Communication no. 7/2020 of 9 July 2020

Subject: Criteria for the scrutiny of the prospectus by Consob within the framework of the rules set out in EU Regulation no. 1129/2017 and the EU Commission's Delegated Regulation no. 980/2019

1. The new regulatory framework on the scrutiny of the prospectus

As from 21 July 2019, the new European rules on prospectuses set forth in EU Regulation no. 1129/2017 of 14 June 2017 (hereinafter the "Prospectus Regulation")[1] and in the EU Commission Delegated Regulation no. 980/2019 of 14 March 2019 (hereinafter the "Delegated Regulation"), issued pursuant to article 44 of the Prospectus Regulation[2], shall be fully applicable in the legal systems of the Member States of the European Union.

The Prospectus Regulation and the Delegated Regulation contain rules on the scrutiny that the competent national authorities (hereinafter also ACN) are called upon to carry out for the purpose of approving offer prospectuses or admission to securities trading, with the aim of harmonising the scrutiny criteria at European level and proceeding to optimise them[3].

The Prospectus Regulation defines the approval of the prospectus as "the positive act upon completion of the scrutiny, by the competent authority of the home Member State, of the completeness, consistency and comprehensibility of the information provided in the prospectus" (article 2, paragraph 1, letter r of the Prospectus Regulation).

By virtue of the legislative delegation contained in the Prospectus Regulation (Article 20, paragraph 11), the Delegated Regulation specifies the criteria for the scrutiny of the completeness (article 36), comprehensibility (article 37) and consistency (article 38) of the information provided in the prospectus.

The Delegated Regulation also provides that "If necessary for investor protection, the competent authority may apply additional criteria to those set out in articles 36, 37 and 38 for the purposes of scrutinising the completeness, comprehensibility and consistency of the information contained in the draft prospectus" (article 40).

The Delegated Regulation also contains provisions aimed at allowing the ACN to carry out an activity of proportional scrutiny in the presence of information already subject to scrutiny or review by the same authority (art. 41).

The objectives of simplification and clarity, underlying numerous provisions of the Prospectus Regulation and the Delegated Regulation, must also be taken into consideration in the context of the scrutiny of prospectuses carried out by the authority.

In fact, the Prospectus Regulation provides that the information in the prospectus must be drawn up and presented in an easily analysable, succinct and comprehensible manner (article 6, paragraph 2, Prospectus Regulation).

Provisions aimed at simplifying and clarifying the information to be included in the prospectus also concern the way risk factors are represented, which must be specific to the issuer and/or the securities and relevant to investment decisions as well as consistent with the overall contents of the prospectus (article 16 Prospectus Regulation). In accordance with the provisions of article 16, paragraph 4 of the Prospectus Regulation, ESMA has published the "Guidelines on risk factors pursuant to the Prospectus Regulation" (01/10/2019|ESMA31-62-1293 IT), which Consob has declared it complies with.

The following constitute further and innovative simplifications for operators:

- the introduction of the universal registration document (DRU) and the related fast track in the approval of the prospectus following the acquisition of the status of frequent issuer (cf. articles 9 and 20, paragraph 6 of the Prospectus Regulation);

- the extension of the possibility of using incorporation by reference and therefore of being able to recall information already published by the issuer in compliance with other obligations (cf. article 19 of the Prospectus Regulation);

- the new disclosure rules in relation to the summary note (cf. article 7 of the Prospectus Regulation);

- the possibility that the base prospectus may consist of separate documents and the provision of a summary note for the base prospectus only with reference to the individual issue once the relevant final terms have been drawn up (cf. article 8, paragraph 6 and 8 of the Prospectus Regulation);

- the provision of simplified and more streamlined disclosure systems for transactions on the secondary market (cf. article 14 of the Prospectus Regulation) or for SMEs (cf. article 15 of the Prospectus Regulation).

