Insights

The European Securities and Markets Authority (“ESMA”) recently updated its Questions and Answers on the Prospectus Regulation (the “Q&As”) to provide clarification on the following aspects:

• The application of Article 4(1) of the CRA Regulation to credit rating disclosure in prospectuses;
• How to determine home Member State in the context of global depository receipts over shares; and
• The publication of supplements to prospectuses when new audited annual financial information is published by a non-equity issuer.

Applicability of Article 4(1) of the CRA Regulation

Article 4(1) of the CRA Regulation (Regulation (EC) No 1060/2009), holds that whenever a credit rating is included in a prospectus, the prospectus must include prominent and clear information as to whether or not the credit rating is issued by a credit rating agency established in the European Union and registered as per the CRA Regulation.
The Q&As clarify that Article 4(1) of the CRA Regulation applies to any credit ratings mentioned in a prospectus.

Determination of home Member State in relation to global depositary receipts over shares (“GDRs”)

The Q&As provide further clarity on how the Prospectus Regulation should be applied in the case of the determination of home Member State with GDRs. The Q&A hold that GDRs are generally issued by a trust or a custodian, which in turn will most likely neither be the issuer of the underlying shares nor an entity belonging to the same group of the issuer. Based on this, GDRs will not qualify as equity securities, but will instead qualify as non-equity securities. Based on this, the definition of ‘home Member State’ in the Prospectus Regulation (Article 2(m)) applies.

Publication of supplements in relation to new audited annual financial information by non-equity issuers

The Q&As clarify that when new audited annual financial statements are published during the period of validity of a base prospectus or a non-equity prospectus, this does not automatically trigger an obligation to publish a supplement to the prospectus on the new audited annual financial statements. However, the Q&As hold that without any prejudice to the home competent authority’s powers to request such information, the issuer should make its own assessment based on materiality (pursuant to Article 23(1) of the Prospectus Regulation) as to whether a supplement should be published or not.