BREXIT | Prospectus Directive - Update of ESMA Q&A

ESMA published new Q&A (the “Q&A”) on Directive 2003/71/EC (the “Prospectus Directive”), to clarify various issues which may arise in relation to the implementation of the Prospectus Directive rules in case the UK withdraws from the EU without any withdrawal agreement in place (the so-called “Hard Brexit” scenario). In particular, these new Q&A deal with:

• the choice of a home Member State for third country issuers under the Prospectus Directive; and
• the use of prospectuses approved by the UK.

As regards the choice of a home Member State, ESMA explains that, for the issuers whose home Member State is currently the UK, the withdrawal of the UK from the EU will effectively reset the choice, at the time of the withdrawal. For the purposes of applying Article 2(1)(m)(iii) of the Prospectus Directive, the issuers concerned should choose between the 27 EU Member States and the three EEA EFTA States, namely Iceland, Liechtenstein and Norway, in which they have activities after the withdrawal. ESMA describes two practical scenarios for explanatory purposes.

As regards the use, following a Hard Brexit, of a prospectus approved by the FCA (as UK competent authority) prior to UK withdrawal:

• such prospectuses shall no longer be capable of being passported to the 27 EU Member States and the three EEA EFTA States;
• these FCA - approved prospectuses, if passported to an EU/EEA EFTA State before withdrawal, can no longer be supplemented; and
• those FCA -  approved prospectuses which have been passported to an EU/EEA EFTA State and need to be supplemented, can no longer be used for an offer to the public/admission to trading on a regulated market.

In the same context, ESMA explains how it sees the situation with FCA - approved prospectuses post a Hard Brexit, in four distinct scenarios:

1. The continuance of an offer to the public in an EU/EEA EFTA State – ESMA considers that it is unlikely to be possible; more likely the issuer will have to start a new offer once a prospectus is approved by the new home Member State.
2. The continued maintenance of an admission to trading on a regulated market – ESMA considers that the admission to trading will remain valid without the need for any new prospectus approval by the new home Member State.
3. The making of a new offer to the public – ESMA considers that a prospectus must be approved by the competent authority of the new home Member State.
4. The new admission to trading on a regulated market – ESMA considers that a prospectus must be approved by the competent authority of the new home Member State.

However, ESMA makes clear that the issuers concerned won’t necessarily have to draw up a new prospectus as they may be able to submit the FCA - approved prospectus to the new home Member State’s competent authority so long as it contains the necessary information.