This content is from: Local Insights

Onselling to retail investors

A new Article 100-bis has been introduced to Legislative Decree 58 of February 24 1998 (the Financial Services Act) to regulate the circulation of financial instruments, initially subscribed by institutional investors, to retail investors (pursuant to Article 100(1)(a) of the Financial Services Act).

Article 100-bis establishes that if institutional investors resell financial instruments in Italy to non-institutional investors, they remain liable for the solvency of the issuer for one year from the issue date. This applies even if the non-institutional investor made the purchase request to the intermediary directly, unless the intermediary gives the non-institutional investor a document containing specific information on the financial instruments as required by Consob.

In respect of financial instruments initially subscribed by institutional investors and so not accompanied by a prospectus, the institutional investors may:

  • resell the financial instruments to other institutional investors;
  • keep the financial instruments in the portfolio for one year (the holding period) before onselling to retail.

Or, if they decide to transfer the financial instruments to retail during the holding period they would be required to:

  • guarantee the solvency of the issuer; or
  • deliver a specific information document to non-institutional investors.

Consob has recently cleared the extent of the rule and specified the kind of information that the document delivered to non-institutional investors must contain.

Particularly, this provision applies to transfers of financial instruments to non-institutional investors entered into before Article 100-bis enters into force, even if the issue has already taken place.

The guarantee of the issuer's solvency (or the intermediary's obligation to deliver the required document to non-institutional investors) does not extend throughout the entire life of the financial instrument but is limited to the holding period.

The liability toward the non-institutional investors extends to any intermediary through which the retail investor has closed the purchase of the financial instruments.

Article 100-bis does not apply, however, in respect of public offerings: a) of an aggregate amount not exceeding €2.5 million, calculated over 12 months (as stated in Article 33 of Consob Regulation 11971 of May 14 1999 as amended from time to time); b) that have as their object financial instruments issued or guaranteed by the Italian government or an EU member state or issued by international organizations of a public nature of which one or more EU member states are part; c) that have as their object financial instruments issued by the European Central Bank or the national central banks of the EU member states.

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