A European screening exercise of prospectus approvals that involved Luxembourg’s financial supervisor CSSF has concluded that EU regulators need to be more efficient in their assessments and that more clarity needs to be provided on the use of “additional criteria” that national supervisors apply.
Publishing the results of its peer review on the scrutiny and approval of prospectuses, the European Securities and Markets Authority Esma on Thursday described its overall findings as “satisfactory”. The review assessed the impact of different approaches regarding scrutiny and approval by competent authorities on issuers’ ability to raise capital in the EU.
“The publication of this peer review is a significant step to understanding how prospectus review processes impact on issuers’ ability to raise capital in the European Union,” said Esma chair Verena Ross (pictured).
Publishing a prospectuses is considered a critical step for companies looking to raise capital in Europe’s financial markets. Before it can be shared with potential investors, a prospectus need to comply with regulatory requirements and is subject to a green light from the respective national financial regulator. Only then a company can go out and start convincing investors to buy its new shares.
‘Important recommendations’
Esma’s review “sets out important recommendations… and for supervisory convergence initiatives directed to both Esma and the European Commission, that aim at reinforcing and enhancing the scrutiny and approval of prospectuses. Acting on these recommendations will lead to better outcomes for both issuers and investors in the EU.”
Esma’s review concluded that the notion of “additional criteria” applied during the scrutiny process “lacks clarity”, a point which the European Commission is invited to address. It also concluded that “there is scope for efficiency improvements” in respect of some approval processes, and that the liability regime in Italy “has a strong impact” on how Italian supervisor Consob scrutinises and approves prospectuses.
The peer review assessed all EU financial supervisors in the Esma community and involved onsite visits to the AMF (France), BaFin (Germany), CBI (Iceland), CONSOB (Italy), CSSF (Luxembourg), SFSA (Sweden) to gain a deeper understanding of how they scrutinise and approve prospectuses.