Avv. Salvatore Providenti Bergamo University 29.10.2018 The slides - - PowerPoint PPT Presentation

• Avv. Salvatore Providenti

Bergamo University 29.10.2018 The slides are based on a common work with

• Avv. Alessandra Atripaldi

a. a.

Introduction Introduction to to European European and and national ational securities securities law law

1) Freedom of movement 2) Rules and institutions in Italy

b. b.

Some Some of

• f the

the main ain set et of

• f rules

rules

1) The MIFIR-MIFID framework 2) The MAR-MAD framework 3) The Transparency and Prospectus Framework

• Art. 26.2 of the Treaty on the Functioning of the

European Union “The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in

accordance with the provisions of the Treaties”.

• Admission of securities to official stock‐exchange ‐ listing and information to be published
• Rights of shareholders in listed companies
• Transparency of information about issuers of securities
• Prospectus to be published when securities are
• ffered to the public or
• admitted to trading on a regulated market
• Takeover bids
• Market abuse
• Credit rating agencies
• Investment research and financial analysts
• Investment funds (UCITS):
• applicable rules
• rganisational requirements and rules of conduct
• Investment services:
• MiFID and investment services
• Capital adequacy of investment firms and credit institutions
• Investor compensation schemes

• Consolidated Law 58/1998 and executing regulations (“TUF”)
• Minister of the Economy and Finance (Treasury)
• Consob
• Bank of Italy
• Borsa Italiana S.p.A.
• Consob and Bank of Italy Regulations
• Central Depositary of Financial Instruments (Montetitoli)
• Compensation systems
• Judicial system (criminal, administrative and civil courts)
• Relationships with other Authorities

The Commissione Nazionale per le Società e la Borsa (CONSOB) is the public authority responsible for regulating the Italian securities market.

• Born in 1974
• Main Law: LEGISLATIVE DECREE No. 58 OF 24 FEBRUARY 1998 Consolidated Law on

Finance pursuant to Articles 8 and 21 of Law no. 52 of 6 February 1996

• Its activity is aimed at the protection of the investing public. In this connection, the

CONSOB is the competent authority for ensuring:

• transparency and correct behaviour by securities market participants
• disclosure of complete and accurate information to the investing public by

listed Companies;

• accuracy of the facts represented in the prospectuses related to offerings
• f transferable securities to the investing public;
• compliance with regulations by auditors entered in the Special Register
• It conducts investigations with respect to potential infringements of insider dealing

and market manipulation law.

• ESMA is an independent EU Authority that contributes to safeguarding the

stability of the European Union's financial system by ensuring the integrity, transparency, efficiency and orderly functioning of securities markets, as well as enhancing investor protection. In particular, ESMA fosters supervisory convergence both amongst securities regulators, and across financial sectors by working closely with the other European Supervisory Authorities competent in the field of banking (EBA), and insurance and

• ccupational pensions (EIOPA).
• REGULATION (EU) No 1095/2010 OF THE EUROPEAN PARLIAMENT AND OF

THE COUNCIL of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority ‐ ESMA)

• The objectives of supervisory activities indicated in this section shall be:
• a) the safeguarding of faith in the financial system;
• b) the protection of investors;
• c) the stability and correct operation of the financial system;
• d) competitiveness of the financial system;
• e) the observance of financial provisions
• For the pursuance of objectives indicated in subsection 1, the Bank of Italy shall be

responsible for risk containment, asset stability and the sound and prudent management of intermediaries

• For the pursuance of objectives indicated in subsection 1, Consob shall be

responsible for the transparency and correctness of conduct

• Consob shall supervise regulated markets with the

aim of ensuring the transparency of the market, the

• rderly conduct of trading and the protection of

investors

• Art. 91
• Consob shall exercise the powers provided for in this

Part (ISSUERS) having regard to the protection of investors and the efficiency and transparency of the market in corporate control and the capital market

1) 1) The The MIFIR-MIFID IFIR-MIFID framework framework 2) 2) The The MAR-MAD AR-MAD framework framework 3) 3) The The Prospectus rospectus Regulation egulation

16/06/17

16/06/17

• OLD REGIME
• MIFID1: Markets in financial instruments and investment services: Directive

2004/39/ of 21April 2004 on markets in financial instruments

• NOW
• MIFID2 – Directive n. 2014/65 of 15.5.2014
• harmonization: requires the Member States to harmonise the rules governing

investment services and activities. To that end, the Member States must set up an authorisation system enabling investment firms to operate throughout the EU. These firms must be registered andthe register must be accessible to the public. Each authorisation is notified to the European Securities and Markets Authority (ESMA).

• Investor protection: considerably enhanced by setting business of conduct rules for

providing investment services to clients and minimum standards for the mandate and powers that national competent authorities must have at their disposal. It also establishes effective mechanisms for real‐time cooperation in investigating and prosecuting breaches of the rules.