Moreover, some national institutions such as the so-called pre-filing, i.e. the possibility for issuers and offerors to start a prior dialogue with the Authority before the formal start of an investigation, continue to still be applied in the new system, and indeed their usefulness is renewed with a view to simplifying and reducing the burdens on issuers[4].

It appears from the above that, in examining the issue of scrutiny criteria, particular attention should be paid to the simplification and clarity of the information to be included in the prospectuses. These objectives must therefore necessarily be taken into account by Consob in the scrutiny of prospectuses, but at the same time must guide the conduct of issuers and persons required to draw up a prospectus so that the inclusion of information in prospectuses effectively complies with the principles underpinning the new rules.

Ultimately, Consob's scrutiny must include the verifications required by the Prospectus Regulation, the Delegated Regulation and the ESMA guidelines, and at the same time ensure compliance by issuers with the objective of a significant simplification of the prospectus, also favouring the use of all the instruments offered by the new regulations.

2. The purpose of this Communication

In 2009, Consob had clarified the tasks that the Prospectus Directive and the national implementing rules contained in the Consolidated Law on Finance assigned to Consob when approving prospectuses and any supplements thereto[5].

In light of the renewed regulatory framework and with a view to ensuring investor protection, the efficiency of administrative action and to give effect to the simplification of the burden imposed on market operators, the 2009 Communication needs to be comprehensively revised to adapt Consob's position to the new reference context.

This communication takes into account, on the one hand, the specific nature of the Italian context in which Consob is entrusted with institutional supervisory tasks in sectors other than the approval of offer prospectuses and/or admission to trading[6], and, on the other hand, the overall structure of the Italian financial supervisory system, characterised by the presence of separate authorities: Consob, which is responsible for transparency and correctness of conduct, and the Bank of Italy and Ivass, which are responsible for risk containment, capital stability and the sound and prudent management of intermediaries, in addition to the market management company, which is responsible for admission to listing (over which Consob has been given superordinate supervision under article 66-ter, paragraph 6, of the Consolidated Law on Finance).

This imposes a need for coordination and cooperation between different entities, a need which is also clearly recognised in the new Prospectus Regulation[7].

It should also be considered that the provision of uniform criteria for the scrutiny of the prospectus (cf. article 20, paragraph 9, of the Prospectus Regulation) has not been accompanied by the provision of a harmonised system of the individual national authorities’ responsibility, an area which is still governed by national laws, with inevitable repercussions on the actual approach to this scrutiny in the various jurisdictions.

The aim is, therefore, to provide the public with initial guidance related to the application of the new regulatory framework with regard to the following profiles:

- the criteria for the scrutiny of the prospectus provided for in the Delegated Regulation;

- exchanges of information within Consob and with the other supervisory authorities in the financial sector;

- the additional criteria for the scrutiny of the prospectus;

- the excluded checks during the review activity of prospectuses;

- the application of the proportionate approach to the scrutiny of prospectuses, their constituent parts and supplements.

However, it should be clarified that the content of this Communication should be complemented by the positions taken or to be taken in the future by ESMA, which is entrusted with the task of ensuring convergence of practices by the authorities of Member States[8].

3. The criteria for scrutiny of the prospectus provided for in the Delegated Regulation

In order to ensure that the competent authorities apply criteria for scrutiny of the prospectus harmonised at European level, the Delegated Regulation has established provisions on the criteria for scrutinising the completeness (article 36), comprehensibility (article 37) and consistency (article 38) of the information contained in the draft prospectus[9].

These criteria apply to the prospectus or its constituent parts (Registration Document, Securities Note and Summary Note), including the universal registration document (DRU), submitted for approval or filed without prior approval (where applicable), and to all related amendments to the DRU, as well as to supplements to the prospectus (article 35 of the Delegated Regulation).

