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Securities prospectus

EU rules on the information that must be provided by companies that want to attract investors, raise capital and finance their growth.

What is a prospectus?

Most companies that want to raise capital through public offers or have securities admitted to be traded on regulated markets need to provide investors with a prospectus.

A prospectus is a legal document that describes

  • a company's main line of business, its finances and shareholding structure
  • the securities that are being issued and/or admitted to trading

It contains the information an investor needs before making a decision whether to invest in the company's securities (such as shares, bonds, derivatives).

Prospectus Directive

The EU introduced rules on prospectus in 2003, with Directive 2003/71/EC. These rules underwent a major revision in 2010, with the adoption of amending Directive 2010/73/EU.

EU prospectus rules ensure that adequate and equivalent disclosure standards are in place in all EU countries so that investors can benefit from the same level of information. Under these rules, once a prospectus has been approved in one EU country, it is valid throughout the EU (single passport for the issuers).

The rules also ensure that minimum protection for investors is of the same standard across the EU.

Prospectus Regulation

In 2015 the European Commission conducted a consultation which identified shortcomings in the regime introduced by the prospectus directive. For companies, these rules constitute a lot of legal paperwork often running into hundreds of pages. This can be costly and burdensome for businesses, especially for smaller ones. The feedback also showed that it can be difficult for investors to wade through very detailed information.

As part of its capital markets union action plan, in June 2017 the EU adopted a Regulation (EU) 2017/1129 to improve the prospectus regime. The regulation aims to

  • make it easier and cheaper for smaller companies to access capital
  • introduce simplification and flexibility for all types of issuers, in particular for secondary issuances and frequent issuers which are already known to capital markets
  • improve prospectuses for investors by introducing a retail investor-friendly summary of key information, catering for the specific information and protection needs of investors

The new prospectus regime will ensure that appropriate rules cover the full life-cycle of companies from start-up until maturity as frequent issuers on regulated markets.