• MIFIR – Regulation n. 600/2014 of 15.5.2014 (applicable as of 3.1.2018)

– PRODUCT INTERVENTION

• In providing investment and non‐core services and activities, authorised

intermediaries must: a) act diligently, fairly and transparently in the interests of customers and the integrity of the market. b) acquire the necessary information from customers and operate in such a way that they are always adequately informed; c) use publicity and promotional communications which are correct, clear and not misleading, d) have resources and procedures, including internal control mechanisms, suitable for ensuring the efficient provision of services and activities

• In the provision of investment services and activities and accessory services, Italian

investment companies, non‐EU investment companies, asset management companies, harmonised asset management companies, financial intermediaries registered in the list pursuant to Article 107 of the Consolidated Law on Banking, Italian banks and non‐EU banks: a) shall adopt all reasonable measures to identify and manage conflict of interest which may arise with the customer or between customers, also by the adoption of appropriate organisational measures, in order to avoid a negative impact on the interests of the customer; b) shall clearly inform customers, prior to acting on their behalf, of the general nature and/or sources of conflict of interest where measures taken pursuant to paragraph a) are not sufficient to ensure, with reasonable certainty, that the risk of damaging the interests of the customer is avoided; c) shall perform independent, sound and prudent management and take measures to safeguard the rights of customers with regard to their assets

• INVESTMENT CONSULTANCY AND PORTFOLIO MANAGEMENT
• The intermediaries must know from the customer
• a) awareness and experience of the investment sector relevant to the type
• f instrument or service;
• b) the financial position;
• c) the investment objectives.
• Where intermediaries providing investment consultancy or portfolio

management services are unable to obtain the information required under this article, they shall abstain from providing said services

• Based on information obtained from the customer, and taking into account the

nature and characteristics of the service provided, the intermediaries shall assess whether the specific transaction recommended or executed as part of the provision of portfolio management services satisfies the following criteria:

a) correspondence with the customer’s investment objectives; b) the nature of the transaction is such that the customer is financially able to face any risk related with the investment compatible with his investment objectives; c) the customer has the necessary experience and awareness of the nature of the transaction to understand the risks involved in such a transaction or management of the portfolio

• Where the services are provided to a professional customer, intermediaries may

presume that, with regard to the instruments, transactions and services for which said customer is classified as a professional customer, he has the necessary level of experience and awareness

• 1. In the provision of investment services other than investment consultancy and

portfolio management … intermediaries shall verify that the customer has the necessary level of experience and awareness to understand the risks deriving from the instrument or investment service offered or requested

• 2. Intermediaries may presume that a professional customer has the necessary level
• f experience and awareness to understand risks relating to the investment

service or transactions or type of transaction or instruments according to which the customer was classified as professional.

• 3. Where for the purposes of subsection 1 the intermediary considers that the

instrument or service is not appropriate to the customer or potential customer, the intermediary shall advise accordingly. Said advice may be provided in a standardised format

• 4. Where the customer or potential customer decides not to provide the information

… or where such information is insufficient, the intermediaries shall advise the customer or potential customer that such a decision inhibits any intermediary verification that the service or instrument is appropriate to the customer. Said advice may be provided in a standardised format

• No adequacy and appropriateness but Conflict of interests rules apply
• Simple financial instruments

shares admitted for trading on a regulated market, or equivalent market in another country, money market instruments, bonds or other debt securities (excluding bonds or debt securities with an underlying derivative), harmonised UCITS

• OTHER SIMPLE FINANCIAL INSTRUMENTS:

no derivatives frequent opportunities to sell, redeem or otherwise obtain repayment such at prices openly available to market operators (not by the issuer) no liability for the customer which exceeds the cost; Information and characteristics allows the average retail customer to make an informed decision

• f investment

• By regulation and after consulting the Bank of Italy, Consob

shall identify private professional customers, together with the criteria to identify private persons who on request may be treated as professional customers, and related request procedures

• Annex 3 of Consob Regulation on Intermediaries

• WRITTEN CONTRACTS AND GIVEN COPY
• Except for investment consultancy (often connected to other

services)

• The executing orders may not be written
• No refer to usage for fees or any payment by the customer
• Nullity due to the violation of these rules may be enforced
• nly by customer
• “In actions for damages in respect of injury caused to the

customer in the performance of investment services or non‐ core services, the burden of proof of having acted with the due diligence required shall be on the authorised intermediaries”

• Different decision by Italian Courts
• Supreme Court after different statements by local Courts: in

case of violation of rules concerning the fairness of the behaviour REINBURSEMENT OF DAMAGES/CIVIL RESPONSIBILITY BUT NOT NULLITY OF THE CONTRACT (2007)

• Consob can apply administrative sanctions to directors,

managers, internal audit officers of intermediaries

• Sanctions go from 30.000 to 10% of Turnover to the legal

person

• Directors and other officers if conditions art. 190‐bis (SEE

BEFORE) are present

• All affected persons can oppose the sanctions in front of

Courts of Appeal with a simplified procedure

• The customers can found on the breach of rule sanctioned by

Consob (especially if confirmed by Courts) their civil action

9 General Guidelines

1.