The provisions indicate the elements to be taken into account by the authorities when scrutinising the completeness (article 36, paragraph 1), comprehensibility (article 37, paragraph 1) and consistency (article 38) of the information contained in the draft prospectus. These criteria, in light of the regulatory framework of the Delegated Regulation, must be applied by all the competent authorities and can therefore qualify as mandatory or standard.

The provisions also provide specific powers for the authority to scrutinise the completeness (article 36, paragraph 2)[10] and comprehensibility (article 37, paragraph 2)[11] of the information.

In the case of prospectuses to be used exclusively for admission to trading on a regulated market of securities other than equity securities for which no summary note is required, in accordance with article 7 of the Prospectus Regulation, the Delegated Regulation provides for the application to the prospectus of a smaller number of mandatory scrutiny criteria[12].

4. Exchanges of information within Consob and with the other supervisory authorities in the financial sector

Also in the new regulatory framework, Consob's prospectus investigation activities take into account the information assets held by Consob, as part of its organizational architecture, and the exchanges of information with the other supervisory authorities in the financial sector.

This position is in line with the provisions of Recital no. 71 of the Prospectus Regulation - specifically dedicated to the powers of the competent national authorities - which provides that "the designation of a competent authority for the approval of prospectuses should not exclude cooperation between such competent authority and third parties, such as banking and insurance regulators or listing supervisory authorities, in order to ensure the efficiency of the process of scrutiny and approval of prospectuses in the common interest of issuers, investors, market participants and the markets themselves".

The principle, which emerges from Recital 71, according to which the efficiency and effectiveness of scrutiny must not be hindered by the structure and organisation of supervision in the individual national systems, also applies with regard to the internal division of competences relating to the various supervisory functions assigned to the designated national authority for the approval of prospectuses.

Consob, for the purpose of approval of prospectuses, therefore enters into exchanges of information internally and with other competent supervisory authorities and uses the information acquired in the performance of its institutional tasks in such a way as to ensure, as required by European legislation, the efficiency of the scrutiny and approval process of prospectuses in the common interest of issuers, investors, market participants and the markets themselves.

In this sense, the exchanges of information between the various organisational units of Consob and those with the other supervisory authorities do not fall within the additional scrutiny criteria set out in article 40 of the Delegated Regulation.

In fact, with regard to the exchange of information within the authority, as responsibility for the approval of the prospectus is assigned to Consob, and therefore not to one of its individual Offices, the information set that must be used in carrying out ordinary scrutiny can only be that available to Consob as a whole.

On the other hand, in Italian law, cooperation with other supervisory authorities is also imposed by the cooperation obligations provided for the performance of institutional tasks (pursuant to article 4 of the Consolidated Law on Finance and article 94-bis, paragraph 4, of the Consolidated Law on Finance[13])[14].

However, it is understood that the necessary internal coordination and with the other authorities in the sector must not affect the length of the approval process, as the authorising Authority is responsible for putting in place all the necessary oversights to acquire the information necessary for the scrutiny of the prospectus in good time.

5. The additional criteria for scrutiny of the prospectus

The competent authority may apply additional scrutiny criteria when it is necessary to adapt the scrutiny to the specific characteristics of a prospectus so as to ensure investor protection[15].

The Delegated Regulation does not limit the possibility of applying additional scrutiny criteria to exceptional cases.

However, in order to ensure an efficient approval process, it is considered that the power to apply additional scrutiny criteria should be exercised on a case-by-case basis, taking into account the specificity of the Issuer, the offer or admission to trading on a regulated market.

5.1 The situations to which additional scrutiny criteria apply

In the investigation activity carried out by Consob in the past, a number of cases have been found that required the carrying out of in-depth investigations and the inclusion in the prospectus of additional information aimed at enabling investors to make informed investment choices and, therefore, to achieve investor protection.

With a view to facilitating the investigative processes that will involve issuers submitting an application for approval of the prospectus, the following are examples of the circumstances and information areas that may be subject to additional checks and requests for integration.

