Prospectus & Transparency Directives

As will be known (see Regulatory Roundups 28 & 32) HM Treasury issued a consultation on the early implementation of certain changes brought about by a revision of the Prospectus Directive (and the Transparency Directive). For the record, the changes derived from Amending Directive 2010/73/EU which came into force on 31 December 2010; Member States have until 1 July 2012 to implement the Directive.

The two measures that were implemented earlier than required (on 31 July 2011 as opposed to the date mentioned above) were the increase in the investor threshold before a prospectus is required from 100 to 150 investors and raising the total size of an offer before the offer falls within the scope of the prospectus regime from €2.5M to €5M. The reason for the early introduction was the Government’s belief that these measures would help small companies to access capital markets more easily.

A joint HM Treasury and FSA consultation has been released (CP11/28) with the purpose of bringing about the remaining amendments arising from 2010/73/EU (please note, there may be some technical issues with the link to the Amending Directive provided as it does not seem to be supported by all web platforms. If you cannot access the document using the link please copy and paste the following address into your web browser:

Although the changes to the investor and offer size thresholds was a relaxing of, the then, lower limits, some stricter thresholds are to be introduced. The amount of capital that a single investor must provide – if an issuer wishes to take advantage of the exemption from having to provide a prospectus – increases from €50K to €100K. This comes about following concerns that the lower limit may be attracting retail investors (on the matter of investor categorisation the definition of ‘qualified investors’ will be changed to include professional clients and eligible counterparties). As a result of this increase, a security’s minimum denomination doubles to €100K. There is a similar increase for offers of non-equity securities.

Appendix 1 of CP11/28 contains the draft FSMA Regulations whilst Appendix 3 contains the draft changes to the Prospectus Rules sourcebook (PR); the Disclosure Rules and Transparency Rules sourcebook (chapters 4 & 6 only) (DTR); and to the Listing Rules sourcebook (LR).

The consultation period ends 13 March 2012.

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