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Julia Lemonia Raptis, LL.M. (Columbia), LL.M. (Vienna) Senior Officer, Markets and Exchanges Supervision Financial Market AuthorityBaku, October 10-12, 2012 Expert Mission on Prospectus Requirements INT MARKT IND/EXP 49302 organised in co-operation with State Committee for Securities of the Republic of Azerbaijan
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Agenda Overview of the FMA European and International Financial Markets Regulation Minimum Information under the Prospectus Directive (PD) and Prospectus Regulation (PR) National Legislation in Austria and Administrative Practice in Austria Adaptations to the Minimum Information in Prospectuses and Base Prospectuses Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 2
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4 Financial Market Authority – General Overview (1) Before the establishment of the FMA, the supervisory activity was performed by the Ministry of Finance (for insurance and banking) and by the Austrian Securities Agency (for securities) FMA operational as of April 1st, 2002 Integrated Supervisory Authority for the entire Austrian Financial Market Responsible for the supervision of: Credit Institutions Insurance Companies, Pension Funds Securities Firms, Issuers and the Vienna Stock Exchange Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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5 Financial Market Authority – General Overview (2) Established as an independent institution with own legal personality under public law Full independence, secured by legal provision in constitutional rank, including: Budgetary independence (own budget) Personal independence (own conditions for employment) Accountable to the Financial Committee of the National Assembly Total Staff: around 300 Assisted by the Oesterreichische Nationalbank (Austrian National Bank) in the field of Banking Supervision (on site inspections and off-site analysis) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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6 Organisation Chart Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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7 Management of FMA (1) Board of Directors: 2 members, appointed for a period of 5 years proposed by the Federal Government appointed by the Federal President in charge of the management of the FMA Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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8 Management of FMA (2) Supervisory board: 6 plus 2 co-opted members appointed for a 5 years period Chairman, vice-chairman and 4 members (all appointed by the Ministry of Finance, of which the vice-chairman and 2 other members upon nomination by the Austrian National Bank) 2 co-opted members (named by the Austrian Chamber of Commerce, no voting right) No active management function, but empowered to consent to certain issues (e.g. financial plans, investment plans, compliance rules) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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9 Funding of Supervision (1) Objectives Budgetary Independence of the FMA No Restrictions from Federal Budget Regulations Autonomy in the Employment of Staff Obligation to Respect Principles of Economic Efficiency, Expediency and Economic Rationality Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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10 Funding of Supervision (2) Basic principle: budgetary independence Major part is born through annual fees paid by the supervised entities – hereby: Allocation of costs depending on where they arise (2011: € 38.1 mn) Direct charges for services (2011: € 3.1 mn) Contributions of the Republic of Austria (flat amount of € 3.5 mn per fiscal year) Costs of the OeNB of max. € 8 mn for on-site inspections and off-site analysis to be covered by the FMA Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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11 Funding of Supervision (3) About 90% of the supervision costs borne by the supervised institutions: Banks Insurance Companies Brokers, Bond Issuers, Stock Exchange Listed Companies Pension Fund Companies Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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12 Total Budget: 2010: 38,4 million euros 2011: 44,8 million euros Cost allocation among the four accounting groups (2011): Banking 45.56% Insurance 22.81% Securities 28.11% Pension Funds 3.52% Cost of Personnel: about 63.32% Funding of Supervision (4) Julia Lemonia Raptis, FMA
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13 Mission Statement (1) Objectives of FMA to contribute toward the stability of Austria as a financial market to reinforce confidence in the ability of the Austrian financial market to function to protect in accordance with provisions of law investors, creditors and consumers to put forth preventive efforts with respect to compliance with supervisory standards while consistently punishing any violations of these standards Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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14 Mission Statement (2) In order to achieve these aims: The FMA monitors and takes any measures necessary to ensure compliance with provisions of law The FMA defines minimum standards and publishes regulations putting legal provisions into concrete terms In dialogue with market participants the FMA works out proposals for ensuring that the Austrian financial market permanently adheres to high standards The FMA represents Austria's interests in EU and other international bodies and supports cooperation with other supervisory authorities Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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15 Securities Supervision (1) Supervised financial service providers Dep. III/1 : 159 Issuer 1 stock exchange Dep. III/2: 93 investment firms 176 investment service providers Dep. III/3: 823 credit institutions 29 collective investment schemes 176 investment firms and investment service providers 20 pension companies Dep. III/4: 24 Investment management companies 5 Real estate management companies 10 Licensed severance and retirement funds Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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16 Securities Supervision (2) Div. III/1: Markets and Exchanges Supervision (supervision of the Vienna Stock Exchange, approval of prospectuses, transaction reports, market abuse) Div. III/2: Investment Firms (on- and off-sight supervision, capital requirements) Div. III/3: Rules of Conduct and Compliance (chinese walls, inducements) Div. III/4: Supervision of Collective Investment Firms (incoming and outgoing notification, investment schemes database) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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Prospectus Team Part of the Div. III/1: Markets and Exchanges Supervision 5 full-time members, 3 part-time members Approval of prospectuses and supplements Conducting investigations of infringements of the Capital Markets Act (CMA) Point of contact for market participants and others regarding questions or complaints concerning prospectuses, supplements and advertisments Representing the FMA in the Corporate Finance Standing Committee and other bodies of ESMA Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 17