1) Reports from third parties

In the event that Consob receives reports or statements from external parties, including those transmitted under the whistleblowing procedure, concerning the issuer and/or the information contained in the prospectus, the reports considered significant in light of the following elements shall be taken into consideration during the investigation activity: (a) the source of the report, with particular regard to reports from qualified parties by reason of the link with the issuer (e.g. employees and collaborators, creditors, guarantors, shareholders' associations, etc.); (b) the facts reported in detail and relating to the information contained in the prospectus; (c) the number of qualified reports received on the same issuer.

2) External information

The proactive search for information disseminated to the public, including through mass communication tools (internet, news agencies, etc.), is not one of the checks required for the approval of the prospectus. However, as part of the investigation on the prospectus, requests for clarification may be addressed to issuers with regard to publicly available information which is relevant to the offer or admission to trading to which the prospectus relates[16].

3) Pro forma accounting of significant or complex transactions

In the event that the strengthening of the issuer's assets and liabilities is functional to the implementation of complex corporate reorganization operations and the examination of the prospectus reveals critical issues regarding the information elements inherent to the accounting treatment adopted by the issuer for the pro-forma representation of the transaction produced on the occasion of the prospectus, Consob may carry out specific investigations or requests for clarification, in order to identify any additional information to be reported in the prospectus.

4) Initial public offering (IPO)

In case of transactions related to an initial public offering (IPO), the significant organisational changes that the company has undertaken in order to comply with the regulations applicable to listed companies require careful checking of the information contained in the prospectuses.

The application by the issuer, for the first time, of new rules aimed at listing may in fact make it necessary to include supplementary information in the prospectus. In-depth analyses may be necessary to understand the specificities and significant events in the history of the company, often affected by internal reorganisations of both the business and its corporate governance and by the adoption, for the purposes of the IPO, of a new set of accounting standards required for listed issuers.

The purpose of these in-depth analyses is to ensure a clear representation in the prospectus of certain significant information profiles that may be of particular significance for a newly listed company, such as information relating to specific accounting items, such as the valuation of intangible assets, with particular regard to goodwill, which have a significant impact with respect to the "Total Assets" in the Balance Sheet, and cases of changes in the accounting principles used for the financial information included in the prospectus. The identification of the significant reporting threshold of financial statement items is carried out on the basis of data taken from the issuer's most recent individual or consolidated financial statements, where available. In the presence of an issuer with a complex financial history and/or that has made a significant financial commitment, as specified in article 18 of the Delegated Regulation, the historical financial information included in the prospectus (combined financial statements, carve out, financial statements relating to an entity other than the Issuer, pro-forma) shall be taken into account where appropriate.

Similar checks could be carried out in relation to the prospectuses of listed issuers drawn up on occasion of reverse mergers/acquisitions, as a result of which a new company business is contributed and included in the scope of consolidation of an existing vehicle company already listed on the regulated market.

The purpose of these checks is not to ask the issuer to amend its financial data. This is because the process of scrutiny of the prospectus does not involve an assessment of the compliance of the financial information with the reference accounting legislation, the compliance of the financial statement data contained in the prospectus with the corporate accounts and the correspondence to the accounting data of the reworkings carried out for the purposes of inclusion in the prospectus. The purpose of the checks in question is to assess the need to provide additional information in the prospectus on specific significant accounting issues that have emerged during the preparatory phase and to give investors the opportunity to take them into account in their investment choices.

5) Determination of the working capital statement in equity security prospectuses

Issuers of equity securities must certify with the working capital statement that, in their opinion, they have sufficient liquid resources or ready cash to meet their obligations falling due within 12 months of the date of approval of the prospectus or, if not, indicate the funding sources from which they will be able to raise the necessary additional working capital.

In this respect, Consob may be called upon to carry out specific in-depth analyses and request additional information in order to make the statement of the existence of working capital consistent with the other information contained in the prospectus, such as risk factors, investments, loans, use of proceeds, references or observations contained in the audit report. In particular, Consob's in-depth analyses and requests for clarification may concern the criteria for defining the statement and how to cover current financial needs in the event of a financial deficit. Any guidance on this matter will be taken into account and will be provided by ESMA.

