First reaction to Esma Prospectus Directive paper

Author: | Published: 16 Jun 2011
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The European Securities and Markets Authority (Esma) has launched a Prospectus Directive consultation. The paper, released on June 15, is seeking comments on the technical advice it proposes to give the EC on delegated acts.

Esma is seeking comments by July 15. View the consultation paper here 

Much attention has centred on final terms. The consultation has requested a fully completed summary for the individual issue merged into the final terms

"I find this slightly worrying," said one source. He argued that the summary is the introduction to the base prospectus, intended only to help investors in their reading of it.

"The idea of separately completing the summary and adding it onto the final terms goes back to the short-form idea of simply ignoring the prospectus," he added.

The paper suggests other more onerous requirements regarding final terms, available to view here.

"All these things are small, incrementally, but they are turning what has been an efficient issuance mechanism into a more cumbersome one," said the source.

The source believed this could be exacerbated in the volatile, tighter listing windows of the current market, where issuers’ programs need to be perfect in order to launch quickly.

"The slightest thing being changed might mean an updated prospectus, which could throw them out of the issuance window. How would that impact funding?"

There are also problems surrounding the readability requirements of a prospectus. The more information included up front, the more it hits the readability requirement. Issuers will then have to break down their programmes into individual ones, which will add to costs.

In January the EC requested Esma to advise on possible delegated acts concerning the Prospectus Directive as amended by Directive 2010/73.

Esma has been asked to deliver its advice by September 30. But in an executive statement on its website, the regulator said it would deliver its advice on the areas also included in section 3.3 by September 30 ('Instructions in relation to the requirements of the securities note schedules and the building blocks’).

The regulator has asked those providing comments to indicate material concerns over the impact of the advice being considered.