Council of the European Union Adopts Amendments to Prospectus Directive

The amendments to the Prospectus Directive aim to address deficiencies in the existing legal framework relating to securities prospectuses with a view of improving legal clarity and reducing burdens for issuers and intermediaries, while at the same time enhancing investor protection.

On 11 October 2010, the Council of the European Union adopted a new directive amending the Prospectus Directive 2003/71/EC and the Transparency Directive 2004/109/EC. The new directive is expected to be published in the Official Journal of the European Union shortly and has to be implemented by Member States into their national law within 18 months of the 20th day following publication in the Official Journal.

Key amendments

Key changes proposed by the new directive relate to the following:

Form of summary of prospectus

The form of the prospectus summary will be further harmonized as to format and content. This shall facilitate comparability of summaries of similar products. The summary shall serve as the key source of information for retail investors. It shall, in a concise and non-technical language provide key information on the following: (i) a short description of the risks associated with and essential characteristics of the issuer or any guarantor, (ii) a short description of the risks associated with and essential characteristics of the securities, (iii) the general terms of the offer including expenses charged to the investor, (iv) details of the admission to trading and (v) reasons for the offer and use of proceeds.

Prospectus exemptions

Certain exemptions from the obligation to publish a prospectus shall be modified. Most notably, thresholds are increased and the qualified investor definition shall be aligned to the MiFID professional client / eligible counterparty concept:

offers made to fewer than 150 persons (formerly: 100 persons) per Member State are exempt; offers made to investors who acquire securities for a total consideration of at least EUR 100.000 (formerly: EUR 50.000) are exempt; offers to acquire securities with a denomination of at least EUR 100.000 per unit (formerly: EUR 50.000) are exempt; offers made to qualified investor are exempt whereby the exemption now relates to the qualification of professional clients or eligible counterparties under MiFID. The amended directive further extends the prospectus exemption for employee securities offers to offers by affiliated companies of the employer company. The exemption shall also apply...

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