Investment firms should inform clients, clearly and simply, that the reason for assessing suitability is to enable the firm to act in the client’s best interest. At no stage should investment firms create any ambiguity or confusion about their own responsibilities in the process.

2.

Investment firms must have in place adequate policies and procedures to enable them to understand the essential facts about their clients and the characteristics of the financial instruments available for those clients (e.g. marital status, age, family, employment, need for liquidity in special moments)

5.

Investment firms should take reasonable steps to ensure that the information collected about clients is reliable. In particular, firms should:

(a) not rely unduly on clients’ self‐assessment in relation to knowledge, experience and financial situation; (b) ensure that all tools employed in the suitability assessment process are appropriately designed (e.g. questions are not drafted in such a way that they lead the client to a specific type of investment); and (c) take steps to ensure the consistency of client information

6. Where an investment firm has an ongoing relationship with the client, it should establish appropriate procedures in order to maintain adequate and updated information about the client;

8‐ In order to match clients with suitable investments, investment firms should establish policies and procedures to ensure that they consistently take into account: (a) all available information about the client that is likely to be relevant in assessing whether an investment is suitable, including the client’s current portfolio of investments (and asset allocation within that portfolio); (b) all material characteristics of the investments considered in the suitability assessment, including all relevant risks and any direct or indirect costs to the client

• No adequacy and appropriateness but Conflict of interests rules apply
• Simple financial instruments
• shares admitted for trading on a regulated market, or equivalent market

in another country, money market instruments, bonds or other debt securities (excluding bonds or debt securities with an underlying derivative), harmonised UCITS

• OTHER SIMPLE FINANCIAL INSTRUMENTS:
• no derivatives
• frequent opportunities to sell, redeem or otherwise obtain repayment

such at prices openly available to market operators (not by the issuer)

• no liability for the customer which exceeds the cost;
• Information and characteristics allows the average retail customer to make

an informed decision of investment

• By regulation and after consulting the Bank of

Italy, Consob shall identify private professional customers, together with the criteria to identify private persons who on request may be treated as professional customers, and related request procedures

• Annex 3 of Consob Regulation on

Intermediaries

16/06/17

• Before:
• Directive 2003/6/EC on insider dealing and market manipulation (MAD)
• Now:
• Market Abuse Regulation (MAR) n. 596 of 16 April 2014
• ensures that rules keep pace with market developments, such as new trading platforms, as well as

new technologies, such as high frequency trading (HFT).

• Market Abuse Directive (MAD2) n. 56 of 16 April 2014 on criminal sanctions
• complements MAR by requiring Member States to introduce common definitions of criminal
• ffences of insider dealing and market manipulation, and to impose maximum criminal penalties for

the most serious market abuse offences.

• Member States have to make sure that such behaviour, including the manipulation of benchmarks, is

a criminal offence, punishable with effective sanctions everywhere in Europe.

• The revamped EU legal framework will
• ensure even more efficient, transparent and trustworthy European financial markets;
• increase investor protection and confidence by allowing deeper and more integrated financial markets, and

contribute to the creation of the Capital Markets Union.

• strengthen the fight against market abuse across commodity and related derivative markets, explicitly ban

the manipulation of benchmarks, such as LIBOR, and

• reinforce the investigative and sanctioning powers of regulators.
• strengthen and replace existing EU rules on market integrity and investor protection, first adopted in 2003.

• Without prejudice to the information requirements

established by specific provisions of law, listed issuers shall make available to the public, without delay, the inside information referred now in Art. 7 MAR that directly concerns such issuers and their subsidiaries

• Definition of Information:
• precise nature,
• which has not been made public,
• relating, directly or indirectly, to one or more issuers or to one or

more financial instruments, and

• if it were made public, would be likely to have a significant effect
• n the prices of those financial instruments or on the price of

related derivative financial instruments

• Information shall be deemed to be of a precise nature if:

a)

it refers to a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to occur; and

b)

it is specific enough to enable a conclusion to be drawn as to the possible effect of the set of circumstances or event referred to in paragraph a) on the prices of financial instruments.

• Information which, if made public, would be likely to have a significant

effect on the prices of financial instruments shall mean information a reasonable investor would be likely to use as part of the basis of his investment decisions

• Insider dealing arises where a person possesses inside information and

uses that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates

• The use of inside information by cancelling or amending an order

concerning a financial instrument to which the information relates where the order was placed before the person concerned possessed the inside information, shall also be considered to be insider dealing.