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Agenda Overview of the FMA European and International Financial Markets Regulation Minimum Information under the Prospectus Directive (PD) and Prospectus Regulation (PR) National Legislation in Austria and Administrative Practice in Austria Adaptations to the Minimum Information in Prospectuses and Base Prospectuses Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 18
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19 International Relations - Overview Bilateral cooperation – Memoranda of Understanding Multilateral Cooperation European Level -EBA (European Banking Authority, London) -ESMA (European Securites and Markets Authority, Paris) -EIOPA (European Insurance and Occupational Pension Authority, Frankfurt) World-wide Level -Basel Committee (on Banking Supervision) -IAIS (International Association of Insurance Supervisors) -IOPS (International Organisation of Pension Supervisors) -IOSCO (International Organisation of Securities Commissions) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 20 Multilateral cooperation European level FMA (together with Austrian MoF and OeNB) are represented in various Committees and Work Groups on EU - level dealing with supervisory issues (see listed below) International level FMA is also represented in various international institutions in the field of financial supervision (see listed below)
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International Level Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 21 IMF INTERNATIONAL MONETARY FUND FINANCIAL STABILITY INSTITUTE FINANCIAL STABILITY BOARD SPOTTING VULNERABILITES IN THE INTERNATIONAL FINANCIAL SYSTEM FATF FINANCIAL ACTION TASK FORCE ON MONEY LAUNDERING 26 MEMBER COUNTRIES 48 RECOMMENDATIONS JOINT FORUM ON FINANCIAL CONGLOMERATES EXAMINES ECONOMIC AND FINANCIAL SITUATION, REPORTS ON FINANCIAL MARKET INTEGRATION BIS BANK FOR INTERNATIONAL SETTLEMENTS ECB EUROPEAN CENTRAL BANK IOSCO INTERNATIONAL ASSOCIATION OF SECURITIES COMMISSIONS IAIS INTERNATIONAL ASSOCIATION OF INSURANCE SUPERVISORS IBRD INTERNATIONAL BANK FOR RE- CONSTRUCTION AND DEVELOPMENT ‚WORLD BANK‘ OECD ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT IASB INTERNATIONAL ACCOUNTING STANDARDS BOARD BCBS BASEL COMMITTEE OF BANK SUPERVISORS ‚BASLER AUSSCHUSS‘
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 22 International Level – Committees Securities Supervision: IOSCO (International Organisation for Securities Commissioners) EFAMA (European Fund and Asset Management Association) ECG(Enlarged Contact Group on the Supervision of Collective Investment Funds) Banking Supervision: BSCEE Conference Vienna Initiative Money Laundering and Terrorism Financing: Financial Action Task Force European Council/Moneyval
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 23 European Financial Markets Regulation (1) types of rules: rules regarding the markets and certain market activities -e.g. how to issue securities to the public, how to provide regular reports and ad hoc releases to the public rules regarding financial institutions -e.g. “fit and proper test”, licensing requirements rules regarding the activities of financial institutions -e.g. collecting deposits, concluding insurance contracts, giving investment advice
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 24 European Financial Markets Regulation (2) levels of regulation (as rules): supranational level e.g. EU regulations, EU directives, Basel recommendations national level e.g. acts/laws of parliament, regulations/ordinances by government and/or ministry, laws/regulations/ordinances/recommendations by national supervisor
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 25 EU level Treaty on European Union (consolidated version OJ 30 March 2010, C 83/13) (TEU) Treaty on the Functioning of the European Union (consolidated version OJ 30 March 2010, C 83/47) (TFEU) regulations, directives European Financial Markets Regulation (3)
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 26 European Financial Markets Regulation (4) levels of regulation/supervision (as regulatory authorities): supranational level -European regulators: –European Banking Authority (London) (EBA) –European Insurance and Occupational Pensions Authority (Frankfurt) (EIOPA) – European Securities and Markets Authority (Paris) (ESMA) –European Systemic Risk Board (Frankfurt) (ESRB) national level -national supervisory authorities –independent entity and/or the Ministry of Finance and/or the Central Bank
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 27 European Financial Markets Regulation (5) Lámfalussy process (four-level approach for European legislation in the field of financial services) Level 1: -high level objectives -framework -directive or regulation Level 2: -technical details -set out by the European Commission Level 3: -common standard and guidelines -to ensure uniform implementation -CEBS (Committee of European Banking Supervisors), CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors, CESR (Committee of European Securities Regulators) Level 4: -enforcement of the high-level objectives -Member States’ reporting obligations
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 28 European Financial Markets Regulation (6) 2. European Financial Markets Regulation Updated legislation process
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 29 European Financial Markets Regulation (7) response to the financial crisis de Larosière Report (Report of the High-Level Group on Financial Supervision in the EU published on 25 February 2009): “There is a Single Market, and financial institutions operate across borders, but supervision remains mostly at national level, uneven and often uncoordinated.” result: new European supervisory architecture (“institutionalisation” of CEBS, CEIOPS, CESR) aiming at coherent cross-border supervision
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Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 30 European Financial Markets Regulation (8) Latest developments – new European supervisory architecture European System of Financial Supervision – microprudential (Directive 2010/78/EU of 24 November 2010 – “Omnibus-I-Directive”) ESMA (Regulation (EU) No 1095/2010) EBA (Regulation (EU) No 1093/2010) EIOPA (Regulation (EU) No 1094/2010) European Systemic Risk Board – macroprudential (Regulation (EU) No 1092/2010)