* * *

The identification of the cases listed above does not imply that Consob applies the additional criteria automatically or a priori, thus disregarding the specific features of an individual offer or admission to trading in the prospectus. The application of the additional criteria by Consob only serves the objective of ensuring the protection of the investor receiving the prospectus.

The listed cases do not cover the full range of situations where additional scrutiny criteria may be necessary, including in light of the rapid changes in financial markets.

Therefore, Consob may identify - in compliance with article 40 of the Delegated Regulation and the principles of impartiality and transparency of administrative action and in light of the pursuit of the goal of investor protection - further situations that require the application of additional criteria for checking compliance with completeness, consistency and comprehensibility; likewise, Consob, following indications from ESMA, may revise and no longer apply previously adopted criteria, considering it no longer useful for the scrutiny in question.

6. Application of the proportionate approach to scrutiny of prospectuses, its constituent parts and supplements

The Delegated Regulation contains provisions defining a proportionate approach to scrutiny of prospectuses.

Article 41, paragraph 1, of the Delegated Regulation provides that when a first draft prospectus submitted to the ACN for approval is substantially similar to a prospectus that has already been approved by the ACN and highlights all the changes made with respect to the already approved prospectus, the Authority is required to apply standard scrutiny criteria only to those parts of the prospectus that have been amended with respect to the prospectus already approved by the ACN.

This rule requires that the draft prospectus submitted to the authority must highlight all the changes compared to the approved prospectus; therefore, in order to apply the proportionate approach, it is necessary that the issuer or the offeror highlights the changes with respect to the already approved prospectus.

With regard to the notion of a substantially similar prospectus, since the provision in question requires that prospectuses should be similar in substance only, the proportionate approach applies even if the format used to draw up the draft prospectus is different to that of the already approved prospectus (for example, where the draft prospectus consists of separate documents and the already approved prospectus is a single document).

Moreover, in compliance with the provisions of article 35 of the Delegated Regulation (according to which "[...], references to the prospectus shall indicate the prospectus or its constituent parts [...]"), the assessment of the substantial similarity of the information may also be carried out with reference to each of the constituent parts of the prospectus (for example, by comparing only the draft securities note with the already approved one). This assessment should also take into account the information included in the already approved prospectus, or in a constituent part of it, through any subsequent supplements.

Article 41 of the Delegated Regulation provides for the application of the proportionate approach in the following cases too:

- when the ACN has already reviewed a universal registration document (DRU) filed without prior approval, when it carries out its scrutiny of the said DRU or its amendments for the purpose of approving the prospectus, it must apply the standard scrutiny criteria only to those parts of the DRU or its amendments which have not already been reviewed (article 41, paragraph 2, Delegated Regulation);

- if the first draft prospectus submitted for approval incorporates by reference information contained in a document that has already been approved, the ACN must apply only the consistency checks set out in article 38 of the Delegated Regulation (article 41, paragraph 3, Delegated Regulation) to such information subject to incorporation by reference.

It is understood that in the cases described above, the information contained in the final version of the prospectus must in any case be up-to-date and comply with the information requirements set out in the relevant prospectus schedules prescribed by the Delegated Regulation.

The proportionate approach provides that, in case of subsequent draft prospectuses, during the scrutiny phase the competent authority shall apply the scrutiny criteria only to the amendments made to the previous draft and to any other information on which such amendments have an impact (article 41, paragraph 5, Delegated Regulation).

In this respect, both recital 26 of the Delegated Regulation, which clarifies that "an iterative procedure is applied for the scrutiny and approval of a prospectus", i.e. that the decision on the approval of a prospectus "may require several cycles of analysis of the draft prospectus and subsequent improvements by the issuer, the offeror or the person asking for admission to trading (...) to ensure that it meets the requirements of completeness, comprehensibility and consistency (...), should be taken into account, as well as the statements made by ESMA in the development of the rules on the proportionate approach contained in the Delegated Regulation.