• For the purposes of this Regulation, recommending that another person engage in

insider dealing, or inducing another person to engage in insider dealing, arises where the person possesses inside information and: (a) recommends, on the basis

• f that information, that another person acquire or dispose of financial

instruments to which that information relates, or induces that person to make such an acquisition or disposal, or (b) recommends, on the basis of that information, that another person cancel or amend an order concerning a financial instrument to which that information relates, or induces that person to make such a cancellation or amendment.

• The use of the recommendations or inducements referred to in paragraph 2

amounts to insider dealing within the meaning of this Article where the person using the recommendation or inducement knows or ought to know that it is based upon inside information.

• This Article applies to any person who possesses inside information as a result of:
• (a) being a member of the administrative, management or supervisory bodies of the

issuer or emission allowance market participant;

• (b) having a holding in the capital of the issuer or emission allowance market participant;
• (c) having access to the information through the exercise of an employment, profession
• r duties;
• (d) being involved in criminal activities.
• This Article also applies to any person who possesses inside information under circumstances
• ther than those referred to in the first subparagraph where that person knows or ought to

know that it is inside information.

• Where the person is a legal person, this Article shall also apply, in accordance with national

law, to the natural persons who participate in the decision to carry out the acquisition, disposal, cancellation or amendment of an order for the account of the legal person concerned.

• For the purposes of this Regulation, unlawful disclosure of inside

information arises where a person possesses inside information and discloses that information to any other person, except where the disclosure is made in the normal exercise of an employment, a profession

• r duties.

• Different activities and behaviours, realized entering

trades or using media, which leads (or it is likely to lead) to false or misleading prices, markets, information on issuers or financial instruments

• There are “accepted market prices”

• EU legislation (MAD1 – Directive 2003/6; now

MAR Regulation 596/2014) requires that Member States adopt "effective, proportionate and dissuasive" administrative sanctions, without prejudice to their faculty to decide whether to also impose criminal sanctions (“double track system”) (Article 14

• f MAD1)

• MAD1
• set forth and took for granted the existence of a legal framework

based on mandatory administrative sanctions, as the most efficient, timely and prompt system

• MAR
• confirms the importance of administrative sanctions as an

essential point of the regulatory framework

Recital 71 MAR “A set of administrative sanctions and measures should be provided for to ensure a common approach in Member States and to enhance their deterrent effect. The possibility of a ban from exercising management functions within investment firms should be available to the competent authority. Sanctions imposed in specific cases should be determined taking into account where appropriate factors such as the disgorgement of any identified financial benefit, the gravity and duration of the infringement, any aggravating or mitigating factors, the need for fines to have a deterrent effect and, where appropriate, include a discount for cooperation with the competent authority”

• Recital 72 MAR
• Even though nothing prevents Member States from laying down rules for

administrative as well as criminal sanctions for the same infringements, they should not be required to lay down rules for administrative sanctions for infringements of this Regulation which are already subject to national criminal law by 3 July 2016. In accordance with national law, Member States are not obliged to impose both administrative and criminal sanctions for the same offence, but they can do so if their national law so permits.

• However, maintenance of criminal sanctions rather than administrative sanctions

for infringements of this Regulation or of Directive 2014/57/EU should not reduce

• r otherwise affect the ability of competent authorities to cooperate and access

and exchange information in a timely manner with competent authorities in

• ther Member States for the purposes of this Regulation, including after any

referral of the relevant infringements to the competent judicial authorities for criminal prosecution

Article 30 Administrative sanctions and other administrative measures

• 1. Without prejudice to any criminal sanctions and without prejudice to the supervisory powers
• f competent authorities under Article 23, Member States shall, in accordance with national law,

provide for competent authorities to have the power to take appropriate administrative sanctions and other administrative measures in relation to at least the following infringements: … Member States may decide not to lay down rules for administrative sanctions as referred to in the first subparagraph where the infringements referred to in point (a) or point (b) of that subparagraph are already subject to criminal sanctions in their national law by 3 July 2016. Where they so decide, Member States shall notify, in detail, to the Commission and to ESMA, the relevant parts of their criminal law.

Recital 23 “The scope of this Directive is determined in such a way as to complement, and ensure the effective implementation of, Regulation (EU) No 596/2014. Whereas

• ffences

should be punishable under this Directive when committed intentionally and at least in serious cases, sanctions for breaches

• f Regulation (EU) No 596/2014 do not require that intent is proven or that

they are qualified as serious. In the application of national law transposing this Directive, Member States should ensure that the imposition of criminal sanctions for offences in accordance with this Directive and of administrative sanctions in accordance with the Regulation (EU) No 596/2014 does not lead to a breach of the principle of ne bis in idem”

• The nature of the administrative measures: fines; confiscation of assets for

a value corresponding to that "used" by the transgressor plus the profit

• btained; disqualification for offices or to practice activities in the financial

markets sector;