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EU: Supervisory architecture since 2011 (1) CO-DECISION EUROPEAN BANKING COMMITTEE (EBC) EUROPEAN SECURITIES COMMITTEE (ESC) EUROPEAN INSURANCE AND OCCUPATIONAL PENSIONS COMMITTEE (EIOPC) European Parliament ECOFINCo Cuncil FSC FINANCIAL SERVICES COMMITTEE EUROPEAN FINANCIAL CONGLOMERATES COMMITTEE (EFCC) European Commission EFC ECONOMIC AND FINANCIAL COMMITTEE Consulting Committee Sub-Committee on Fin.Conglom. Joint Committee Consulting Committee ESRB 31 Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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Fließtext (Arial, 24 pt.) EU: Supervisory architecture since 2011 (2) 32 Europäisches Finanzaufsichtssystem (ESFS) Microprudential Supervision National Supervisory Authorities Joint Committee ESMAEIOPAEBA Macroprudential Supervision European Systematic Risik Board (ESRB) European System of Financial Supervisors (ESFS) ESAs Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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Fließtext (Arial, 24 pt.) 33 Board of Supervisors Executive Director Stakeholder Group Management Board Chair staff Board of Appeal Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 EU: Supervisory architecture since 2011 (3)
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European Level – Committees (1) Sector overreaching Cooperation European Systematic Risk Board: General Board ATC (Advisory Technical Committee) Joint Committee: SCFC (SubC on Financial Conglomerates) SCAML (SubC on Anti Money Laundering) SCCSRV (SubC on Cross Sectoral Developments Risks and Vulnerabilities) SCCPFI (SubC on Consumer Protection and Financial Innovation) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 34
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European Level – Committees (2) Securities and Markets Supervision ESMA: Board of Supervisors; - Management Board, ReviewPanel Market Integrity: ESMA-Pol Investment management SC Corporate Finance Corporate Reporting Investor Protection and Intermediaries Secondary Markets IT management and governance, HR Network Post Trading Credit Rating Agencies Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 35
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Agenda Overview of the FMA European and International Financial Markets Regulation Minimum Information under the Prospectus Directive (PD) and Prospectus Regulation (PR) National Legislation in Austria and Administrative Practice in Austria Adaptations to the Minimum Information in Prospectuses and Base Prospectuses Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 36
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European Prospectus Regime (1) Prospectus Directive (PD) 2003/71/EC as amended: legal framework for the regime for capital market prospectuses in the EU (transposition in national law) PD is a Level 1 Lámfalussy directive under the EU Financial Services Action Plan Prospectus Regulation (PR) Commission Regulation (EC) No 809/2004 as amended: implements the PD at Level 2 and lays down the detailed disclosure requirements (technical implementing measures) for prospectuses (directly applicable) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 37
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European Prospectus Regime (2) Milestones in Developing the Regime: 2001: first proposal by the Commission 2003: adoption of the PD 2004: adoption of the PR 2010: amendment of the PD 2012: two amendments of the PR (see the website of the European Commission [EC] for all documents of the EU relating to the prospectus regime http://ec.europa.eu/internal_market/securities/prospectus/index_en.htm) http://ec.europa.eu/internal_market/securities/prospectus/index_en.htm Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 38
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European Prospectus Regime (3) ESMA publishes Q&As and Recommendations on the Prospectus Regime See http://www.esma.europa.eu/page/prospectushttp://www.esma.europa.eu/page/prospectus ESMA Questions and Answers Prospectuses 17th updated version – September 2012: to promote common supervisory approaches and practices in the application of the PD and its implementing measures aimed at competent authorities under the PD, give market participants (especially issuers) an indication of what constitutes proper implementation of the PD rules Q&A mechanism is a practical convergence tool under Article 29(2) of the ESMA Regulation covers diverse topics in connection with prospectuses Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 39
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European Prospectus Regime (4) ESMA update of the CESR Recommendations – March 2011: to facilitate the understanding of certain disclosure requirements and the consistent implementation without imposing further obligations on issuers ESMA recommends that issuers prepare their prospectuses according to the recommendations unless they turn out to be unsuitable to a particular case prior public consultation process ensures that the views from market participants and end-users are fully considered covers financial information issues and non- financial information issues (specialist issuers, clarification of items, etc.) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 40
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Prospectus Directive (PD) (1) to improve market efficiency by a single approved prospectus enabling issuers to raise capital across the EU with only one approval procedure by one authority (the passport regime) ensure cost effectiveness enhance investor protection by requiring harmonized high standards of disclosure applies to public offers of securities and admission of transferable securities (as defined by MiFID) to trading on a regulated market classified in equity (shares or securities that may be converted into shares of the issuer) and non-equity securities Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 41
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Prospectus Directive (PD) (2) Article 1: Purpose and scope: harmonize requirements for the drawing up, approval and distribution of the prospectus; not applicable e.g. to non-equity securities issued by a Member State Article 2: Definitions : e.g. “offer of securities to the public” means a communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe to these securities. This definition shall also be applicable to the placing of securities through financial intermediaries Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 42
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Prospectus Directive (PD) (3) Article 3: Obligation to publish a prospectus no obligation for an offer of securities addressed -solely to qualified investors; -to fewer than 150 natural or legal persons per Member State, other than qualified investors; -to investors who acquire securities for a total consideration of at least EUR 100 000 per investor or denomination per unit amounts to at least EUR 100 000; - or an offer of securities with a total consideration in the EU of less than EUR 100 000, which shall be calculated over a period of 12 months. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 43
