On 18 February 2015, the European Commission issued a consultation paper relating to its broad-ranging review of the EU Prospectus Directive. The consultation lasts until 13 May 2015 and will be of interest to anyone proposing to offer or list securities in Europe, but certain categories of the consultation are relevant particularly to structured note issuances.

The consultation asks a number of questions related to when a prospectus should be required and when an exemption should apply. These include the automatic exemption for higher denomination securities (at least EUR 100,000) from producing a prospectus for a public offering, and the lighter disclosure regime for such securities where a prospectus has to be drawn up for a listing on an EU regulated market. It also considers whether there should be a harmonised approach across the EU to the question of prospectuses for small offerings (below EUR 5 million). The current position is that the Prospectus Directive does not mandate a prospectus for such an offering, but leaves it open to each EU member state as to whether to impose any prospectus requirements.

The consultation then moves on to focus on the content of prospectuses. Of particular interest here for structured note issuers are the questions regarding short form disclosure. When the PRIIPS Regulation comes into force in the EU, for a structured note sold to a European retail investor, there will be a need to provide a short Key Investor Document (KID) summarising the essential features of the product. This will be in addition to the separate prospectus summary that is already required under the Prospectus Directive in relation to debt securities with denominations below EUR 100,000. The European Commission acknowledges that there is a large degree of overlap in the information required for these two documents and asks for views as to how the overlap of information should best be addressed, whether by means of information already contained in the KID not being duplicated in the prospectus summary, or by eliminating the need for a prospectus summary for such securities altogether. Another alternative approach put forward is whether the formatting content of the prospectus summary and the PRIIPS KID should be aligned, in order to minimise costs and promote comparability of products. These acknowledgements and focus on the overlapping content should be welcomed by structured note issuers.

The European Commission also asks whether there would be support for introducing a maximum length for a prospectus or for certain specific sections of the prospectus, and this could be particularly relevant to structured securities programmes where the base prospectuses are typically some of the longest prospectuses that need to be approved by competent authorities. It also asks for views on whether base prospectuses should be able to remain valid for takedowns for more than the current one year period.3