EU Prospectus Research Articles

The EU prospectus regulation and its impact on SME listings

This study analyses the “regulatory overreach hypothesis”, which asserts regulatory complexity as the cause for the IPO decline in Western countries, by focusing on the novel EU growth prospectus for SMEs introduced by the Prospectus Regulation. Using a hand-collected database of initial offerings at EU exchanges (2016–2022), we find the EU growth prospectus successfully streamlined SME IPOs without jeopardising investor protection. Despite being less complex in terms of word counts, it remains informative. SMEs are more likely to use it unless the offering becomes relatively large. We do not substantiate that fixed listing costs were reduced. Using a triple difference analysis, we do not find robust evidence of an increase in IPO activity. While questioning the regulatory overreach hypothesis, our findings show that IPO regulation can be simplified and made less burdensome without curtailing investor protection.

A New Look on Cooperative Identity in the Light of the EU Prospectus Regulation and Blockchain-Based Public Equity Financing

Сooperative identity has distinct features which formed over a century ago. Legislation of many countries recognises the value of traditional cooperatives by providing them with special regulatory regimes, like tax exemptions. These exact features make cooperatives unattractive when it comes to competing with investor-owned companies for public equity capital. The article looks into the traditional cooperatives within the legal framework of raising public equity capital through the offer of blockchain-based tokens (crypto-assets). The analysis focuses on existing non-blockchain EU regulations, the EU Prospectus Regulation specifically. The study looks into the distinct features of the cooperative identity, analyses the specifics of prospectus regulations, and applies the criteria underlying the initial disclosure obligation when making a public offer to sell equity-based blockchain tokens by cooperatives. The article concludes that complying with the traditional cooperative identity allows entities to access public equity financing using crypto-assets without publishing a prospectus under the Prospectus Regulation. This conclusion is only a first step in analysing the cooperative identity changes when membership is offered in transferable blockchain tokens. Blockchain, cooperative principles, Prospectus, public equity, investment, cooperative rebates, ICOs, MiCA, securities, information asymmetry

The EU Prospectus Regulation and its Impact on SME Listings

The EU Prospectus Regulation and its Impact on SME Listings

A new look on cooperative identity in the light of the EU Prospectus Regulation and blockchain-based public equity financing

Сooperative identity has distinct features which formed over a century ago. Legislation of many countries recognises the value of traditional cooperatives by providing them with special regulatory regimes, like tax exemptions. These exact features make cooperatives unattractive when it comes to competing with investor-owned companies for public equity capital. The article looks into the opportunity for cooperatives to have competitive conditions in raising public equity capital through the offer of blockchain-based tokens. The analysis focuses on existing non-blockchain EU regulations, the EU Prospectus Regulation specifically. The study looks into the distinct features of the cooperative identity, analyses the specifics of prospectus regulations, and applies the criteria underlying the initial disclosure obligation when making a public offer to sell equity-based blockchain tokens by cooperatives. The article concludes that the Prospectus Regulation allows cooperatives that follow the traditional identity to access public equity financing using blockchain tokens without the need to publish a prospectus. This conclusion is only a first step in analysing the cooperative identity changes when membership is offered in transferable blockchain tokens.

The influence of the EU prospectus rules on private law

The influence of the EU prospectus rules on private law

The Contents of the Prospectus: Rules for Financial Information

In keeping with the Prospectus Regulation’s aim of providing investors with any necessary information that is material for making an informed assessment of, among other things, the assets and liabilities, profits and losses, financial position, and prospects of the issuer, financial information is a key element of the prospectus information package. Hence, although under EU law the content and the format of a prospectus both depend on a variety of factors, such as the type of issuer, security and issuance, the prospectus must always provide detailed information concerning the issuers’ assets and liabilities, financial position and profits or losses. Against this backdrop, and with a view to developing a comprehensive analysis of the rules for financial information set out by the EU prospectus regime, I divide this Chapter as follows: Part II provides an overview of relevant rules concerning the financial information that must be included in the prospectus; Part III examines historical financial information; Part IV deals with some specific issues concerning pro forma financial information; finally, Part V analyses the definition of profit forecasts and estimates along with related audit and disclosure requirements. Part VI sets out some concluding remarks.