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Prospectus Directive (PD) (4) Article 4 : Exemptions from the obligation to publish a prospectus, e.g. shares issued in substitution for shares of the same class already issued; securities offered in connection with a takeover by means of an exchange offer; securities offered, allotted or to be allotted in connection with a merger or division; dividends paid out to existing shareholders in the form of shares of the same class; securities offered, allotted or to be allotted to existing or former directors or employees by their employer (third country equivalence decision). Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 44
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Prospectus Directive (PD) (5) Article 4 (cont'd): no obligation for admission to trading on a regulated market of the following types of securities, e.g.: -shares representing, over a period of 12 months, less than 10 % of the number of shares of the same class already admitted to trading; -see all exemptions mentioned on previous slide; - shares resulting from the conversion or exchange of other securities or from the exercise of the rights conferred by other securities, provided that the said shares are of the same class as the shares already admitted; -securities already admitted to trading on another regulated market under certain conditions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 45
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Prospectus Directive (PD) (6) Article 5 : The prospectus … shall contain all information which, according to the particular nature of the issuer and of the securities offered to the public or admitted to trading on a regulated market, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses, and prospects of the issuer and of any guarantor, and of the rights attaching to such securities. This information shall be presented in an easily analysable and comprehensible form. … shall contain information concerning the issuer and the securities to be offered to the public or to be admitted to trading on a regulated market. (Summary: Day 2) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 46
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Prospectus Directive (PD) (7) Article 5 (cont'd): the prospectus may be drawn up as a single document or separate documents; separate documents: registration document (contain the information relating to the issuer), securities note (contain the information concerning the securities offered to the public or to be admitted to trading on a regulated market) and summary note See also Article 12: Prospectuses consisting of separate documents (not to be confused with BP) (Base Prospectus: Day 2) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 47
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Prospectus Directive (PD) (8) Article 7: Minimum information referral to PR various models of prospectuses shall take into account e.g.: -equity / non-equity, securities which have a similar economic rationale, notably derivative securities; -non-equity securities having a denomination per unit of at least EUR 100,000; -non-equity securities, including warrants in any form, issued under an offering programme; -plain vanilla non-equity securities by entities authorised or regulated to operate in the financial markets within the EU; -credit institutions issuing non-equity securities, companies with reduced market capitalisation and SMEs; Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 48
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Prospectus Directive (PD) (9) Article 7 (cont'd): -public nature of the issue; -proportionate disclosure regime for offers of shares by companies whose shares of the same class are admitted to trading on a regulated market or a multilateral trading facility (MTF) which are subject to appropriate ongoing disclosure requirements and rules on market abuse, provided that the issuer has not disapplied the statutory pre-emption rights; -PR shall be based on the standards in the field of financial and non- financial information set out by international securities commission organisations, in particular by IOSCO and on the indicative Annexes to the PD; -ESMA may develop draft implementing technical standards in order to ensure uniform conditions of application of the delegated acts Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 49
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Prospectus Directive (PD) (10) Article 8: Omission of information if final offer price and amount of securities which will be offered to the public cannot be included in the prospectus: determining criteria and/or the conditions and maximum price; the competent authority of the home Member State may authorise the omission from the prospectus of certain information provided for in the PD or PR, if: -disclosure of such information would be contrary to the public interest; -disclosure of such information would be seriously detrimental to the issuer, provided that the omission would not be likely to mislead the public; -such information is of minor importance only for a specific offer or admission to trading on a regulated market and is not such as will influence the assessment of the financial position and prospects of the issuer etc. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 50
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Prospectus Directive (PD) (11) Article 9 : Validity of a prospectus, BP and registration document: 12 months (if supplemented) Article 11: Incorporation by reference allow information to be incorporated in the prospectus by reference to one or more previously or simultaneously published documents that have been approved by the competent authority of the home Member State or filed with it; such information shall be the most recent available to the issuer the summary shall not incorporate information by reference. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 51
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Prospectus Directive (PD) (12) Article 13: Approval of the prospectus Article 14: Publication of the prospectus Article 15: Advertisements shall be clearly recognisable as such; information contained in an advertisement shall not be inaccurate, or misleading; shall also be consistent with the information contained in the prospectus, if already published, or with the information required to be in the prospectus […] competent authority of the home Member State shall have the power to exercise control over the compliance of advertising activity Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 52 see Austrian Part
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Prospectus Directive (PD) (13) Article 16: Supplements to the prospectus (Day 3) Article 17: Community scope of approvals of prospectuses: passport regime Article 18: Notification Article 19: Use of languages Article 20: Issuers incorporated in third countries Article 21: Powers (of competent authorities) Article 22: Professional secrecy and cooperation between authorities Article 23: Precautionary measures Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 53
