The ESMA publishes Q&A document for guidelines on the prospectus area

Date 12 dec. 2011
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In the 13th version of the Q&A document (the “Q&A document”) on the prospectus area, the European Securities and Markets Authority (“ESMA”) has indicated certain guidelines for the use of the Prospectus Directive[1] and the Prospectus Regulation[2].


The background for the Q&A document is that the Prospectus Directive and the Prospectus Regulation still gives rise to a number of application-oriented questions. Therefore, the 13th version is the ESMA’s update of the 12th version of the now shut down CESR.


The Q&A document is not binding for issuers or the Commission but expresses the understanding of the prospectus regulation which the national supervisory authorities have been able to agree on.


Guidelines of the ESMA

The new 13th version contains few changes relative to the 12th version. The first change is an update of Q15 and the second is a new Q76.


Changed accounting conventions (Q15)

In accordance with clause 20.1 of appendix I to the Prospectus Regulation, the issuer of securities must prepare a prospectus in which an audited version of the accounts of the three latest years must be included. If an issuer in the course of the period of three years before the listing on the stock market has changes its accounting conventions for the statement of the annual accounts, doubts may arise as to which extent comparative numbers must be included. This complicates the preparation of the so-called F pages, regardless of whether the issuer has changed its accounting conventions voluntarily or if the changes are due to new standards and interpretations issued by the International Accounting Standards Board (IASB) or by the International Financial Reporting Interpretations Committee (IFRIC).


The problem is particularly of interest if the issuer changes its accounting conventions according to the International Accounting Standards (IAS). According to these, the issuer concerned is obligated to state the figures of the year in question according to the new accounting conventions and the figures of the previous year, also prepared in accordance with the new conventions, in the financial statement of the year where the accounting conventions were changed, cf. the IAS 8. Therefore, the question is how many financial statements are presented in the issuer’s prospectus which are expected to be repeated in corrected form in accordance with the IAS 8.


The ESMA’s (and before the ESMA, the CESR) view of the problem of changes to the accounting conventions is that seeing as the IAS 8 – or other accounting standards, for that matter – cannot be viewed as having precedence relative to the prospectus requirements, further requirements contained therein may not be applied relative to an issuer’s prospectus.  Therefore, the IAS 8 only applies to the financial statement of the year where changes were made, including the comparative figures from previous years included therein, for which reason no further claims under the IAS should apply to other sets of financial statements included in the prospectus. If the issuer has changed its accounting conventions in 2011, the prospectus for a listing in 2012 must include revised financial statements for (i) 2011, including comparative 2010 figures, (ii) 2010 and (iii) 2009.


References to credit ratings in the prospectuses (Q76)

With regards to the credit ratings of issuers and the credit rating agencies (“CRA”) relevant in that connection, a number of questions have been raised regarding the interpretation of the rules on this subject, including regarding the interaction between article 4(1) in the regulation on credit rating agencies (the CRA Regululation) and appendix V, clause 7.5. of the Prospectus regulation.


While issuers pursuant to the CRA Regulation must ensure that the prospectus, if reference to a credit rating is made therein, contains information on whether the credit ratings have been prepared by a CRA established in accordance with the CRA Regulation, issuers must only, pursuant to the appendices to the Prospectus Regulation, provide information on this matter if the issuer has concretely requested such a rating or, moreover, if the issuer has cooperated with a CRA in the rating process. Because the Prospectus Regulation contains the immediate requirements to the contents of prospectuses, the doubt hereafter relates to the matter if the requirement in article 4(1) of the CRA Regulations is to be construed as a supplementary requirement to prospectuses containing credit ratings, with the result that additional information on the CRA in question must be contained herein.


The ESMA’s answer on this matter is that if publication of a credit rating in a prospect is deemed relevant to potential investors, further information on the CRA in question must be deemed as being of equal relevance. For that reason, the ESMA is of the opinion that the issuer should states whether or not the CRA issuing the credit ration has been registered in accordance with the CRA Regulation in the prospectus. However, prospectuses registered before 7 December 2010 containing reference to a credit rating must not be amended with this information. Therefore, the CRA Regulation will be in the nature of a form of supplementary requirement to the Prospectus Regulation.


In continuation hereof, the ESMA has stated how issuers may concretely determine if a CRA has been established in accordance with the CRA Regulation.


As a result of article 18(3) of the regulation, the EU Commission publishes and updates a list with the CRAs registered in accordance with the CRA Regulation in the Official Journal of the European Union and on its website. Subsequently, issuers will be deemed as having fulfilled the requirement of article 4(1) by stating in the prospect whether the CRA in question has been included on the Commission’s list as of the date of publication of the prospectus. In that connection, the ESMA points to the recent change of article 18(3) as a result of which the ESMA will also publish an updated list of approved CRAs for the use of issuers on its website.


However, because the CRA Regulation has only recently come into effect, and because CRAs no later than 7 September 2010 were to submit registration applications, the practical problems have been related to the fact that issuers in some cases were not able to see if a CRA was registered at the time of prospect approval because the application of the CRA in question was still pending approval.


As a result of article 40 of the CRA Regulation, existing CRAs may continue to issue applicable credit ratings to issuers of securities with a view to this rating being indicated in prospectuses, unless an actual rejection of an application for registration on the Commission’s or the ESMA’s list has been given.


In the Q&A document, the ESMA has explained that if the person responsible for the preparation of a prospectus wishes to include a credit rating by a CRA which is not yet registered– but which may still issue credit ratings in accordance with article 40 of the CRA Regulation – the issuer may contact the CRA in question and receive confirmation that the application has been submitted to the ESMA before 7 September 2010 and that it has not yet been reviewed. In such a case, it is possible for the issuer to use the credit rating in question.


Background on the ESMA

Effective from 1 January 2011, the European Securities and Markets Authority (ESMA) assumed the role of supreme supervisory authority within the securities market in the EU from the now shut down supervisory body, the Committee of European Securities Regulators (CESR).


Together with the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA), the ESMA is part of what in everyday language is referred to as the three European Supervisory Authorities (ESA).


Together with the European Systemic Risk Board (ESRB), the ESA constitutes the collective European financial supervisory system, the European System of Financial Supervision (ESFS).


Where the CESR only prepared drafts for technical guidance to the Commission as well as standards and guidelines for the member states, the responsibility of the ESMA is to a larger extent to prepare drafts for the actual legislation which, with as few changes as possible, - if any – is to be adopted by the Commission with binding effect on the member states.


Furthermore, in order to ensure a uniform understanding and application of the rules prescribed by EU law, the ESMA will continue the work of the CESR with the publication of non-legally binding standards and guidelines with a view to the elaboration of certain provisions in the EU legislation. The present Q&A document has been published in continuation hereof.



If you have any questions or require additional information on the guidelines of the ESMA, please contact Attorney Dan Moalem (, attorney Christian R. J. Nielsen ( or junior associate Mattias Vilhelm Warnøe Nielsen (

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.

[1] The directive of the European Parliament and the Council of Europe’s directive 2003/71/EC of 4      November 2003.

[2] The Commission’s regulation (EC) no. 809/2004 of 29 April 2004