• The purpose of the measures seems to be mainly that of restoring

confidence in the markets, affecting the factors (the economic resources and the professional employment or position held by the

• ffender in

financial market sector) which such offences normally make possible, thus stimulating honest investors to operate, guaranteeing public confidence in the markets and in the correct trading on those markets

• There is no question of recovering damages

• Market manipulation based on misleading information
• Parmalat, Antonveneta
• Parmalat: false accounts/continued actions
• CEO and other executive directors/ CFO and other key
• fficers/ Accounting firm and its partners / Non – executive

directors (check duties)

• No administrative sanctions but interdicition to the

accounting firm (which has been closed)

. Antonveneta

• manipulation based on market operations and on

dissemination of misleading information

• Market operations: pre‐arranged (by phone) contracts only

formally closed by means of the market technological system / Price targeting /Continued actions

• False or misleading information: no disclosure on

shareholder’s agreements / Presentation of false alternative candidacy to the board of directors / Continued actions

• Partner of an accounting firm systematically

using information received on extraordinary

• perations (mergers, takeover bids) of listed

companies he was working in to invest

• Communication by the CEO to “political allied”
• f an important acquisition

16/06/17

• The Directive lays down detailed disclosure requirements:
• for issuers whose securities are already admitted to trading on a regulated market;
• to shareholders with voting rights;
• to natural or legal persons holding voting rights or financial instruments that influence voting

rights.

• Competent authority
• Each Member State will designate a competent authority responsible in particular for

implementing the Directive. Each competent authority shall have all the powers necessary for the performance of its functions, specifically:

• monitoring of disclosure of timely information by the issuer and publication on its own

initiative of information not disclosed within the time limits set;

• request for further information and documents;
• verification of compliance with the disclosure requirements, by way of on‐site inspections;
• suspension for a maximum of ten days of trading in securities or prohibition of trading on a

regulated

• market if it finds that the disclosure requirements laid down in the Directive have not been

met or if it has

• reasonable grounds for suspecting that those requirements have been infringed.

By regulation, in compliance with EU Law establishes  ‐tresholds and terms of declaration  publication terms of financial reporting (annual financial report; half‐yearly)  ‐ cases of exemption from the requirement to publish the financial reports;  ‐ the content of information on significant related party transactions Where it is ascertained that documents comprising the financial statements do not comply with drafting regulations, Consob may request that the issuer publishes this fact and arrange publication of supplementary information as necessary in order to reinstate correct market information. Consob may challenge the resolution approving annual accounts on the grounds that the accounts fail to conform with the provisions governing the preparation thereof (IAS) or request the courts to verify the conformity of the consolidated accounts with the same provisions

Transparency – tresholds

Directive 109/2004/EC Transparency

• Reaching, exceeding or

falling below 5 %, 10 %, 15%, 20 %, 25 %, 30 % (or 1/3), 50 % e 75 % (or 2/3)

• Minimum requirements

Italy

• Exceeding or falling below

3% (2 % until D. Lgs. 25/2016) if not PMI; 5%PMI (in the law);

• Reaching, exceeding or

falling below 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.6%, 90% and 95% (Consob Regulation)

• 1. Those who directly or through nominees, trustees or

subsidiary companies, hold interests in shares of an issuer, disclose to the issuer and to Consob when:

• a) reaching or exceeding the thresholds of 5%, 10%, 15%, 20%, 25%,

30%, 50% and 75%;

• b) the reduction of the potential investment to below the thresholds

specified at letter a).

• 2. Those who directly or through nominees, trustees or

subsidiary companies, hold an overall long position, disclose to the issuerand to Consob when:

• a) exceeding the thresholds of 10%, 20%, 30% and 50%;
• b) the reduction to below the thresholds specified at letter a).

• Interest in shares:
• shares comprising the underlying capital of derivative

financial instruments listed under Article 1, paragraph 3, of the Consolidated Law and all other financial instrument or contract, which, by virtue of a legally binding agreement, attributes the holder, on its exclusive initiative, the unconditional right to purchase, by physical delivery, the underlying shares or the discretion to buy, by means of physical delivery, the underlying shares

• ther long positions: shares which constitute the

underlying item of derivative financial instruments listed by article 1, paragraph 3 of the Consolidated Law and all other financial instrument or contract, other than those relevant for potential investments, able to determine the assumption of an financial interest, positively linked to the trend of the underlying item, including the case of the counterparty of the holder of a short position

• verall long position: the aggregate position held in

shares, potential investments and other long positions

• The Authority
• authorizes the publication of prospectuses and the fulfilment of the duty to publish

integration and supplement

• can suspend or forbid the offer
• can punish with administrative sanctions
• Prospectuses:
• Before 2015: from 1/4 to the double of the total value of the offer (or from 100.000 eur

to 2 millions eur)