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Agenda Overview of the FMA European and International Financial Markets Regulation Minimum Information under the Prospectus Directive (PD) and Prospectus Regulation (PR) National Legislation in Austria and Administrative Practice in Austria Adaptations to the Minimum Information in Prospectuses and Base Prospectuses Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 54
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55 Legal Basis Capital Markets Act (CMA) and Stock Exchange Act (SEA) (implementing PD as amended) PR as amended ESMA Questions and Answers Prospectuses 17th updated version – September 2012 ESMA update of the CESR Recommendations – March 2011 National Regulations – Minimum Content, Publication and Languages Regulations Circular of FMA (2.12.2010) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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56 General Overview (CMA and SEA) Public offer pursuant to Art. 2 para 1 and Art. 1 para 1 CMA Prospectus as precondition for Public offer and Admission to trading Exemptions – Art 3 CMA and Art. 75 SEA Different regulation for Prospectuses for securities (Prospectus control and approval by FMA – Prospectus Regulation 809/2004) Prospectuses for investments (Prospectus control by qualified auditor – Schema C of CMA) Supplements for significant new factors, material mistakes or inaccuracies – Art. 6 CMA Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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57 Obligation to publish a Prospectus - CMA Art 1. para (1) For the purpose of this federal act the following definitions shall apply: 1. Public offer: A communication to the general public in any form whatsoever that contains adequate information on the terms and conditions of an offering (or an invitation to subscribe) for securities and investment, and on the securities or investment themselves that give potential investors a basis on which to reach an informed decision on the purchase or subscription to securities. […] Art. 2. para (1) An initial public offering shall be permissible within Austria only on the condition that a prospectus drawn up and audited in conformity with the provision of this Act is published at least one day in advance. Besides the obligation to publish a prospectus for public offers, the admission to trading of securities on a regulated market requires a prospectus pursuant to Art. 74 Stock Exchange Act. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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58 Obligation to publish a Prospectus - CMA Investments (Art. 1 Abs para 1 fig 3 CMA): Property rights for which no securities are issued, arising out of direct or indirect investments of the capital of several investors for their collective account and collective risk or for the collective account or risk together with the issuer if the administration of the capital invested is not overseen by the investor him or herself; Investments in the meaning of this federal act are all transferable, securitized rights that are not securities according to MiFID; Securities (Art. 1 para 1 fig 4 CMA): transferable securities in the meaning of MiFID except money market instruments with a maturity shorter than twelve months; Prospectus InvestmentsSecurities Dividend Securtities Non -equity securities Base ProspectusSingle Prospectus Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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59 Structure of Prospectuses Content of Prospectuses Table of content Summary Risk factors Information according to annexes (additional information (Specialist Issuers)) Building Block Approach Registration Document and Securities Notes Common Combinations: -Annex I and III for equity securities (IPOs and Capital Increases) -Annex IV and V for debt securities -Annex XI (Registration document for Credit Institutions) -Annex X (Certificates representing shares) -If applicable Annex II (Pro-Forma Financial Information) Languages: German or English Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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60 Scrutinizing Standards applied by the FMA Completeness On the basis of the minimum requirements contained in the annex applied Issuer can apply for the omission of information Art. 7 para 6 CMA Consistency Within the prospectus and its annexes (if existent) The FMA does not check the correctness of information – this issue is covered by the issuer’s declaration of liablity Understandability For an average informed investor Glossary and special terms Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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61 Publication of Prospectuses Basis: No prospectus shall be published until it has been approved by the FMA (Art 10 para. 1 CMA). After the approval the prospectus has to be filed with the OeKB (Austrian Control Bank, acting as registration office) at the latest at the day of publication (Art 8a para 7 CMA). The FMA publishes a list of prospectuses approved over the last 12 month. The availability of the prospectuses are indicated in this list. Further registration requirements: Issuer Calendar, Issuer Information Center, … Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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62 Publication Simultaneously with the publication of the prospectus (at the latest on the subsequent day) a publication notice has to be published Contents: Name of issuer Type and volume of securities Information if admission to trading was applied for Planned schedule for the public offer Notice that a prospectus was published and where it is available Date Publication of Supplements (Art 6 para 1 CMA): Supplements have to be published simultaneously with their submission at the FMA (same mean of publication as original Prospectus). Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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63 Means of Publication A prospectus is deemed available if: a printed form is made available (at the offices of the issuer, the market on which the securities are being admitted to trading or the financial intermediaries); it is available at the homepage of the issuer, the financial intermediaries including the paying agent; it is available at the homepage of the regulated market; (it is available at the homepage of the FMA – not possible at the moment); (it is printed in defined news papers) The issuer has to inform the FMA about the means of publication Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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64 Structure of Prospectus Approval Specialization/training of team members: Law, Business Administration, Banking Full implementation of 4-eye principle Integrated Supervision Approach Approvals 2007: Prospectuses: 70; Supplements: 23 2008: Prospectuses: 42; Supplements: 15 2009: Prospectuses: 100; Supplements: 44 2010: Prospectuses: 100; Supplements: 48 2011: Prospectuses: 104; Supplements: 65 Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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65 Process of approval Process Prospectuses for securities 1. Submission Formal application Signed prospectuses Quantity (FMA: 1; OeKB: 1; in case of listing at the Vienna Stock Exchange: 2) If necessary: Cross-Reference-List („CRL“) Additionally: submission of documents via electronic media (doc file or pdf) – max 10 MB Hardcopy submission triggers the time limits Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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66 Process of approval Process 2.