On 8 February 2016, following its review of Turkish legislation governing prospectus disclosure requirements, the European Securities and Markets Authority (ESMA) announced that a share prospectus drawn up according to Turkish laws and regulations and approved by the Turkish Capital Markets Board (the CMB) can constitute a valid prospectus under the Prospectus Directive (PD) for the purposes of its approval by the home competent authority of a Member State within the European Economic Area (the EEA). This follows the CMB’s application to ESMA to assess its prospectus equivalency after the CMB’s recent amendments harmonising Turkish prospectus requirements with EEA standards.

As a result of ESMA’s decision, and in line with Article 20 of the PD, Turkish issuers may therefore now submit their CMB-approved share prospectuses to any EEA competent authority for approval and, pursuant to the EEA passporting regime, once such approval is obtained, the relevant share prospectus may be used for offers to the public and/or admissions to trading on all or any regulated markets in the EEA without further review or disclosure.

In addition, ESMA has confirmed that it considers that a wrap (a separate document containing additional disclosure which combines with the prospectus to be approved under the PD) is not necessary, provided that the original prospectus contains financial statements prepared in accordance with IFRS. ESMA’s view does not, however, limit the discretion of any EEA national competent authority to require such a wrap nor will the position that the respective competent authorities will take on this point become apparent until Turkish issuers begin to submit CMB-approved share prospectuses to them for approval.

It is also worth noting that ESMA’s equivalency opinion does not extend to rights issue prospectuses or to prospectuses for small and medium-sized enterprises or other companies with reduced market capitalisation.

Conclusion

ESMA’s decision plays a pivotal role in the integration of Turkish capital markets with European markets and recognises the success of Turkey’s ongoing efforts to harmonise its capital markets rules with those of the EU. In addition, by permitting Turkish issuers to use their CMB-approved share prospectuses to access the EEA markets, ESMA’s decision should help bolster Turkey’s aim to develop Istanbul as a financial centre whilst at the same time significantly reducing the amount of red tape that issuers face when raising equity finance in the EEA.