7 things the vanilla bond market needs to see in the new Prospectus Regulation

As detailed in the latest ICMA Quarterly Report, ICMA has identified seven key concerns for the vanilla bond market in the proposed new Prospectus Regulation:

1. There must be differentiated disclosure requirements for wholesale and retail bonds, including an exemption from the prescribed format summary requirement for wholesale bonds.
2. The new risk factor requirements must be calibrated in a manner that is workable for issuers.
3. Language relating to the prospectus summary liability regime and the purpose of the summary needs to be clear and consistent throughout the Prospectus Regulation.
4. The scope of the general disclosure test should be narrowed for bonds to ensure prospectuses only contain the information that investors really need.
5. There needs to be clarity in relation to investor withdrawal rights triggered by the publication of a supplement and the circumstances in which they apply.
6. There should be a suitable implementation period that allows Level 2 measures to be properly considered, consulted upon and delivered in sufficient time for market participants to adjust to the new regime.
7. Amendments are needed to ensure that the new threshold that would require a prospectus to be prepared for the admission to trading on a regulated market of shares resulting from the conversion or exchange of other securities where the resulting shares represent 20% or more of the number of shares already admitted to trading does not have unintended consequences for regulatory capital and loss absorbing capacity (eg CoCos) and other securities that may be converted mandatorily under BRRD.

Of the above concerns, the most important point is the need to maintain distinct disclosure regimes for wholesale and retail bonds, including an exemption from the summary requirements for wholesale bonds.

Contact me to find out more about ICMA’s work on the Prospectus Regulation, or see further the EU prospectus regime article on page 24 of the latest ICMA Quarterly Report.