-X. Submission Electronic versions are sufficient Compare versions Declaration of identity Final submission See 1. submission Declaration of identity Recommendation: timely contact with FMA Notification to other EU member states if requested by the issuer Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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67 Process Preliminary talks (optional) Submission of prospectus Formal audit FMA not competentMissing signatures Missing attachments / other formal mistakes Formal submission correct Formal rejection Request for amendment Art. 13 para 4 AVG Request for amendment Art. 13 para 3 AVG New submission or rejection Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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68 Process Formal submission correct (Start of time limits) Scrutinization of prospectus (pursuant to Art. § 8a para 1 CMA) Request for amendment (statement of all defficiencies) time limit of 2 or 4 weeks Approval of Prospectus Hard copies of prospectus required Handover of 1/3 prospectuses approved (formal stamp) to issuer Prospectus does not comply to legal requirements Prospectus complies with legal requirements New submissionNo new submission Rejection New scrutinization (time limits starts anew) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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69 Supervisory approach of the FMA Criminal and administrative proceedings Art 15 CMA (criminal – up to 2 years of imprisonment or 360 daily fine rates) -Public offer without approved and published prospectus/supplements -Incorrect, misleading information, concealment of information Art 16 CMA (administrative proceedings – subsidiary to criminal proceedings – up to EUR 50,000) -Violation of publication and filing regulation -Violation of regulations regarding advertisements -Perform activities as prospectus controller without required insurance -… Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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70 Specialist Issuers – Start Up Start-up Companies Business-Plans - Content: -Target group of the issue -Management team -History of the business idea -Business model (incl. Business areas and products) -Corporate strategy and targets -Market environment (e.g. Customers, Suppliers, Competitors, legal requirements) -Structure of Assets and Financing -Organizational structure -Milestones and criteria which influence the successful implementation of the business model -Forecast of revenues and profits (optional – requires report by indipendent auditors) Interim financial statements Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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71 Specialist Issuers – Real Estate Companies Real Estate Companies Valuation Report for real estate which qualify as long term assets By independent expert Content -Date of inspection -Date of valuation -Details for valuation -Treatment of various costs -Properties with negative value -Sum of values (divided by buildings on own properties) -Changes in valuations Additional information to be included in the prospectuses: Negative adjustment clause Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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72 Financials Historical Financial Information Dividend securities -3 Business years (including audit report) -Bridging method -Interim Information (if published) with comparative figures -Pro-forma Financial Information (if applicable) Non-dividend securities -2 Business years (including audit report) -Interim Information (if published) with comparative figures Incorporation by reference Further financial information Capitalization and indebtedness Profit forecasts BY1BY2BY3 UGB IAS/IFRS Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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73 Advertisements Regulation in Art 4 CMA apply for securities and investments Regulations „interested parties“ Far reaching definition of advertisement Reference to prospectus and supplements No incorrect or misleading information No contradiction to information in prospectus Julia Lemonia Raptis, FMA Baku, October 10-12, 2012
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Agenda Overview of the FMA European and International Financial Markets Regulation Minimum Information under the Prospectus Directive (PD) and Prospectus Regulation (PR) National Legislation in Austria and Administrative Practice in Austria Adaptations to the Minimum Information in Prospectuses and Base Prospectuses Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 74
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Prospectus Regulation (PR) (1) Article 1: Subject matter the format of prospectus referred to in Article 5 PD; the minimum information requirements to be included in a prospectus provided for in Article 7 PD; the modalities according to which information can be incorporated by reference in a prospectus provided for in Article 11 PD; the publication methods of a prospectus in order to ensure that a prospectus is publicly available according to Article 14 PD; the methods of dissemination of advertisements referred to in Article 15 PD Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 75
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Prospectus Regulation (PR) (2) Article 2: Definitions ‘schedule’ means a list of minimum information requirements adapted to the particular nature of the different types of issuers and/or the different securities involved ; ‘building block’ means a list of additional information requirements, not included in one of the schedules, to be added to one or more schedules, as the case may be, depending on the type of instrument and/or transaction for which a prospectus or BP is drawn up; ‘risk factors’ means a list of risks which are specific to the situation of the issuer and/or the securities and which are material for taking investment decisions; … Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 76
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Prospectus Regulation (PR) (3) Article 2a: Categories of information in the BP and the final terms (FT) determine the degree of flexibility by which the information can be given in the BP or the final terms: -‘Category A’ means the relevant information which shall be included in the BP and cannot be left in blank for later insertion in the FT; -‘Category B’ means that the BP shall include all the general principles related to the information required, and only the details which are unknown at the time of the approval of the BP can be left in blank for later insertion in the FT; -‘Category C’ means that the BP may contain a reserved space for later insertion for the information which was not known at the time of the approval of the BP. Such information shall be inserted in the FT. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 77 (Base Prospectus: Day 2)
