directives. It recognises the possibility of using modern technologies in addition to the already existing arrangements. The Commission shall adopt detailed rules on this subject to ensure a common implementation of the Directive. This means that the Commission could issue rules concerning the modalities for delivering, free of charge, a copy of the prospectus to prospective investors asking for it.
In order to ensure a central point of information and enable investors to get the relevant information the Directive requires that the prospectus (as a single document or the separate documents) is made available on the competent authority web-site.
The Directive establishes rules on advertising.
In order to ensure proper investor protection and consistency with the information which will be included in the prospectus (which is deemed to be the document on the basis of which investment decisions have to be taken) certain conditions are required. Competent authorities must receive and check the advertisements, notices, and posters before their publication.
The Directive also establishes the principle that advertising should be clearly recognisable as such and the information contained in an advertisement must be fair, accurate and in any case consistent with that contained in the prospectus.
Detailed rules to ensure a common implementation and investor protection shall be provided by the Commission according to Level 2 (comitology) procedure. This means that the Commission could establish guidance about how to advertise the performance of the securities offered to the investor to avoid giving to retail investors misleading impression about future gains.
Due to the fact that these measures are necessary for the single passport system to become effective, a deadline for the approval (180 days after the entry into force of the Directive) has been set.
The Directive clarifies that information addressed by the issuer or the offer to qualified or special categories of investors shall also be disclosed to the public.
This Article reproduces rules already provided for in the listing particulars and the public offer Directives. A supplement is required in case significant new factors capable of affecting assessment of the securities arise after the prospectus has been published and before the offer is closed or trading has started. In order to maintain consistency, the supplement is subject to the same rules as applicable to the prospectus in terms of prior approval and availability to the public.
This Article replaces the existing mutual recognition system. The aim of the provision is to ensure that in the case of multinational offerings or multiple trading (i.e. offer or admission to trading in States other than the home Member State) the prospectus approved by the home competent authority is accepted in all Member States concerned without the need for provision of additional information or approval of this information.
However, due to the fact that information is a good that is quickly out of date certain guarantees are provided for in paragraph 2. In case more than three months have lapsed the competent authority in the host Member State is entitled to ask for the publication of an updated securities note and summary document to be approved by the home competent authority.
The Article provides for a new language regime which allows host Member States to require the translation of the summary note only, provided that the registration document and the securities note are available in a language which is usually accepted in the sphere of finance. This concept is already part of the 'acquis' in the field of securities. In particular, Article 17, paragraph 2 of Directive 79/279/EEC on listing admission refers to the publication of the information in a language or languages which are 'customary in the sphere of finance and accepted by the competent authorities'. Similar provisions are included in Article 7, paragraph 2, of Directive 82/121/EEC (regular reporting); Article 10, paragraph 2, of Directive 88/627/EEC (major holdings) and included in Directive 80/390/EEC by Directive 94/18/EC (Eurolist).
In order to ensure proper protection, and in line with the requirements applicable in the Directives providing for an European passport (Investment Services Directive, Second Banking Directive ), the host authorities should receive a notification of the prospectus (and the relevant supplements) accompanied by a certificate of approval granted by the home country authority stating that the prospectus has been drawn up supplying all the information required by this Directive.
In case of issuers incorporated in a third country, the prospectus shall be approved by the EU 'home country' authority designated according to this Directive. This authority may recognise the prospectus drafted according to the rules applicable to the issuer in the third country provided that the information requirements are equivalent to those required by this Directive. Once approved by the EU 'home' competent authority the prospectus may be used in other EU member State.
To ensure an European approach the competent authorities are required to notify to the Commission and Member States the rules applicable to third country issuers. In case of objections raised by the Commission or other Member States on the equivalence of such rules, the Commission shall subject the matter to comitology.
Member States are also required to notify the Commission the list of the issuers which prospectus have been approved.
The Commission is required to draw up a report on the implementation of this Article and to submit proposal for a new Directive if appropriate.
In addition guidance to promote a common and consistent approach by Member States shall be provided under the Level 2 (comitology) procedure.
The introduction of a notification system requires mutual trust among competent authorities and similarities in performing regulatory and supervisory functions. At present the Directives simply require Member States to notify who the competent authorities are.
The designation of an administrative competent authority in each Member State answers the need for efficiency and clarity, and to enhance co-operation between competent authorities.
The administrative nature of these single competent authorities is necessary to ensure their independence from the markets and to avoid conflicts of interest.
The Directive sets out a minimum list of requirements for powers to be given to competent authorities. These requirements will allow competent authorities to fulfil their duties and will lead to greater consistency and clarity in the application of the provisions of the Directive.
As it is common to all Community legislation in the financial field, rules are required in order to ensure proper confidentiality for information collected by the competent authorities in performing their tasks.
However, the confidentiality cannot constitute a barrier to mutual assistance and co-operation among competent authorities at EU level and, provided that certain guarantees are met with the competent authorities of third countries.
This Article provides for all these requirements along the lines of already existing legislation (including insider dealing and Investment Services Directives).
The Article implements a principle already provided for in the Treaty and common to all Community legislation in the financial field. When the competent authorities of the host Member State ascertain irregularities committed by the issuer or by the financial institutions in charge of the public offer procedures or violations of the obligations deriving for the issuer from the fact that the securities are admitted to trading they must refer to the home competent authorities. However, as a matter of necessity and urgency, in order to protect investors they are allowed to take all the required measures. These measures must be properly justified and subject to the right to apply to the courts in the Member State which adopted them .
Notification of the measures to the Commission is envisaged. The Commission has the power to require the competent authority to amend or abolish the measures.
This Article refers to the Committee, the Securities Committee This Committee shall assist the Commission in performing the Level 2 (comitology) tasks.
The Directive also provides for an adequate sanctioning mechanism to be put in place in each Member State. It states that penalties, including administrative sanctions, must be effective, proportionate and dissuasive.
In order to ensure proper protection for all affected parties, the Directive requires that all decisions taken under laws, regulations and administrative provisions adopted in accordance with this Directive are subject to the right to apply to the courts.
This Article states the transposition deadline.
Directive 80/390/EEC, as amended by 82/148/EEC, 87/345/EEC, 90/211/EEC and 94/18/EC and Directive 89/298/EEC are repealed at the same date as this Directive will enter into force as provided for in Article 25 above.
This Article provides for the first submission of the registration document by issuers whose securities have already been admitted to trading on regulated markets.
This Article deals with the entry into force and the deadline for the implementation of this Directive in Member State laws.