Initial Coin Offerings and EU Prospectus Disclosure

There is a growing consensus among regulators and commentators that some cryptocurrencies (so-called ‘investment tokens’) are securities, provided that they grant their owner rights that are comparable to those of an investor. As a consequence, EU initial disclosure regulation applies, requiring the issuer to draw up a prospectus that contains all the information relevant for an investor to make an informed decision. Issuers of investment tokens are also subject to prospectus liability if the prospectus is flawed or no prospectus was made available at all. However, this conclusion is only the first step of the wider debate of the best regulation of investment tokens, and many questions remain. The elephant in the room is whether the current regulation can be sensibly applied to public offers of investment tokens. This article discusses open questions in this regard, such as which national regulator is responsible for prospectus review and administrative measures? How can issuers from outside the EU ensure they do not become subject to the EU initial disclosure obligations? Who would the ‘issuer’ be if the tokens were offered by a decentralised network? The article concludes that EU initial disclosure regulation can be sensibly applied to initial coin offerings. However, the fact that supervision and enforcement are currently carried out on the national level poses serious problems that should be addressed in the future. Initial coin offering, ICO, security token offering, STO, cryptocurrency, crypto token, crypto asset, prospectus, investment token, security token

Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law

Cryptocurrencies, such as bitcoin and ethereum, have not only risen to public attention as novel means of payments, but also as facilitators of initial coin offerings (ICOs, also called token sales). In these entirely online-mediated offerings, entrepreneurs sell tokens registered on a blockchain in exchange for cryptocoins. Buyers receive tokens that can be understood as cryptographically-secured coupons which embody a bundle of rights and obligations. In July 2017, the SEC released an investigative report that highlighted that such tokens can be subject to the full scope of US securities regulation. It is unclear, however, to what extent EU securities regulation is applicable to ICOs and, particularly, whether issuers have to publish and register a prospectus in order to avoid criminal and civil prospectus liability in the EU. In conceptual terms, this depends on whether tokens are considered “securities” under the EU prospectus regulation regime. Against this background, this paper develops a nuanced approach that distinguishes between three archetypes of tokens: currency, investment, and utility tokens. It analyzes the differential implications of each of these types, and their hybrid forms, for EU securities regulation, and develops policy proposals for their regulation.

Crypto-Securities Regulation: ICOs, Token Sales and Cryptocurrencies under EU Financial Law

Cryptocurrencies, such as bitcoin and ethereum, have not only risen to public attention as novel means of payments. Rather, the current hype is fueled by financial applications built on top of these currencies that stand to potentially upend consumer and investment markets. The most remarkable and economically relevant of these applications are tokens sold via initial coin offerings (ICOs, also called token sales). In 2017 alone, the equivalent of about $5 billion have been raised through ICOs, and in the first quarter of 2018 already more than $6 billion. In these entirely online-mediated offerings, startup entrepreneurs sell tokens registered on a blockchain in exchange for cryptocoins traded on that blockchain (typically bitcoins or ethers). Investors receive tokens that can be understood as cryptographically-secured coupons which embody a bundle of rights and obligations. In July 2017, the SEC released an investigative report that highlighted that such tokens can be subject to the full scope of US securities regulation. As a result, issuers increasingly structure ICOs such as to prevent US citizens and residents from obtaining tokens in order to exclude the reach of US securities regulation. However, for the time being, EU citizens and residents are free to invest in tokens. This raises the question to what extent EU securities regulation is applicable to ICOs and, particularly, whether issuers have to publish and register a prospectus in order to avoid criminal and civil prospectus liability in the EU. In conceptual terms, this depends on whether tokens are considered “securities” under the EU prospectus regulation regime. The question is of great practical relevance since, despite the high stakes involving several $100 million in some ICOs, to our knowledge, up to now not a single token issuer has published or registered any such prospectus. Against this background, this paper develops a nuanced approach that distinguishes between three archetypes of tokens: currency, investment, and utility tokens. It analyzes the differential implications of each of these types, and their hybrid forms, for EU securities regulation. While the variety of tokens offered necessitates a case-by-case analysis, the discussion reveals that at least some types and hybrid forms of tokens are subject to EU securities regulation. By and large, pure investment tokens typically must be considered securities, while pure currency and utility tokens are exempted from securities regulation in the EU. In identifying these archetypes, regulation and market oversight will have to put substance over form. Finally, we spell out criteria for the application of EU securities regulation to hybrid token types. The paper closes by offering two policy proposals to mitigate legal uncertainty concerning token sales. First, we suggest tailoring disclosure requirements to the code-driven nature of token sales. Such an ICO-specific safe harbor would offer a clear and less burdensome path to EU law compliance for token sellers who suspect that their tokens may qualify as securities. This only requires the Commission to amend its delegated 2004 Commission Prospectus Regulation. Second, we propose that, on an international level, governments form a compact to bestow certainty about the application of their respective securities regulation regimes to token sales. This is, first, to avoid regulatory overkill on the one and regulatory lacunae on the other hand in online-mediated, global token sales. Second, overlapping, and partially contradicting, securities regulation regimes can even undermine each other. In the end, only a joint international regulatory regime can efficiently balance investor protection and investor access in the face of the novel generation of decentralized blockchain applications.

