ESMA publishes Final Report on prospectus disclosure guidance to replace CESR Recommendations
- On 15 July 2020, ESMA published its Final Report1 on guidelines for disclosure requirements under the Prospectus Regulation2, containing the final version of the guidelines (the "ESMA Guidelines"). The Final Report follows responses received on ESMA's July 2019 Consultation Paper3.
- The ESMA Guidelines included in the Final Report substantially update and will replace the existing guidance provided in the CESR Recommendations4, originally adopted in 2005 by ESMA's predecessor, CESR and most recently updated by ESMA in 2013.
- While the CESR Recommendations provided guidance in relation to disclosure requirements under the old Prospectus Directive5 and related legislation, the ESMA Guidelines provide guidance on the prospectus disclosure requirements under the Commission Delegated Regulation6 supplementing the Prospectus Regulation which came into force on 21 July 2019.
- The ESMA Guidelines have been drafted pursuant to Article 16(3) of the ESMA Regulation7 and, in accordance with that article, competent authorities and financial market participants in EEA member states must make every effort to comply with the guidelines. Under the ESMA Regulation's 'comply or explain' regime, competent authorities must notify ESMA whether or not they comply within two months of publication of the guidelines on ESMA's website.
- The ESMA Guidelines will also be applicable in the UK provided they come into force during the post-Brexit transition period which expires on 31 December 2020.
Content of ESMA Guidelines and key changes from CESR Recommendations
- The ESMA Guidelines largely follow the same order and carry over the content of the CESR Recommendations with some simplifying drafting changes. In some areas, ESMA has added new guidelines and has also amended or added new content in the explanatory text. The changes made by ESMA were either proposed in the Consultation Paper or were included based on respondents' reactions to the consultation.
- Guidance from a number of the disclosure-related responses in ESMA's Questions and Answers on prospectuses8 (last updated in April 2019) have also been carried across to the ESMA Guidelines.
- While the majority of changes are non-substantive amendments, the ESMA Guidelines include the following key changes:
|Pro forma financial information||
|Working capital statements||
|Capitalisation and indebtedness||
|Profit forecasts and estimates||
- The following items from the CESR Recommendations have not been carried over to the ESMA Guidelines:
|Selected Financial Information||
|Financial Data not Extracted from Issuer's Audited Financial Statements||
- The final ESMA Guidelines will be translated into the official EU languages and published on ESMA's website. They will become effective two months after publication on ESMA's website in all the official languages. There is currently no indication from ESMA on timing for publication of the guidelines.
- We believe the ESMA Guidelines will add clarity. They largely maintain the existing guidance under the CESR Recommendations (which is well understood by market participants and their advisers), but where relevant provide helpful updates to simplify drafting, align with IFRS and to reflect changes between the old disclosure requirements under the Prospectus Directive and the current requirements under the Prospectus Regulation, which should make the guidance easier to navigate.
1 Final Report: ESMA Guidelines on disclosure requirements under the Prospectus Regulation of 15 July 2020
2 Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017
3 ESMA's 12 July 2019 consultation paper on the draft guidelines
4 ESMA update of the CESR recommendations: The consistent implementation of Commission Regulation (EC) No 809/2004 implementing the Prospectus Directive of 20 March 2013
5 Prospectus Directive (2003/71/EC)
6 Commission Delegated Regulation (EU) 2019/980 of 14 March 2019
7 Regulation (EU) 1095/2010
8 Questions and Answers Prospectuses 30th updated version – April 2019
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