On that occasion, ESMA clarified that, in order to ensure its goal of investor protection, the Authority has the power/duty to also request information on non-amended parts where significant issues arise at a later stage with respect to the first request for information or amendment. However, according to ESMA, the competent authority should endeavour to request amendments or additional information to the draft prospectus as soon as possible[17].

The rules of the aforementioned article 41 regarding the proportionate approach also apply, pursuant to article 35 of the said Regulation, to the scrutiny of supplements. And notwithstanding the provisions of article 23, paragraph 1 of the Prospectus Regulation which states that "any significant new fact, material mistake or inaccuracy relating to the information contained in the prospectus (...) shall be mentioned without undue delay in a supplement to the prospectus".

In carrying out its scrutiny, Consob takes the above provisions into account, in accordance with ESMA's instructions, in order to reduce administrative burdens on issuers and make administrative activity more efficient.

7. Excluded checks during the review activity of prospectuses

Under the new rules, the following checks cannot be considered to be included in the scope of the scrutiny of the information contained in the prospectuses for the purposes of approval by the Authority:

- check that the facts set out in the prospectus are true;

- check of the compliance of the financial information with the reference legislation;

- examination of the compliance of the financial statement data contained in the prospectus with the corporate accounts;

- the timely review of the correspondence with the accounting data of the reworkings carried out for the purposes of inclusion in the prospectus;

- check of the compliance of the corporate transaction with the applicable legislation.

Such exclusion, already present in the previous regulations laid down in the Prospectus Directive, is confirmed by the rules set out in the Prospectus Regulation.

In fact, the approval of the prospectus concerns the information contained in it and not the approval by the authority of the offer/admission to trading; moreover, the application of the criteria of completeness, consistency and comprehensibility cannot take the form of a due diligence activity carried out by the Authority on the data and information provided in the prospectus by the issuer[18].

In this sense, the prospectus schedules, annexed to the Delegated Regulation, provide for the inclusion of a statement that the competent authority approves the document "only to the extent that it meets the requirements of completeness, comprehensibility and consistency imposed by Regulation (EU) 2017/1129" (emphasis added) and that "such approval should not be considered an endorsement of the issuer", nor "an endorsement of the quality of the securities (see, for example, Annexes 1, 6, 11 and 14, points 1.5, to the Delegated Regulation).

In another part of the Prospectus Regulation, it also states that responsibility for the information contained in the prospectus lies at least with the issuer or its administrative, management or supervisory bodies, the offeror, the person asking for admission to trading or the guarantor, as the case may be. On this point, article 11 of the Prospectus Regulation leaves the implementation of this principle to the national regulatory authority.

The exclusion of the checks referred to above from the activity of approving the prospectus is, moreover, supported by the rules of the Prospectus Regulation which provide the timing for approval of the prospectus and communication of the amendments, requests for additional information and decisions of the authority to the issuer, offeror or person asking for admission to trading (article 20, paragraphs 2, 3, 4 and 6) which cannot be considered compatible with the carrying out of activities consisting in checking the truthfulness of information.

This implies, therefore, that Consob, when approving a prospectus, cannot request the amendment of the transaction or of the financial statements included in the prospectus, but can only request amendments or additional information to be included in the prospectus in order to enable investors to make informed investment choices, or to represent to the persons responsible for the prospectus the reasons why such document is not suitable for approval[19].

In the event of breaches of the Prospectus Regulation by persons required to request the approval of a prospectus by the competent authority, Consob may activate its own precautionary and sanctioning powers or report significant facts and circumstances to the competent judiciary, as indicated in particular in article 32 of the Prospectus Regulation

8. Scope of the Communication

It should be noted that the indications given in this Communication replace those set out in Communication DEM/9025420 of 24 March 2009.

