1. Legal Aspects of Finance
Slide Set 9
The Disclosure Duties:
The Duties in Issues of Securities (Especially Prospectuses)
Matti Rudanko

2. Offering and Listing of Securities
on the admission of securities to official stock exchange listing and on information to be published on those securities
DIRECTIVE 2001/34/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 28 May 2001
on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC
”Prospectus directive”
In force from 1 July, 2005
DIRECTIVE 2003/71/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 4 November 2003
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3. MiFID
Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 (MiFID II)
on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU
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4. ”Europassport” for issuers
COMMISSION REGULATION (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards
information contained in prospectuses as well as the format, incorporation by reference and
publication of such prospectuses and dissemination of advertisements
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5. Finnish regulation Legal Aspects of Finance 9 SMA ch. 3 - 5
Ministry of Finance decrees 452/2005, 479/2006, 818/07 and 940/2007
FSA standard 5.2a on Securities offerings and listing
FSA interpretation 3/2005 on the prospectus under the Prospectus Directive in issue program
CESR’s recommendations for the consistent implementation of the European Commission’s Regulation on Prospectuses N:o 809/2004 (CESR /05-054b)
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6. Marketing and issuance of securities, duty of disclosure (SMA ch
Marketing and issuance of securities, duty of disclosure (SMA ch. 1 sect. 2 – 4)
General Principles
On securities markets, a procedure that is contrary to good securities market practice is prohibited
Securities shall not be marketed or acquired in business by giving false or misleading information
Information which is found to have been misleading or false after its presentation and which may be of material importance to an investor shall, without delay, be corrected or supplemented in a sufficient manner.
Anyone who offers a security to the public or applies for the admission to public trading or multilateral trading facility of a security or, on the basis of an authorization, handles the issuance of a security or application for the admission to public trading of a security on behalf of another, shall make available for the subscribers on an equal basis sufficient information on factors which may have a material effect on the value of the security.
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7. Prospectus Directive art. 2 p.1d
‘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
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8. Duty to prepare a prospectus SMA ch. 4, sect. 1
Anyone who offers securities to the public or applies for the admission to public trading of a security shall be under an obligation to publish a prospectus relating to the securities before the entry into force of the offer and to have them available for the public during the validity of the offer.
In addition to the offeror and the issuer, the party handling the offer or issuance on the basis of an order shall also be liable for the preparation of the prospectus.
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9. Exemptions from the duty
The state of Finland, BOF, a Finnish municipality, EEA-stata, ECB etc. as issuers
Ministry of Finance decree 538/05:
Exemptions subject to consideration (by FSA)
General exemptions:
debt securities maturing in less than 12 months
Unit fund shares
an offer of securities addressed solely to qualified investors;
an offer of securities addressed to fewer than 150 natural or legal persons per Member State, other than qualified investors
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10. Exemptions from the duty, cont.
Qualified investors: professional investors and eligible counterparties
An offer of securities addressed to investors who acquire securities for a total consideration of at least EUR per investor, for each separate offer or an offer of securities whose denomination per unit amounts to at least EUR
An offer of securities with a total consideration of less than EUR , which limit shall be calculated over a period of 12 months
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11. FSA Standard 5.2a, Recommendations
(25) The prospectus shall provide adequate information on the principles of issue allocation between individual investor groups, ie mainly on the allocation of subscribed shares between the public, members of staff, if any, and institutional investors.
(26) It should especially be mentioned if the company or issue organiser has decided on the special treatment of a certain investor group, body of investors or the customers of a certain intermediary, together with details of the percentage shares set aside for these groups.
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12. FSA approves the prospectus
FSA Standard 5.2a
FSA approves the prospectus
All approved listing particulars, prospectuses and offer documents are published on the Financial Supervision Authority's website,
together with a list of prospectuses approved by the competent authority of a member state of the European Economic Area and recognised by the Financial Supervision Authority.
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13. The Contents of the Prospectus: FSA ch. 4, section 6
The prospectus shall provide sufficient information to the investor for the making of a well-founded assessment on the securities and their issuer. The prospectus shall contain essential and sufficient information on the assets, liabilities, financial position, the result and prospects of the issuer as well as on the rights attached to the security and any other factors which may have a material effect on the value of the securities. This information shall be presented in an easily analysable and comprehensible form.
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14. Minimum Disclosure Requirements COMMISSION REGULATION (EC) No 809/2004, annexes
PERSONS RESPONSIBLE, STATUTORY AUDITORS
RISK FACTORS
INFORMATION ABOUT THE ISSUER
BUSINESS OVERVIEW
ORGANIZATIONAL STRUCTURE
OPERATING AND FINANCIAL REVIEW
CAPITAL RESOURCES
PROFIT FORECASTS OR ESTIMATES
BOARD PRACTICES
EMPLOYEES
MAJOR SHAREHOLDERS
FINANCIAL STATEMENTS
DIVIDEND POLICY
LEGAL AND ARBITRATION PROCEEDINGS
MATERIAL CONTRACTS
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15. The Contents and the Structure of the Prospectus, cont.
The prospectus may be drawn up as a single document or separate documents.
A prospectus composed of separate documents shall divide the required information into
a registration document,
a securities note
and a summary note.
The registration document shall contain the information relating to the issuer.
The securities note shall contain the information concerning the securities offered to the public or to be admitted to trading on a regulated market.
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