Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/2.5.5:2.5.5 Powers of ESMA with respect to prospectuses

Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/2.5.5

2.5.5 Powers of ESMA with respect to prospectuses

Documentgegevens:

mr.drs. T.M.C. Arons, datum 07-05-2012

Datum: 07-05-2012
Auteur: mr.drs. T.M.C. Arons
JCDI: JCDI:ADS369687:1
Vakgebied(en): Ondernemingsrecht (V)

The Prospectus Directive 2003 provides for a common minimum set of powers for the competent authorities to guarantee the effectiveness of their supervision.1 The competent authority requested to approve the prospectus2 shall at least have the following powers: the power to require the issuer, offerors or persons asking for admission to listing to include in the prospectus supplementary information that is necessary for investor protection3 and the power to prohibit a public offer if it considers that the duty to provide adequate information was infringed or if it has reasonable ground for suspecting that it would be infringed.4 Furthermore, the home competent authority has the power to suspend a public offer or listing for a maximum of 10 consecutive working days on any single occasion if it has reasonable grounds for suspecting that the provisions of the Directive have been infringed.5 It can also prohibit trading if it suspects that the provisions have been infringed.6 The abovementioned powers of the competent authorities are discretionary. The different competent authorities co-operate7 within the current framework of CESR in the Expert Group Prospectus Level 3.

I will now address the implications of the powers granted to ESMA with respect to the public enforcement of the prospectus information requirements. First, there is the possibility of intervention by ESMA in the case of continued disagreement between national competent authorities. The starting point is that the Prospectus Directive 2003 requires that the national competent authorities co-operate with each other whenever necessary for the purpose of carrying out their duties and making use of their powers. In particular, they have to exchange information and co-operate if that issuer has more than one home competent authority because of its various classes of securities, or where the approval of a prospectus has been transferred to the competent authority of another Member State pursuant to article 13(5). The competent authorities also need to cooperate when requiring suspension or prohibition of trading for securities traded in various Member States. In the event of continued disagreement between the competent authorities or in case of emergency, ESMA can take a decision addressed to a financial market participant that suspends or prohibits listing of the securities.

The home competent authority has the full individual and exclusive authority to approve the prospectus.8 There is no duty to co-operate with respect to the approval of the prospectus. If the home competent authority does not ensure that the prospectus contains the required information in the prescribed format, ESMA can take action on the basis of article 17(6) of the ESMA regulation to ensure compliance by adopting an individual decision addressed to a financial market participant.9

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Recital 38 PD 2003.

Each competent authority, including host competent authorities, are also empowered to take the following measures once the securities are admitted to trading on a regulated market: (a) require the issuer to disclose all material information which may have an effect on the assessment of the securities admitted to trading on regulated markets in order to ensure investor protection or the smooth operabon of the market; (b) suspend or ask the relevant regulated market to suspend the securities from trading if, in its opinion, the issuer 's situation is such that trading would be detrimental to investors' interests; (c) ensure that issuers whose securities are traded on regulated markets comply with the obligations provided for in articles 102 and 103 of Admission to Listing Directive 2001 and that equivalent information is provided to investors and equivalent treatment is granted by the issuer to all securities holders who are in the same position, in all Member States where the offer to the public is made or the securities are admitted to trading; (d) cany out on-site inspections in its territory in accordance with national law, in order to verify compliance with the provisions of this Directive and its implementing measures. Where necessary under national law, the competent authority or authorities may use this power by applying to the relevant judicial authority and/or in cooperation with other authorities. In accordance with art. 21 of the ESMA regulation, ESMA is entitled to participate in on-site inspections where they are carried out by two or more competent authorities.

Art. 21(3)(a) PD 2003.

Art. 21(3)(f) PD 2003.

Art. 21(3)(d) PD 2003.

Art. 21(3)(h) PD 2003.

The duty to co-operate laid down in art. 22(2) PD 2003. The national competent authorities may refer to ESMA situations where a request for cooperation, in particular to exchange information, has been rejected or has not been acted upon within a reasonable time. In the event of continued disagreement in cross-border situations, ESMA may use its power, including the adoption of an individual decision addressed to a financial market participant, in accordance with the procedure laid down in art. 19 of the ESMA regulation. Art. 5(11) of the Omnibus I Directive (2010/78/EU) added the later provision to paragraph 2.

It is noteworthy that the Commission will have the delegated powers to adopt regulatory technical standards to specify the procedures for the approval of the prospectus and the conditions in accordance with which time limits may be adjusted if the Commission Proposal Omnibus II Directive is adopted (Art. 13(7) PD 2003 as amended by art. 1(3) of the Proposal). In that case, ESMA shall develop draft regulatory technical standards for submission to the Commission by 1 January 2014 at the latest.

It is noteworthy that in cases where, despite the measures taken by the home Member State's competent authority or because such measures prove inadequate, the issuer or the financial institution in charge of the public offer persists in breaching the relevant legal or regulatory provisions, the host Member State's competent authority, after informing the home Member State's competent authority and ESMA, can take all appropriate measures in order to protect investors. Art. 23PD 2003 as amended by Art. 5(12) of the Omnibus I Directive.