This Communication includes indications on prospectuses falling within the scope of application of Regulation 1129/2017; the same indications, where compatible, shall apply to prospectuses for financial products other than securities.

THE CHAIRMAN
Paolo Savona

Notes:

[1] Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market and repealing Directive 2003/71/EC, published in the OJEU series L 168, p. 12 of 30 June 2017.

[2] Commission Delegated Regulation (EU) 2019/980 of 14 March 2019 supplementing Regulation (EU) 2017/1129 of the European Parliament and of the Council as regards the format, content, scrutiny and approval of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Commission Regulation (EC) No 809/2004, published in OJEU Series L 166, p. 26 of 21 June 2019. For the sake of completeness, it should be recalled that the new European regulatory framework for prospectuses also consists of Commission Delegated Regulation (EU) No 979/2019 of 14 March 2019 which supplements Regulation (EU) 2017/1129 of the European Parliament and of the Council with regard to regulatory technical standards concerning key financial information in the summary note of the prospectus, publication and classification of prospectuses, disclosure relating to securities, supplements to the prospectus and the notification portal, and which repeals Commission Delegated Regulations (EU) No 382/2014 and (EU) 2016/301, published in the OJEU series L 166, p. 1 of 21 June 2019.

[3] Cf. Considering (60) to the Prospectus Regulation. Furthermore, the Report accompanying the text of the Delegated Regulation specifies that this Regulation "aims to create a single set of rules that can be implemented consistently across the EU".

[4] Cf. article 4, paragraph 1-bis and 52, paragraph 1-bis of the Issuers' Regulation.

[5] Although that Communication specifically referred to the approval of prospectuses for equity securities, it also contained indications that could easily be referred to debt securities prospectuses.

[6] Such as, for example, the competences under the Transparency Directive, the MAR Regulation, the MiFID II Directive, the Ucits Directive, the Takeover Bids Directive, as well as carrying out other tasks identified by national legislation on issuers and intermediaries.

[7] Cf. Considering (71) of the Prospectus Regulation.

[8] In fact, consider what is reported in the ESMA Document of 28 March 2018 (ESMA31-62-800) "Final Report. Technical advice under the Prospectus Regulation” under paragraph 838 “Once the new Level 2 measures are put in place and it has been possible to assess how they function, ESMA will consider whether there is a need for further guidance at Level 3 in relation to the criteria for scrutiny and review. Such guidance might be delivered as guidelines, in response to the specific empowerment in PR Article 20(12), or in the form of other Level 3 measures.”

[9] It is useful to recall here Recital (21) to the Delegated Regulation and also paragraph 835 of the ESMA Final Report. Technical advice under the Prospectus Regulation quote: "ESMA is mindful that Level 1 has set a goal of harmonising the criteria for scrutiny of the prospectus and observes that the lists of criteria for scrutiny of completeness, comprehensibility and consistency in the proposed Article A [Note: article A of the Technical Advice contained the provisions now included in articles 36, 37, 38 of the Delegated Regulation] pursue this goal. Currently no across-the-board scrutiny criteria exist and NCAs are therefore free to determine their individual approaches to scrutiny, within the framework of the prospectus regime. Establishing a set of standardised rules for scrutiny of prospectuses, the lists of criteria in the proposed Article A (now Article N) will therefore undoubtedly harmonise the scrutiny process.”

[10] In particular, it has been provided that, if the issuer has a complex financial history or has made a significant financial commitment pursuant to article 18 of the Delegated Regulation, the competent authorities may require the issuer to include, amend or remove information from the draft prospectus, taking into account the circumstances indicated in the said article 36, paragraph 2 of the Delegated Regulation.

[11] In particular, it has been provided that competent authorities may, on a case-by-case basis and in addition to the information set out in the Prospectus Regulation for the summary note and the Delegated Regulation for the specific summary note of the EU growth prospectus, request that certain information provided in the draft prospectus be included in the summary note.