• Now: from 25.000 eur to 5 million Eur
• Disqualification (directors of intermediaries, listed companies, other open companies;

from 2 months to 3 years)

• Other violations: from 5.000 eur to 750.000 eur
• Shareholdings:
• from 10.000 eur to 1,5 millions eur ; from 5.000 to 750.000 eur if there is a late of no

more than 2 months

• Criminal violation: false prospectus
• Possibility of informative manipulation
• Civil responsibility for prospectuses: issuer

(directors, board of statutory auditors, important offers, e.g. CFO), intermediaries placing financial products, accounting firm, Authority

• Statutory auditors
• Surveillance board
• Audit Committee
• Accounting firm

• securities shall only be offered to the public in the Union after prior

publication of a prospectus

• Prospectuses are legally required documents presenting the information

necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses, and prospects of the issuer and of any guarantor, and of the rights attached to investment products.

• Any person who intends to make a public offering shall give advance notice

thereof to NCA (Consob for Italy), attaching the prospectus to be published

• The prospectus shall be drafted in compliance with models provided in EU

regulations on this matter

• Offerors or issuers may request the issue of the authorisation in order to

have the prospectus published in a MS recognized abroad

• The prospectus shall contain the information that, depending on the

characteristics of the financial products and the issuer, is necessary for investors to make an informed assessment of the issuer's assets and liabilities, profits and losses, financial position and prospects and of the financial products and related rights.

• The prospectus also contains a securities note which briefly gives key

information, in non‐technical jargon, in the language in which the prospectus was originally drafted. The format and content of the securities note, together with the prospectus, give adequate information on the fundamental features of the financial products in order to aid the investors to decide whether or not to invest in such products



Regulation Regulation (UE) 2017/1129 (UE) 2017/1129 14.6.2017 14.6.2017



Ex Exemptin ing t g the s smallest ca llest capital ra tal raisin isings gs

• does not apply to issues of

sues of secur securities wi es with a a value lue be below € low €1 mill million (PD set that limit at € at €100 00,00 ,000).

• MS now able to exempt issuers they consider to be small from the obligation to publish a prospectus by setting a

higher threshold - up to €8 m million lion - for their domestic markets. This change makes it easier and cheaper for SMEs to raise funding in the EU.



EU EU gro growth p prospect ctus -

• a ligh

lighter p er prospect ctus f us for s r smaller co ller companies a ies and small is ll issu suances ances

• For smaller companies wishing to tap into European markets, the regulation provides a considerably lighter

regime and less complex requirements for issuing a prospectus.

• The EU growt

EU growth pr prospe

• spect

ctus, a new type of prospectus, will be available for SMEs, companies with up to 499 employees (small mid-caps) admitted to an SME growth market or small issuances by unlisted companies.



Shorter prospec Shorter prospectuse uses and and bett better invest er investor infor

• r informati

ation

• PR specifies, with greater clarity, the amount of information needed in order to make prospectuses shorter and clearer.



Sim Simplify lifying s seco condary is issuance suance for listed firms for listed firms

• Companies already listed on a public market that wish to issue additional shares (secondary issuance) or raise debt

(corporate bonds) are now able to benefit from a simplified prospectus. 

Fast-track a rack and s simplified lified f freq equen uent is issuer re er regime gime

• Companies that frequently issue securities are also able to use the 'Universal Registration Document' (URD).
• sort of 'shelf registration' containing all the necessary information about the company.
• Issuers that regularly maintain an updated URD with their supervisors can benefit from five day fast-track

approval when they need to raise capital on the markets.

• simplifies the procedure for issuers already known to the market.



Sin Single a le access p cess poin int f for a r all EU l EU prospectu ctuses es

• ESMA will, for the first time, provide free of charge and searchable online access to all prospectuses approved in EEA.



Paper prospec Paper prospectuses uses are no are no longer requi longer required, d,

• unless a potential investor requests them.

 The Regulation shall not apply

shall not apply to the following types of securities: (a) units of UCITS other than the closed-end type; (b) non-equity securities issued by a Member State, ECB or alike; (c) shares in the capital of central banks of the Member States; (d) securities guaranteed by a Member State or alike; (e) securities issued by associations with legal status or non-profit-making bodies; (f) non-fungible shares of capital whose main purpose is to provide the holder with a right to occupy an apartment, or other form of immovable property or a part thereof and where the shares cannot be sold on without that right being given up

 The PR lays down requirements for the drawing up, approval

and distribution of the prospectus to be published when securities are:

• offered to the public or
• admitted to trading on a regulated market situated or operating

within a Member State.

 a prospectus shall contain the necessary information which is

material to an investor for making an informed assessment

• f:

 (a) the assets and liabilities, profits and losses, financial

position, and prospects of the issuer and of any guarantor;

 (b) the rights attaching to the securities; and

 Definitions (Article 2)

• 'small and medium-sized enterprises'. For the purposes of the

regulation, the €100 million threshold that previously defined 'companies with reduced market capitalisation' has been raised to €200 million, as stipulated in Directive 2014/65/EU.