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Prospectus Regulation (PR) (4) Article 3: Minimum information to be included in a prospectus A prospectus shall be drawn up by using one or a combination of the schedules and building blocks set out in the PR; and shall contain the information items required in Annexes I to XVII and Annexes XX to XXIX depending on the type of issuer or issues and securities involved. Subject to Article 4a(1), a competent authority shall not request information items which are not included therein; subject to Article 4a(1), a competent authority shall not request that a prospectus contains information items which are not included in the Annexes; Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 78
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Prospectus Regulation (PR) (5) Article 3 (cont'd): the competent authority may, on a case-by-case basis, require the information to be completed, for each of the information items; and, may, on a case-by-case basis, require certain information provided in the prospectus, to be included in the summary; Article 4: Share registration document schedule: Annex I shares and other transferable securities equivalent to shares; other securities that can be converted or exchanged into shares or other transferable securities equivalent to shares and provided that these shares are not yet traded on a regulated market […] at the time of the approval covering the securities, and that the underlying shares or other transferable securities equivalent to shares can be delivered with physical settlement. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 79
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Prospectus Regulation (PR) (6) Article 4a: Share registration document schedule in cases of complex financial history or significant financial commitment … and in consequence the inclusion in the registration document of certain items of financial information relating to an entity other than the issuer is necessary in order to satisfy the obligation laid down in Article 5(1) PD, those items of financial information shall be deemed to relate to the issuer. Article 5: Pro forma financial information building block (Financial Information: Day 3) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 80
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Prospectus Regulation (PR) (7) Article 6: Share securities note schedule: Annex III Article 7: Debt and derivative securities registration: document schedule for securities with a denomination per unit of less than EUR 100 000: Annex IV Article 8: Securities note schedule for debt securities with a denomination per unit of less than EUR 100 000: Annex V The schedule shall apply to debt where the issuer has an obligation arising on issue to pay the investor 100 % of the nominal value in addition to which there may be also an interest payment Article 9: Guarantees building block (n/a for MS as guarantors): Annex VI Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 81
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Prospectus Regulation (PR) (8) Article 10: Asset backed securities registration document schedule: Annex VII Article 11: Asset backed securities building block: Annex VIII Article 12: Debt and derivative securities registration document schedule for securities with a denomination per unit of at least EUR 100 000: Annex IX Article 13: Depository receipts schedule: Annex X Article 14: Banks registration document schedule : Annex XI Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 82
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Prospectus Regulation (PR) (9) Article 15: Securities note schedule for derivative securities: Annex XII Article 16: Securities note schedule for debt securities with a denomination per unit of at least EUR 100 000: Annex XIII Article 17: Additional information building block on the underlying share: Annex XIV Article 18: Registration document schedule for collective investment undertakings of the closed-end type: certain items of Annex I and Annex XV Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 83
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Prospectus Regulation (PR) (10) Article 19: Registration document schedule for Member States, third countries and their regional and local authorities: Annex XVI Article 20: Registration document schedule for public international bodies and for issuers of debt securities guaranteed by a member state of the OECD: Annex XVII Article 21: Combination of schedules and building blocks: Annex XVII Article 22: Minimum information to be included in a BP and its related final terms: Annex XVIII (Day 2) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 84
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Prospectus Regulation (PR) (11) Article 23: Adaptations to the minimum information given in prospectuses and BPes the competent authority, taking into consideration the specific nature of the activities involved, may ask for adapted information, in addition to the information items included in the schedules and building blocks set out in Articles 4 to 20, including, where appropriate, a valuation or other expert’s report on the assets of the issuer, in order to comply with the obligation referred to in Article 5(1) PD. The competent authority shall forthwith inform the Commission thereof. In order to obtain the inclusion of a new category in Annex XIX a Member State shall notify its request to the Commission. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 85
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Prospectus Regulation (PR) (12) Article 24: Content of the summary of the prospectus, of the BP and of the individual issue: Annex XXII (Summary & BP: Day 2) Article 25: Format of the prospectus Clear and detailed table of content Summary Risk factors linked to the issuer and the type of security covered by the issue Information according to annexes (additional information (Specialist Issuers)) Otherwise: cross reference list (identify the pages where each item can be found in the prospectus) Article 26: Format of the BP and its related final terms (BP: Day 2) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 86
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Prospectus Regulation (PR) (13) Article 26a: Proportionate schedule for rights issues: Annex XXIII and XXIV shall apply to rights issues, provided that the issuer has shares of the same class already admitted to trading on a regulated market or a MTF (if it meets certain requirements) A statement at the beginning of the prospectus shall indicate clearly that the rights issue is addressed to shareholders of the issuer and that the level of disclosure of the prospectus is proportionate to that type of issue. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 87
