Insights

On 18 February 2020, ESMA updated its Q&A on the Prospectus Regulation. Specifically, when commenting about the length of prospectus summaries relating to several securities (question 13.3) ESMA clarified that in terms of Article 7(7) of the Prospectus Regulation, the maximum page limit for prospectuses covering several securities is 9 sides of A4-sized paper.

ESMA also clarified in situations involving the use of a key information document (KID), the length of the summary can be extended by 3 pages for each additional security. A KID is a document required under Regulation 1286/2014 (the PRIIPs Regulation) which is designed to help investors (a) gain a better understanding of investment products’ behaviour, and (b) compare products with other similar investment products. In order to minimise compliance costs and administrative burdens for issuers whose securities fall under both the Prospectus Regulation and the PRIIPs Regulation, the Prospectus Regulation allows issuers to substitute the information required by Article 7(7) of the Prospectus Regulation (i.e. information about the security contained in the prospectus summary) with the information set out under Article 8(3) of the PRIIPs Regulation. As mentioned, in such cases, the length of the summary can be extended by 3 pages for each additional security.

Furthermore, when commenting about the length of prospectus summaries where there are multiple guarantors (question 13.4) ESMA clarified that the summary may be extended by only 1 additional side of A4-sized paper per guarantor. Accordingly, if there are multiple guarantors, 1 additional page could be added per guarantor.

2. Interim Report of the High-Level Forum on the Capital Markets Union

In November 2019, the European Commission set up a high-level forum (HLF) to further advance the Capital Markets Union Initiative (CMU). The HLF brings together 28 high-level capital markets “wise women and men” from across the EU. With members from banking, insurance, asset management, trading, civil society and academia, the HLF is a cross-discipline initiative focused primarily on making progress on the CMU project.

Since its inception a few months ago, the HLF has been focusing on identifying the main challenges of the CMU and ways to deal with them. To this end, the HLF mission is two-fold: (a) to put forward concrete and detailed recommendations, and (b) to set out the method and process necessary to see them through.

In this regard, the HLF recently published an interim report which proposes high-level measures that must be put forward and implemented to address certain key areas that must be tackled if a proper CMU is to be achieved. These key areas and measures will guide the work of the HLF in the coming months.

These key areas (and their corresponding measures) identified by HLF in the report include:

• Financing for businesses: here the HLF is recommending a number of measures including some to increase risk appetite for institutional investors;
• Market infrastructure: in order to tackle this area, the HLF is proposing measures to ensure a better quality of trading, and wider use of passports in post-trading for a more efficient and competitive capital market landscape;
• Retail investment: in order to promote retail investment, the HLF is, inter alia, suggesting measures to steer citizens towards suitable, long-term investment products, assisted by professional intermediaries; and
• Cross-cutting issues: the HLF also identified a number of measures that must be taken to address issues which affect a number of areas, for example, measures to tackle the issue of withholding tax for cross-border investors.

This report does not put forward any specific policy proposals, yet. The final report with concrete and targeted policy recommendations to the European Parliament, Member States, European Commission, and other stakeholders will be published in May 2020.