Legal Aspects of Finance Slide Set 9 The

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

EU Regulation Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 • on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (Mi. FID II) Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 • on the admission of securities to official stock exchange listing and on information to be published on those securities Regulation (EU) 2017/1129 • on the prospectus to be published when securities are of the European offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/ECText with EEA Parliament and of the relevance. (”Prospectus directive”) Council of 14 June 2017 Legal Aspects of Finance 3 2

Regulation (cont. ) 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 • ”Europassport” for issuers CESR’S (SEE SLIDE SET 4: 2 – 3) RECOMMENDATIONS FOR THE CONSISTENT IMPLEMENTATION OF THE EUROPEAN COMMISSION’S REGULATION ON PROSPECTUSES N: O 809/2004 (CESR /05 -054 B) Legal Aspects of Finance 3 3

Mi. FID Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 (Mi. FID II) • on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU Legal Aspects of Finance 9 4

Regulation, domestic • Securities Markets Act (14. 12. 2012 / 746 http: //www. finlex. fi/fi/laki/kaannokset/2012/en 20120746. pdf • Repeals: Former SMA (495/1989) • Ch. 3 – 4 (prospectus), 6 – 9 on disclosure duties • Marketing and issuance of securities, duty of disclosure (SMA ch. 1 sect. 2 – 4) • The Penal Code, Ch. 51, Section 5 (1. 4. 1999/475) - Information crime relating to the securities markets • Lower level norms: FSA Legal Aspects of Finance 3 5

Marketing and issuance of securities, duty of disclosure, general principles (SMA ch. 1 sect. 2 – 4) 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 Such information of material importance to an investor shall, without delay, be corrected or supplemented Issuer and provider of issue services 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. Legal Aspects of Finance 9 6

Prospectus Directive art. 2 p. 1 d ‘Offer of securities to the public’ means a communication to persons in any form and by any means, This definition shall also be applicable to the placing of securities through financial intermediaries 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. Legal Aspects of Finance 9 7

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. Legal Aspects of Finance 9 8

Exemptions from the duty The state of Finland, BOF, a Finnish municipality, EEA-state, ECB etc. as issuers Ministry of Finance decree 538/05 (not any more valid, but contains a well-outlined list): 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 Legal Aspects of Finance 9 9

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 100 000 per investor, for each separate offer or an offer of securities whose denomination per unit amounts to at least EUR 100 000 An offer of securities with a total consideration of less than EUR 1. 500 000, which limit shall be calculated over a period of 12 months Legal Aspects of Finance 9 10

FSA Standard 5. 2 a, 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. Legal Aspects of Finance 9 11

FSA Standard 5. 2 a 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. Legal Aspects of Finance 9 12

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. Legal Aspects of Finance 9 13

Minimum Disclosure Requirements COMMISSION REGULATION (EC) No 809/2004, annexes PERSONS RESPONSIBLE, STATUTORY AUDITORS BOARD PRACTICES RISK FACTORS EMPLOYEES INFORMATION ABOUT THE ISSUER MAJOR SHAREHOLDERS BUSINESS OVERVIEW ORGANIZATIONAL STRUCTURE OPERATING AND FINANCIAL REVIEW CAPITAL RESOURCES PROFIT FORECASTS OR ESTIMATES FINANCIAL STATEMENTS DIVIDEND POLICY LEGAL AND ARBITRATION PROCEEDINGS MATERIAL CONTRACTS Legal Aspects of Finance 9 14

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 The registration document shall contain the information relating to the issuer. a registration document, a securities note and a summary note. The securities note shall contain the information concerning the securities offered to the public or to be admitted to trading on a regulated market. Legal Aspects of Finance 9 15