 Voluntary prospectuses (Article 4)

• allows issuers to opt in for the EU prospectus, even when the offer
• f securities to the public or an admission of securities to trading
• n a regulated market is outside the scope of the regulation (in

effect making the issuer eligible for an EU passport), provided that the competent authority approves such a 'voluntary' prospectus.

 Subsequent resale of securities (Article 5)

• tackles the issue of subsequent resale of securities.
• as long as the prospectus is valid and duly supplemented and the

issuer consents to its subsequent use, financial intermediaries subsequently reselling the securities should be entitled to……….



In view of the specificities of different types of securities, issuers, offers and admissions

a) a) standard standard pros prospectus ctus:

 Single document  Separate documents:

 Summ Summary y  provides an introduction containing warnings, as well as key information on the issuer, the offeror or the person asking for admission, on the securities and on the offer itself and/or the admission to trading.  Regist egistrat ation docu n document nt  (a) identifies the directors, senior management, advisers and auditors;  (b) summarises essential information about the issuer (financial situation, capitalisation and risk factors);  (c) provides information on the company (business operations, products/services, factors affecting the business);  (d) makes available an operating and financial review (and prospects);  (e) supplies extra information on the directors, senior management and employees;  (f) provides information regarding the major shareholders and related-party transactions; and  (g) specifies what financial information must be included in the document (periods to be covered, age of financial statements and other information of a financial nature).  secur securiti ties note es note  names the directors, senior management, advisers and auditors; presents offer statistics as well as an expected timetable; supplies essential information about the issuer; discloses the interests of experts or advisers the company is dealing with; provides information on the details of the offer and admission to trading; and discloses additional information of a statutory nature that is not covered elsewhere in the prospectus.  Once the competent authority of EEA MS approves a prospectus, it can be used for raising capital by means of a public

• ffer or admission to a regulated market in other MS.

 Frequent issuers should be incentivised to draw up their prospectus as separate documents, since that can reduce their cost of compliance with this Regulation and enable them to swiftly react to market windows.  All constituent parts of the prospectus should be subject to approval.

b) b) URD URD for Frequent Issuers for Frequent Issuers c) c) base pros base prospectus ctus (art. 8) d) d) simpl simplified prospec d prospectus for secondary issuances us for secondary issuances e) e) EU Growth pros EU Growth prospectus ctus f) f) whole wholesale prosp prospectus for non-eq us for non-equity secur securities,



A self-contained part of prospectus that should be read together with other parts which should be a useful source of info for investors, mainly retail



Nature and risks of



issuer & guarantor



Securities

• focus on key info that investors need in order to be able to decide.

 convey the essential characteristics of, and risks associated with, the issuer, any guarantor, and the securities offered or admitted to trading on a regulated market.

• provide the general terms and conditions of the offer



4 sections: 4 sections:

 Warnings  Info on issuer  Info on securities  Info on offer or admission



Maximum lenghts: 7 sides of A4



FORM: easy to read in format and style



Where a KID is required under PRIIPs Regulation, it may replace the content of summary under PR

• package retail and insurance-based investment products



From rationale comes the derogation: no summary for listing prospectus

• f non-equity securities if:
• Only to be traded on a regulated mkt only for qualified investori
• Denomination per unit > 100,000 (per public offer prospectus these are exempt)



Issuers whose securities are admitted to trading on:

• regulated markets or
• MTFs



Option to publish every financial year a univ universal al r regi gistrati tion

• n document

document (URD) (URD) containing info on the issuer for that financial year.



Similar to US Shelf registration egistration:

• Enable the issuer to keep the information up-to-date and draw up a prospectus by adding only a

securities note securities note and a summar summary.

• when market conditions become favorable for an offer or an admission to trading issuer should be

deemed to be a fre frequent issuer uent issuer as from the moment when the issuer submits URD for approval to the competent authority.



Fast track Fast track for approval if NCA pre-allerted (main content already known):

• 5 days



Approval of URD for 2 consecutive years, considered well known to NCA:

• filing without ex ante approval,
• nly
• nly ex post

ex post review review

• loose after 1 year without filing



As long as it has not become a constituent part of an approved prospectus: possibility of amendment

• Voluntariry (i.e. a material change in the organisation or financial situation of the issuer )
• Upon request NCA (during ex post review)



URD content: disclosure standards are based on those for equity securities:

• EU Growth prospectus
• Specific disclosure regime for secondary issues
• wholesale prospectus for non-equity securities

 Option only for issuer of:

• non equity securities (already existed for this)
• warrants

 BP

BP + Final Final terms: erms: contain same info of standard prospectus

 BP: everything but terms not known at the time of drawing

up

 Final

Final terms erms:

• only info relating to securities note specific of the issue:

 ISIN no.  Price  Maturity date  Coupon  Exercise date  Exercise price  Redemption price  Other terms not known at the time of drawing up of BP

• When not in the BP, no approval by NCA only filing



Once a class of securities is admitted to trading on a regulated market, investors are provided with ongoing disclosures by the issuer under MAR+TD



The need for a full prospectus is less acute

• At least 18 months of trading



Info presented in an easily analysable, concise and comprehensible form



SP content is alleviated, taking into account the information already disclosed:



EC dele EC delegate gated acts d acts in accordance with Article 44 to supplement this Regulation by setting out the schedule schedules specifying the reduced information, which shall include in particular:

• (a) the annual and half-yearly financial information published over the 12 months

prior to the approval of the prospectus;

• (b) where applicable, profit forecasts and estimates;
• (c) a concise summary of the relevant information disclosed under Regulation (EU) No

596/2014 over the 12 months prior to the approval of the prospectus; (d) risk factors;

• (e) for equity securities, the working capital statement, the statement of

capitalisation and indebtedness, a disclosure of relevant conflicts of interest and related-party transactions, major shareholders and, where applicable, pro forma financial information.

 “… in order to encourage the use of capital

market financing by SMEs, this Regulation should ensure that special consideration is given to SME growth markets, which are a promising tool to allow smaller, growing companies to raise

• capital. The success of such venues depends,

however, on their ability to cater for the financing needs of growing SMEs…. Therefore, it is appropriate that this Regulation establishes a specific proportionate EU Growth prospectus regime which is available to such companies. A proper balance should be struck between cost- efficient access to financial markets and investor protection ” (recital 51)

 SMEs  MID Caps  Reduced info required  Proportionate disclosure  a document of a standardised format, written in a simple

language and which is easy for issuers to complete.

 It shall consist of:

• specific summary based on Article 7,
• specific registration document and
• specific securities note.

 The information in the EU Growth prospectus shall be

presented in a standardised sequence in accordance with the delegated act referred to in paragraph 2

 Content left to RTS by the EC  Mandate to ESMA



The risk factors featured in a prospectus shall be limited to risks which are specific to the issuer and/or to the securities and which are material for taking an informed investment decision, as corroborated by the content of the registration document and the securities note.



When drawing up the prospectus, the issuer, the offeror or the person asking for admission to trading on a regulated market shall assess the materiality of the risk factors based on the probability of their

• ccurrence and the expected magnitude of their negative impact.



Each risk factor shall be adequately described, explaining how it affects the issuer or the securities being offered or to be admitted to trading. The assessment of the materiality of the risk factors provided for in the second subparagraph may also be disclosed by using a qualitative scale

• f low, medium or high.



The risk factors shall be presented in a limited number of categories depending on their nature. In each category the most material risk factors shall be mentioned first according to the assessment provided for in the second subparagraph.

 A prospectus shall not be published unless the

relevant competent authority has approved it,

 NCA shall notify issuer/offeror

notify issuer/offeror /person asking for admission of its decision decision regarding the approval of the prospectus within 10 within 10 working working days days of the submission of the draft prospectus.

 extended to 20 workin

20 working days g days where the offer to the public involves non listed securities for the first offer to the public

 Reduced to 5 working

5 working days days in case of a URD

 NO silence = approval  NCA shall notify ESMA of the approval

approval of the prospectus ASAP.

• The issuer, offeror or any guarantor, as applicable, or the persons

responsible for the information contained in the prospectus, shall be liable, each in relation to the extent of their own duties, for damages caused to the investor placing reasonable faith in the truth and accuracy

• f information contained in the prospectus, unless it is proved that all due

diligence was adopted for the purpose of guaranteeing that the information in question complied with the facts and that no information was omitted that could have altered the sense thereof.

• The intermediary responsible for placement shall be liable for false

information or omissions that could influence the reasoned decisions of an investor, unless said intermediary proves that all due diligence was adopted pursuant to the previous subsection.

• False with special purposes can lead to a criminal sanction
• Any person who, with a view to obtaining an undue profit for himself or

for others, in prospectuses required for public offerings or for admission to trading on regulated markets, with the intention of deceiving the recipients of the prospectus, includes false information or conceals data or news in a way that is likely to mislead such recipients, shall be punished by imprisonment for between one and five years

• The breach of the general obligation to publish prospectuses can lead to

an administrative sanction up to 5 million Euros

• The breach of rules concerning the content and other rules issued by

Consob can lead to an administrative sanction up to 750.000 euros

• Sometimes the sanction can be applied to directors or officers working for

the company issuing or offering securities (violations of personal duties with serious effects on firms, risks, investor protection or integrity and fairness of the market – art. 190 –bis Italian Consolidated Law)

• Consob can suspend or inhibit offers in course

without prospect or breaching rules on fairness and disclosure during public offers