EUROPE: New Securities Prospectus Legislation

Wednesday August 8 2018

Prospectuses will no longer be required in future for offers of securities to the public with a total consideration in the European Economic Area (EEA) of less than EUR 8 million. Instead, it will suffice to draw up a considerably shorter securities information sheet (Wertpapier-Informationsblatt – WIB), file it with the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) and publish it.

This is a central element of the new law exercising the options of the EU Prospectus Regulation and adapting other financial market legislation, with which German legislators have taken advantage of the liberalisation option provided for in the Regulation. Most provisions of the law entered into force on 21 July 2018.

Prospectus Regulation

The EU Prospectus Regulation sets the threshold for the obligation to draw up a prospectus for offers of securities to the public at a total consideration of EUR 1 million. It offers Member States two options: below that threshold, they can lay down other proportionate disclosure requirements at national level and not require a prospectus. It also gives Member States the option of fully exempting offers of securities to the public not exceeding EUR 8 million from the obligation to publish a prospectus. Notification is of course not possible in either case.

Use of the options in Germany

In Germany, in particular an amendment to the WpPG takes advantage of both options to the extent that issuers offering securities to the public with a total consideration of between EUR 100,000 and less than EUR 8 million must draw up, file and publish a WIB instead of a prospectus (see the “New requirements for issuers” table). Offers of securities up to a total consideration of less than EUR 100,000 are prospectus and WIB-exempt. Thresholds are to be calculated over a period of 12 months in both cases.

By raising the prospectus obligation threshold to EUR 8 million, legislators have ensured considerable liberalisation in order to promote Germany’s capital market.

Approval procedure and WIB content

The WIB is intended to serve investors as a source of information for their investment decisions. It may not be published until BaFin has granted approval. The approval procedure largely corresponds to that of the capital investments information sheet stipulated in the VermAnlG.

The WIB may comprise no more than three pages and must clearly state the key information on securities, offerors, issuers and any guarantors in an easily comprehensible manner; the details and sequence are prescribed. Section 3a (3) sentence 2 of the WpPG(WpPG-E – only available in German) (see info box “Legal Background”) contains a longer, albeit non-exhaustive, list of requirements. The WIB must also contain a warning to the effect that acquisition of the security involves considerable risks and can result in the total loss of the capital invested. It must also include a note stating that no prospectus approved by BaFin has been filed, as well as other information.

The WIB is to be kept up to date and/or corrected, if necessary, for the duration of the public offer. The updated version is also to be filed with BaFin and published, although no new BaFin approval is required. Offerors should not be burdened with recurring approval costs.

Click on the above link for further information.