UK implementation of the Amending Directive
12 July 2012
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The Directive amending the Prospectus Directive and Transparency
Directive (the "Amending Directive", 2010/73/EU)
came into force on 31 December 2010 and was required to be
implemented by all member states by 1 July 2012. The UK implemented
two aspects of the Amending Directive on 1 July 2011. This article
briefly summarises how the UK has implemented this and the
remaining amendments.
On 1 July 2011 the UK implemented two aspects
of the Amending Directive by way of amendments to the Financial
Services and Markets Act 2000 ("FSMA"). These
were:
- increasing from 100 to 150 the number of persons (other than
qualified investors) to whom an offer of transferable securities
may be made before an approved prospectus is required; and
- increasing from €2.5 million to €5 million the limit for the
total consideration of an offer in the EU where a prospectus is not
required.
On 1 July 2012 the Amending Directive was implemented in the UK
by:
- the Prospectus Regulations
2012 (SI 2012/1538) which made further amendments to FSMA; and
- the FSA Prospectus Amending Directive Instrument
2012 which amended the FSA Handbook - primarily the Prospectus
Rules, Listing Rules and Disclosure and Transparency Rules
("DTRs").
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The main changes made by virtue of the
implementation of the Amending Directive are set out below.
1. Changes to exemptions from
producing a prospectus
(a) The definition of "qualified
investor" has been changed to bring it into line with MiFID (the
Markets in Financial Instruments Directive, as amended) categories
of investors, namely professional clients, persons treated as
professional clients and eligible counterparties. As noted above,
the concept of a qualified investor is relevant to the calculation
of the number of persons to whom an offer of transferable
securities may be made before an approved prospectus is required.
It is the classification of an investor by the investment firm or
credit institution that will be relevant and such organisations
must communicate the client classification to an issuer (subject to
data protection rules). The requirement for the Financial Services
Authority to maintain a register of qualified investors has been
deleted;
(b) The minimum consideration a person
must pay for transferable securities in order to be exempt from the
obligation to produce a prospectus has increased from €50,000 to
€100,000 (or an equivalent amount); and
(c) The minimum denomination of
transferable securities to qualify for an exemption from producing
a prospectus has increased from €50,000 to €100,000 (or an
equivalent amount).
2. Content of prospectus
summary
Clarification has been provided on the
content of the prospectus summary. The summary must convey
concisely the "key information" relating to the securities which
are the subject of the prospectus. The definition of key
information includes the essential characteristics and risks
associated with the issuer and the securities, the general terms of
the offer and the use of proceeds.
Clarification has also been provided that
liability will not attach to the prospectus summary unless, when
read with the rest of the prospectus, it is misleading or
inconsistent or does not provide the key information (as defined
above).
The European Commission has also published a
delegated regulation amending the Prospectus Regulation which
provides that the length of a summary should not exceed 7% of the
length of the prospectus or 15 pages, whichever is longer. This
replaces the requirement that a summary should be no longer than
2,500 words.
3. Supplementary
prospectuses
Changes to FSMA have clarified the period
when a supplementary prospectus can be required as being the period
between when the prospectus is approved and the later of the offer
closing and the point when the securities start to trade on the
regulated market. The changes also clarify that, where a
supplementary prospectus is published, a condition to an investor's
right to withdraw is that the significant new matter giving rise to
the need for the supplementary prospectus must have occurred prior
to delivery of the relevant securities.
4. Changes for retail cascade
regime
The changes to FSMA provide that a new
prospectus is not required on the subsequent resale of securities
through a financial intermediary (known as a retail cascade) where
a valid prospectus is still available and the issuer, or other
person that drew up the prospectus, has given its written consent
to the use of that prospectus.
5. Final terms
FSMA is being amended to include a new
provision that final terms may only contain information that
relates to the securities note and must not be used to supplement
the base prospectus.
6. Other changes to the
Prospectus Rules
The requirement for issuers with securities
admitted to trading on a regulated market to publish an annual
update has been deleted, as it replicates requirements under the
DTRs.
Various changes have been made to the
incorporation of documents by reference. Only documents filed under
the Prospectus Directive or Transparency Directive may be
incorporated by reference. Issuers are no longer entitled to
incorporate by reference information published in an annual
information update.
Brad Isaac is a
Partner in the Corporate
Group of Field Fisher Waterhouse LLP in
London.