Changes in the EU Prospectus Regulation and Market Abuse Regulation approved by European Parliament
In April 2024, the European Parliament approved the Listing Act. The Listing Act is a series of amendments to existing EU regulations and directives to inter alia standardize and simplify prospectus requirements, enhance disclosure practices, providing further clarity on inside information and expanding the definition of market soundings and exemptions in existing regulation.
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With the Listing Act having been approved by the European Parliament, the changes are expected to enter into force in the EU during the coming months, with some changes having staggered implementation over the course of 15 to 18 months thereafter. Thus, the time of implementation in Norway remains unclear.
EU Prospectus Regulation – simplified disclosure, wider exemptions and enhancing ESG requirements
The EU Prospectus Regulation undergoes amendments to simplify disclosure practices, provide wider and new exemptions and strengthening of ESG requirements. The Listing Act implies that the EU Prospectus Regulation introduces standardized formats and sequences for prospectuses, promoting consistency and clarity for the market and investors. In addition, prospectuses are now required to be provided in electronic form, eliminating the need for paper copies upon request.
Other key changes in the EU Prospectus Regulation include:
- The list of documents that can be incorporated by reference has been expanded to include inter alia sustainability reports and short-form summary documents.
- Further ESG disclosure requirements for prospectuses are expected, taking into account whether debt securities consider ESG factors or pursue ESG objectives.
- The fungible securities exemption, which allows issuers to offer additional shares in the same share class without the need to publish a new prospectus if the issued shares represent less than 20% of the shares already admitted to trading over a period of 12 months, will be expanded. The new threshold is 30% of already traded shares and will also open for offers to the public to be included on certain conditions being fulfilled.
- The exemption for shares resulting from the conversion or exchange of other securities has been expanded, increasing the threshold from 20% to 30%.
- Equivalence decisions for third country prospectuses can now be adopted at an EU level, eliminating the need for National Competent Authorities to review them individually.
- The requirement to rank risk factors has been replaced with a requirement to list them consistently with the issuer’s assessment.
Market Abuse Regulation (MAR) – inside information and market soundings
The EU Listing Act also introduces changes to MAR, enhancing transparency, bringing further clarity to the inside information definition and market soundings scheme. First, the Listing Act provides further clarity on what constitutes inside information and when its disclosure may be legitimately delayed. Second, the market soundings regime, which allows for confidential discussions between issuers and potential investors, is now an optional safe harbor and the definition of market soundings has also been expanded. Other key highlights include the option of establishing a “permanent insider list” for persons having regular access to inside information and increased threshold for management transaction notices.