The European Securities and Markets Authority (“ESMA”) has published its final reports on the Prospectus Regulation (the “Regulation”) and civil prospectus liability. Together, these reports aim to facilitate capital market activity by reducing regulatory burdens, following a detailed review of feedback and evidence collected through public consultations.
Key elements of the Regulation report include:
If implemented, these changes would substantially ease compliance for issuers, notably by simplifying the prospectus format and reducing historical financial data requirements, reducing them from three to two years for equity offerings and from two to one year for debt instruments. This would expedite preparation and approval, facilitating quicker access to capital markets, especially for Small to Medium-sized Enterprises (“SMEs”) and frequent debt issuers. Investors would benefit from clearer, more comparable disclosures, including enhanced ESG-related content. For regulators, the integration of structured, machine-readable metadata and alignment with the ESAP would support more efficient and automated supervision across the EU.
ESMA has submitted its recommendations to the European Commission (“EC”), which must decide on the proposed data reporting requirements within three months, with the option to extend the decision period by an additional month.
The civil liability report confirms that the existing fault-based framework under Article 11 of the Prospectus Regulation is, overall, functioning effectively. Stakeholder feedback indicated no urgent need for reform. ESMA’s advice reaffirms this position and updates its 2013 guidance on civil liability. While the proposals explore the possibility of introducing a safe harbour for forward-looking statements, potentially encouraging more transparent disclosures, they fall short of recommending harmonisation of core liability standards.
As a result, significant divergences across Member States in terms of fault thresholds, limitation periods, and scope of responsibility will remain. ESMA does, however, recommend clarifying applicable law in cross-border disputes, potentially through amendments to the Rome I and II Regulations, which could alleviate some legal uncertainty.
The EC is expected to prepare a report for the European Parliament and the Council by the end of 2025. This will assess the existing liability framework for prospectus disclosures and evaluate the need for further harmonisation to enhance accountability and investor protection across the EU.
For any further information or assistance, please contact us at info@gtg.com.mt
Author: Dr Neil Gauci