On 15 March 2013, the European Securities and Markets Authority (ESMA) published a consultation paper on a draft regulatory and technical standard (RTS) concerning those situations which if they arise will always require the publication of a supplement to the prospectus. Responses must be submitted by 14 June 2013.
Scope of RTS
The consultation paper sets out a draft RTS concerning situations that will require the publication of a supplement to the prospectus which ESMA is obliged to develop in accordance with the Prospectus Directive. The listed situations are concrete examples of the general obligation in the Prospectus Directive to publish in a supplement every significant new factor, material mistake or inaccuracy relating to information included in the prospectus which is capable of affecting the assessment of the securities.
ESMA notes, however, that even where a situation has arisen which is on the list, a new prospectus (instead of a supplement) could be required by the competent authority due to lack of consistency, completeness or comprehensibility of the full prospectus when read with the supplement. ESMA further notes that the list is not an exhaustive list of all situations requiring a supplementary prospectus.
Meaning of "material" and "significant" – same test for prospectus
In relation to all situations which may require a supplement that are not included in the list, ESMA notes that it is up to the issuer, the offeror or the person asking for admission to trading on a regulated market to assess their significance or materiality and that the test as to whether a new factor, mistake or inaccuracy qualifies as a triggering event for producing a supplement is the same test as whether information should be included in the prospectus. Consequently, the terms 'significant' or 'materiality' should be assessed according to the same qualitative and/or quantitative criteria used when drafting the prospectus.
List of triggering events
The draft RTS specifies ten situations which should be considered as a significant new factor or a material mistake or inaccuracy and therefore will always require the publication of a supplement to a prospectus. We have summarised the ten situations below but click here for our note on the consultation which provides more details.
Publication of new annual audited financial statements
ESMA proposes that a supplement should be submitted as soon as practicable after the publication of the annual audited financial statements of certain issuers.
Profit forecast for equity securities and depositary receipts
There is currently a presumption that the publication of a profit forecast before the final closing of an offer of shares would trigger the need for a supplement. ESMA proposes to extend this presumption so that the publication of a profit forecast should trigger an obligation to publish a supplement for all issues of specified securities.
Profit estimate for an annual financial period
Similar to its approach on profit forecasts, ESMA proposes that the publication of profit estimates should also trigger an obligation to publish a supplement for all issues of specified securities.
Change of control of the issuer
ESMA considers that a change in control of certain issuers will trigger the requirement for a supplement.
Public takeover bids for equity securities and depositary receipts
ESMA proposes that
- any new public takeover bid by third parties in respect of certain issuers, and
- the outcome of any public takeover bid,
would be considered significant and would trigger a requirement to produce a supplement.
Working capital statements for certain equity securities
ESMA proposes an automatic obligation to produce a supplement where a prospectus contains a working capital statement and that statement ceases to be valid in connection with issues of certain securities. The trigger event would apply to approved prospectuses in respect of specified securities.
Admission to trading or offer to the public in an additional EU member state
ESMA proposes that a supplement shall be required where an issuer is seeking admission to trading on an additional EU regulated market, or intending to make an offer to the public in an additional EU Member State than the one(s) specified in the prospectus.
New significant financial commitment for equity securities
ESMA proposes that where specified issuers make new significant financial commitments which are likely to give rise to a significant gross change, the issuers shall publish a supplement so that investors can consider the most up-to-date financial position when making their investment decision.
Any judgement or concluding event of governmental, legal or arbitration proceedings already disclosed in the prospectus
ESMA proposes that all issuers (debt and equity) should always be prepared to prepare a supplement for any judgement or concluding event, even if subject to an appeal, in the course of any governmental, legal or arbitration proceedings already disclosed in the prospectus.
An increase in the aggregate nominal value of the programme
ESMA proposes that a supplement is required when the issuer increases the aggregate nominal amount of the programme.
ESMA's consultation coincides with the UKLA's current consultation on a number of its technical notes, one of which concerns supplementary prospectuses (TN/605.2). (Click here for our article on the UKLA consultation.) In general, the technical note provides that when assessing whether an offer or admission can be amended through a supplementary prospectus, the UKLA will consider whether the "fundamental premise of the original document still stands". ESMA specifically does not address the situation where there have been amendments to the terms and conditions of the securities. However, the UKLA's standpoint is that terms and conditions should not be changed through a supplementary prospectus, except in very limited circumstances where, following the amendment or change to the terms, the securities are manifestly the same securities.
ESMA's list of triggering events does not appear to conflict with the UKLA position as none of the events appear to have the effect of changing the fundamental terms and conditions of the offer. For example, both ESMA and the UKLA agree that increasing the number of securities to be admitted could be done via a supplement to the prospectus. Furthermore, ESMA states that the same test should be applied to supplements as for prospectuses, when determining information should be disclosed to investors. If this position is agreed following consultation, we would expect the UKLA to confirm that it endorses ESMA's approach by revising its technical note.
Whilst one might query whether ESMA's list of situations reveals any 'surprises' which are not already perceived to be trigger events in practice, the market should welcome the certainty of a prescribed list, which will go towards making the assessment of whether to produce a supplement a simpler and formulaic process.