Reforming EU securities laws: the new EU Prospectus Regulation

PurposeTo analyse the changes brought about by the new EU Prospectus Regulation, which replaced the EU Prospectus Directive, which has been the cornerstone of EU securities regulation for over a decade. The Regulation is part of the EU Commission’s plans for a Capital Markets Union launched in September 2015, which is intended to achieve a true single market for capital across the EU and allow companies to access the capital markets in a more cost efficient way.Design/methodology/approachThis article discusses the key changes to the European prospectus regime included in the new EU Prospectus Regulation and highlights the changes compared to the old prospectus regime.FindingsThe new Prospectus Regulation will change current prospectus rules and practice for both equity and debt issuances in several areas and will contribute to a more uniform European prospectus regime. For EU Member States, the format of a regulation (rather than directive) that the new Prospectus Regulation has taken means that there will be much less room for divergence of prospectus rules across its member states. The Regulation’s success in making EU capital markets more uniform will depend to a great extent on whether the application of the new rules by member states’ regulators will be more consistent.Originality/valueKey EU securities law changes are explained by an experienced EU and US securities lawyer practising in London.

Cross-border public offering of securities in fostering an integrated ASEAN securities market: the experiences of Singapore, Malaysia and Thailand

In 2015, the ASEAN Economic Community was formally established and its aim was to achieve, among other things, an integrated securities market within ASEAN. Prior to the formal establishment of the ASEAN Economic Community, in 2009, with a view towards achieving the objective of securities integration, Singapore, Malaysia and Thailand adopted the ASEAN Disclosure Standards, a set of harmonised disclosure standards for issuers making cross-border initial public offerings (‘IPOs’). These participating member states also entered into a framework for the expedited review for cross-listings. However, more than five years later, there is no documented use of the ASEAN Disclosure Standards; cross-border IPOs and cross-listings remain rare. This paper is a study of cross-border IPOs of issuers in, and cross-listings within, the participating member states during the 2010-2014 period, with a view to obtaining insights on how issuers access capital markets. These insights are relevant to the broader questions about the long-term viability of ASEAN’s regulatory policies of promoting integration through harmonisation of minimum standards along with limited mutual recognition. This paper compares the ASEAN approach with the EU Prospectus Directive and the Trans-Tasman Mutual Offering Framework. This paper argues that to move to a truly pan-ASEAN equity offering, there needs to be, at a minimum, a greater supervisory and enforcement convergence.

EU Prospectus Regulation: Some Out-of-the-Box Thinking

One of the core initiatives of the European Commission’s plan for a Capital Markets Union is its proposal to replace the existing legal framework for public offerings with a new regulation. The new regulation would bring some incremental changes to the existing framework, mainly in the direction of: (a) lowering the burdens for issuers (via broader exemptions for secondary offerings, an attempt to increase the use of shelf registration, and simplified prospectuses for small issuers); and (b) making prospectuses more retail investor-friendly (via shorter summaries and limits on the use of risk factors).

EU Prospectus Regulation: Some Out-of-the-Box Thinking

One of the core initiatives of the European Commission’s plan for a Capital Markets Union is its proposal to replace the existing legal framework for public offerings with a new regulation. The new regulation would bring some incremental changes to the existing framework, mainly in the direction of: (a) lowering the burdens for issuers (via broader exemptions for secondary offerings, an attempt to increase the use of shelf registration, and simplified prospectuses for small issuers); and (b) making prospectuses more retail investor-friendly (via shorter summaries and limits on the use of risk factors).