[12] Cf. article 37, paragraph 1, subparagraph 2, of the Delegated Regulation. A summary note is not required under article 7, paragraph 1, subparagraph 2, of the Prospectus Regulation, if the prospectus concerns the admission to trading on a regulated market of securities other than equity securities, provided that: a) such securities are traded exclusively on a regulated market, or a specific segment thereof, to which only qualified investors have access for the purpose of trading such securities; or b) such securities have a unit par value of at least EUR 100,000.

[13] In this regard, it should be noted that, while the aforementioned article 94-bis of the Consolidated Law on Finance provides for an obligation to enter into cooperation agreements limited to prospectuses of bank debt securities not intended for trading on a regulated market, the amendments to the Consolidated Law on Finance aimed at implementing the Prospectus Regulation in Italy establish an extension of this obligation to all prospectuses relating to bank securities (article 94, paragraph 4, of the Consolidated Law on Finance, in the document submitted for consultation by the MEF in February 2020).

[14] The above procedures will also be applied when examining supplements to prospectuses with reference to the information contained in the supplement, in a manner compatible with the approval schedule established by the Prospectus Regulation.

[15] As specified in Recital (22) to the Delegated Regulation.

[16] On this issue, consider what was stated in the ESMA Final Report. Technical advice under the Prospectus Regulation cit. al par. 838: “ESMA acknowledges the wish from respondents to have clarity in relation to information outside the prospectus and the role this plays in NCAs’ scrutiny of prospectuses. ESMA therefore observes the following, on the basis of PR Articles 2(r), 20(4), 20(11), 32(a), (b) and (c) as well as Recitals 60 and 71: NCAs are not required to look at information outside the prospectus in connection with their scrutiny or review of a prospectus/URD; they are only required to scrutinise/review the information contained in the prospectus/URD. However, this should not prevent each NCA from looking into information outside the prospectus in specific situations and on a case-by-case basis when it considers that it might be relevant to do so, nor should it stop the NCA from raising comments in relation to information outside the prospectus which would seem relevant for inclusion in the prospectus.”

[17] This is the conclusion in the ESMA Final Report. Technical advice under the Prospectus Regulation cit. paragraphs 871 and 872, stating that: “[…] In relation to the suggestion that NCAs be prohibited from raising comments on parts of the prospectus which they have already scrutinised, ESMA maintains the position set out in connection with its work under the Omnibus II Directive that it would run contrary to the general PR objective of investor protection to outlaw such comments as this could effectively result in NCAs being prohibited from commenting on significant matters in the prospectus where such are discovered in a subsequent round of scrutiny. However, NCAs should always endeavour to raise comments on the draft prospectus at the earliest possible opportunity. (872) Furthermore, ESMA fully agrees that NCAs should remain mindful of the consistency of the prospectus when applying the proportionate approach permitted by proposed Article B (now Article O) [Note: now the reference is to article 41 of the Delegated Regulation]; this is in line with its position that the application of the derogations should never compromise the NCA’s obligation to ensure the completeness, comprehensibility and consistency of the draft prospectus […].”

[18] ESMA also stated this in its consultation paper on the definition of the technical opinion concerning the criteria for scrutiny of the prospectus (ESMA31-62-650|6 July 2017): “[…] ESMA is of the view that the criteria do not imply an obligation for NCAs to verify the truthfulness of the information provided in the prospectus or to perform due diligence on individual pieces of information in the prospectus or on the prospectus in its entirety. Similarly, ESMA considers that NCAs are not required to assess whether the information in the prospectus complies with other legislative requirements than those of the prospectus regime. [...]'” (paragraph 28).

[19] This conclusion derives, as well as from the provisions of the Delegated Regulation, from Article 20, paragraphs 4, 5, 6 and 32 of the Prospectus Regulation.