Find out the latest on the EU Prospectus Regulation...

It’s easy to lose track of where we are on the EU Prospectus Regulation, with several recent publications covering a pretty wide range of disparate topics (oh, and a day job to do…). So for those wanting a quick, high-level snapshot – here it is! For more in-depth coverage, see the articles in the latest ICMA Quarterly Report starting on page 29.

• Level 1: The Level 1 text is final and the overall date of application is 21 July 2019 (some limited provisions apply already or apply from 21 July 2018). The changes from the current PD regime may result in some changes to vanilla bond market practice, but certainly not as extensive as those originally proposed (e.g. a differentiated disclosure for bonds with a €100,000 minimum denomination is still envisaged).
• Main Level 2 provisions (e.g. detailed disclosure schedules and building blocks*): ESMA submitted its Final Report on Technical Advice to the European Commission at the end of March 2018. The European Commission is expected to prepare draft delegated acts on the basis of ESMA’s technical advice by June 2018. Following translation and adoption, the European Parliament and the Council will have an objection period (likely until Spring 2019). 

The Final Report is 503 pages long and covers a wide range of different topics. Unfortunately a number of ICMA’s comments to the previous consultation were not reflected, but the proposal to make profit forecasts mandatory for debt prospectuses has helpfully not been taken forward. On the other hand, a report on any profit forecasts will still be required, without it being mandatory for auditors to provide such report. There is also a 3-page length limit on prospectus cover notes and various other changes to the current regime. 

• Other Level 2 provisions (e.g. RTS on advertisements, supplements, publication, key financial information for the summary and data and machine readability): ESMA is currently considering the responses it received to its recent consultation (including the ICMA response), and is due to deliver its final report by 21 July 2018. Generally speaking, it was helpful that the draft RTS proposed in ESMA's consultation paper was largely based on existing measures under the Prospectus Directive, where relevant. However, there has been some discussion among bond market participants around how the prescriptive requirements for key financial information in the summary and new requirements for advertisements would work in practice. See the latest ICMA Quarterly Report article starting on page 29 for more details.  
• Level 3 (ESMA Guidelines on risk factors / ESMA Q&A): We are currently expecting ESMA to publish a consultation paper on Guidelines on risk factors in Q3 2018. It seems that ESMA also intends to update its Q&A on Prospectuses to reflect the new Prospectus Regulation, which is helpful.

The ICMA Prospectus Regulation Working Group is closely following all these developments with the aim of minimising practical issues for vanilla bond market participants when the new regime comes into force next summer. Feel free to get in touch if you’d like more information - [email protected].  

* Tenuous link to the picture for this article!