Initial Public Offering: The EU Prospectus Regime

Offering shares for the first time to third-party investors is probably one of the most important decisions that can be made during the life of a company. There are a variety of reasons for listing a company in an initial public offer on regulated markets, but these generally come down to two reasons: wish of the company to raise additional equity capital, and selling stakes in the business. Becoming a public company can bring many advantages, but also is costly exercise because involves services of accountants, underwriters, additional disclosure requirements and regulatory compliance. The most important task facing the initial public offer is development of prospectus, a document that basically serves as a brochure for the company. The prospectus obligations within Europe are the subject matter of a specific piece of legislation – Prospectus Directive.

The revised EU Prospectus Regulation: key changes to the contents of prospectuses

This article discusses significant changes to the disclosure regime for prospectuses in the EU. These stem from amendments to the EU Prospectus Regulation that had to be made as a result of the amendments to the EU Prospectus Directive. The changes to the Prospectus Regulation are set out in two delegated regulations of the EU Commission, one of which entered into force on 1 July 2012, covering significant changes to the format and content of prospectuses, the summary and final terms, and introducing a proportionate disclosure regime for certain rights issues and offerings of small and medium-sized enterprises and companies with reduced market capitalisation. A further regulation is pending, covering changes in relation to consents to be given in the context of retail cascades and the requirement for an auditor's report for inclusion of profit forecasts and estimates. A consultation in relation to convertible and exchangeable securities is also pending that will result in further changes to the Prospectus Regulation.

Prospectus Directive amendments – discussion of key changes

This article discusses key changes to the EU Prospectus Directive which were approved by the EU Parliament on 17 June 2010, as well as areas for future improvement. The changes will have a number of practical implications for issuers, although a number of key amendments still require further implementing legislation. The most important areas covered in the Amending Directive include changes to the summary of the prospectus, a new reduced disclosure regime for rights offerings and changes to the withdrawal rights in connection with prospectus supplements. In addition, a number of changes have been made to the offer and admission exemptions, including an increase of wholesale debt denominations, which will necessitate adjustments for offerings even before the deadline for implementation of the amending directive.

The regulation of private placements in France

PurposeThe purpose of this paper is to explain a recently adopted Ordinance (the “Reform Act”) and amendments to the General Regulation of the Autorité des Marchés Financiers (AMF) intended to improve the competitiveness of the French financial market and to harmonize the French regulatory definition of a public offering with the European Union definition under the Prospectus Directive.Design/methodology/approachThe paper explains requirements of the European Union Prospectus Directive, related provisions of the French Reform Act, and certain clarifications provided by the Committee of European Securities Regulators (CESR); discusses the scope of the private placement exemption in France, including definitions of “qualified investors” and a “restricted group of investors”; explains the role of financial intermediaries and how their marketing activities must be structured to avoid losing the benefits of the private placement exemption; interprets loosely defined AMF policies on the resale of securities under the private placement exemption; details exemptions for investment service providers providing asset management for third parties and for “local” offerings; and explains limitations on the private placement exemption posed by the French public offering rules.FindingsFrance has recently amended its public offering regime to further harmonize it with the Prospectus Directive and make the French financial market more attractive to foreign issuers. Additional amendments to the EU Prospectus Directive are expected, which will result in further changes to French private placement regulation.Originality/valueThe paper provides practical guidance from experienced corporate and securities lawyers.

Disclosure practices under the EU Prospectus Directive and the role of CESR

Disclosure practices under the EU Prospectus Directive and the role of CESR

The pan-European retail market are we there yet?

The EU Prospectus Directive1 (the ‘PD’) was introduced in late 2003 amid a flurry of optimism and expectation that it would finally lead to the long awaited pan-EEA retail capital market. For many years, Europeans had cast envious eyes at the liquidity and depth of the securities markets in the U.S.A. Although the USA has the benefit of a common language, the enlarged EEA would have a greater population and with a single harmonized regime, the hope was that the EEA would be able to create a retail market with a depth and liquidity to rival or indeed surpass that of the USA. For many decades, the EEA had enjoyed the benefits of a relatively straightforward and seamless wholesale market. Securities had been sold across borders within the EEA with a minimum of inconvenience from differing laws and regulations, thanks to exemptions permitting such dealings with professional investors...

The implementation of the EU Prospectus Directive - a country-by-country analysis

The implementation of the EU Prospectus Directive - a country-by-country analysis