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Prospectus Regulation (PR) (14) Article 26b: Proportionate schedules for small and medium- sized enterprises and companies with reduced market capitalisation: Annexes XXV to XXVIII means companies, which, according to their last annual or consolidated accounts, meet at least two of the following three criteria: an average number of employees during the financial year of less than 250, a total balance sheet not exceeding EUR 43 000 000 and an annual net turnover not exceeding EUR 50 000 000 Article 26c: Proportionate requirements for issues by credit institutions referred to in Article 1(2)(j) of Directive 2003/71/EC (Financial Information: Day 3) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 88
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Prospectus Regulation (PR) (15) Article 28: Arrangements for incorporation by reference Information may be incorporated by reference in a prospectus or BP, notably -annual and interim financial information; -documents prepared on the occasion of a specific transaction such as a merger or de-merger; -audit reports and financial statements; -memorandum and articles of association; -earlier approved and published prospectuses and/or BP; -regulated information; -circulars to security holders. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 89
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Prospectus Regulation (PR) (16) Article 28 (cont'd): If a document contains information which has undergone material changes, the prospectus or BP shall clearly state such a circumstance and shall give the updated information incorporate information in a prospectus or BP by making reference only to certain parts of a document is possible, provided that it states that the non- incorporated parts are either not relevant for the investor or covered elsewhere in the prospectus When incorporating information by reference one shall endeavour not to endanger investor protection in terms of comprehensibility and accessibility of the information. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 90
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Prospectus Regulation (PR) (17) Article 29: Publication in electronic form the prospectus or BP shall be easily accessible when entering the web- site; the file format shall be such that the prospectus or BP cannot be modified; the prospectus or BP shall not contain hyper-links, with exception of links to the electronic addresses where information incorporated by reference is available; the investors shall have the possibility of downloading and printing the prospectus or BP. Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 91
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Prospectus Regulation (PR) (18) Article 30: Publication in newspapers the publication of a prospectus or a BP shall be made in a general or financial information newspaper having national or supra-regional scope Article 31: Publication of the notice the publication of a notice stating how the prospectus or BP has been made available and where it can be obtained by the public, that notice shall be published in a newspaper that fulfils the requirements for publication of prospectuses according to Article 30 of PR (notice: next working day after publication Article 32: List of approved prospectuses Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 92
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Prospectus Regulation (PR) (19) Article 33: Publication of the final terms of BPes Article 34: Dissemination of advertisements Article 35: Historical financial information (Financial Information: Day 3) Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 93
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PR Annex I Share Registration Document (1) 1.Persons responsible 2.Statutory auditors 3.Selected financial information 4.Risk factors 5.Information about the issuer: 1.History and development of the issuer 2.Investments 6.Business overview 1.Principal Activities 2.Principal Markets Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 94
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PR Annex I Share Registration Document (2) 7.Organisational structure 8.Property, plants and equipment 9.Operating and financial review 1.Financial Condition 2.Operating Results 10.Capital resources 11.Research and development, patents and licences 12.Trend information 13.Profit forecasts or estimates 14.Administrative, management, and supervisory bodies and senior management Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 95
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PR Annex I Share Registration Document (3) 15.Renumeration and benefits 16.Board practices 17.Employees 18.Major shareholders 19.Related party transactions 20.Financial information concerning the issuer’s assets and liabilities, financial position and profits and losses 1.Historical Financial Information 2.Pro forma financial information 3.Financial statements Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 96
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PR Annex I Share Registration Document (4) 1.Auditing of historical annual financial information 2.Age of latest financial information 3.Interim and other financial information 4.Dividend policy 5.Legal and arbitration proceedings 6.Significant change in the issuer’s financial or trading position 21.Additional information 22.Material contracts 23.Third party information and statement by experts and declarations of any interest Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 97
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PR Annex I Share Registration Document (5) 24.Documents on display 25.Information on holdings Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 98
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PR Annex III Share Securities Note (1) 1.Persons responsible 2.Risk factors 3.Key information 1.Working capital Statement 2.Capitalisation and indebtedness 3.Interest of natural and legal persons involved in the issue/offer 4.Reasons for the offer and use of proceeds 4.Information concerning the securities to be offered/admitted to trading 5.Terms and conditions of the offer 1.Conditions, offer statistics, expected timetable and action required to apply for the offer Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 99
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PR Annex III Share Securities Note (2) 2.Plan of distribution and allotment 3.Pricing 4.Placing and Underwriting 6.Admission to trading and dealing arrangements 7.Selling securities holders 8.Expense of the issue/offer 9.Dilution 10.Additional information Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 100
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Agenda Overview of the FMA European and International Financial Markets Regulation Minimum Information under the Prospectus Directive (PD) and Prospectus Regulation (PR) National Legislation in Austria and Administrative Practice in Austria Adaptations to the Minimum Information in Prospectuses and base prospectuses Concluding Discussions Julia Lemonia Raptis, FMA Baku, October 10-12, 2012 101
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