On 30 November 2015 the European Commission adopted a legislative proposal for the Prospectus Regulation (the Regulation). Once adopted, this will replace the current Prospectus Directive 2003/71/EC and its implementing measures (including Commission Regulation (EC) No 809/2004). The proposed Regulation still requires adoption by the European Parliament (the EP) and the Council. After adoption it will be legally binding on all EU Member States without additional transposition into national law. The EP and the Council are expected to adopt the Regulation in the coming weeks or months. Then, after a further 12 months, the Regulation will come into force throughout Europe.
Apart from transferring the prospectus regime from directive level to regulation level, the Commission proposal covers five main areas that introduce changes:
Increasing the range of small offers that require no prospectus
No EU prospectus will be required for raising public capital with a total value below EUR 500 000 (up from the current EUR 100 000). The Commission is increasing the current threshold five times, thus facilitating access to capital for many small and medium-sized enterprises (SMEs). This will enable cost savings in producing a prospectus: typically, these are disproportionate in relation to the envisaged proceeds, as is often the case for SMEs and raising capital through securities-based crowdfunding platforms. Member States may also exempt from EU prospectus requirements all offers in the range of EUR 500 000 - 10 000 000, although this exemption will only apply to domestic offers with no EU passporting option.
Special regime for SMEs
A simpler and cheaper prospectus regime is introduced for SMEs. This will allow a distinct prospectus for companies with no securities admitted to trading on a regulated market. The prospectus for SMEs will focus on information that is material and relevant for their size. An option will also be available for a SME prospectus in a "question and answer" format.
Shorter summary and better investor protection
Given that the current prospectus summary has not met its objectives (a summary can be 15 pages or longer!), the Commission proposal reduces its length to a maximum 6 x A4 pages to ensure that investors are not deterred from reading it and to encourage issuers to select only information essential for investors. The new summary is closely modelled on the key information document (KID) required under the PRIIPS Regulation (Regulation (EU) No 1286/2014 of the EP and of the Council on key information documents for Packaged Retail and Insurance-based Investment Products).
Simplifying secondary issuance for listed firms
Currently 70% of prospectuses approved annually are so-called secondary issuances for firms already listed on a public market. Those issuers will be able to benefit from a new lighter prospectus regime for subsequent public offers or admissions to a regulated market.
Besides, no prospectus will be required for subsequent admission of the same securities on the same regulated market for issuers whose securities are already admitted to trading on a regulated market, if the newly admitted securities represent less than 20% of existing securities.
“Universal registration document”
The Commission aims to streamline the offer process for so called “frequent issuers” by introducing an optional fast-track approval mechanism. Once an issuer opts to draw up an annual "universal registration document", it is granted fast-track approval by the supervisor when a prospectus is later required (the approval term is shortened up to 5 working days, instead of the current 10).
In addition, once approved, all prospectuses will be stored in a single EU database administered by ESMA (European securities and markets authority).
This proposal implements measures envisaged by the European Commission “Action Plan on Building a Capital Market Union” of 30 September 2015 and is the result of a comprehensive review of the prospectus regime with the ambitious aim of achieving real advantages for SMEs and frequent issuers. It will also aim to make prospectuses simpler, faster and cheaper.