ESMA Guidelines on risk factors
Pursuant to Article 16 (4) of Regulation (EU) 2017/1129 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market (the "Prospectus Regulation"), ESMA was mandated to develop guidelines to assist competent authorities in their review of the specificity and materiality of risk factors included in prospectuses and the presentation of the risk factors across categories depending on their nature.
On 1 October 2019, ESMA published the required guidelines (the "Guidelines").
The Guidelines provide guidance to competent authorities by recommending how they should query and/or challenge the persons responsible for drawing up the prospectus in respect of the following:
- Consistency in risk factor disclosure in the summary;
- Conciseness of the risk factor disclosure;
- Presentation of risk factors across categories based on their nature;
- Corroboration of the specificity and materiality of the risk factor with the overall picture presented in the prospectus;
- Materiality of the risk factor;
- Specificity of the risk factor to the issuer/guarantor or securities.
For illustrative purposes ESMA has included in Appendix I to the Guidelines some practical examples showing how the specificity of a risk factor can be demonstrated, how both the specificity and materiality of a risk factor can be demonstrated together and providing an example of mitigating language.
The Guidelines apply from 4 December 2019. The national competent authorities of Luxembourg and all other Member States of the EEA, except Hungary and Iceland, have notified ESMA that they comply with the Guidelines. Hungary and Iceland have confirmed their intention to comply.
Updated ESMA Q&A
Since our last newsletter, ESMA updated its Q&As relating to the Prospectus Regulation on 4 December 2019 with two new Q&As.
Firstly, with respect to Article 8(8) of the Prospectus Regulation, ESMA has confirmed that it is not permitted to include a pro-forma summary in a base prospectus unless the final terms are included in the base prospectus or supplement and the issue specific summary is annexed thereto.
Secondly, in a scenario where the securities which are being offered to the public or admitted to trading are of a type not covered by the annexes to the Prospectus Regulation and the persons responsible for drawing up the prospectus are therefore uncertain as to which annexes are most appropriate to use, ESMA urges persons to contact the relevant competent authority for confirmation.
Share on
