Introduction to the Prospectus in a Securities Offering

Introduction to the Prospectus in a Securities Offering

Kate Craven

35 years: Capital markets

In this video, Kate discusses what a Prospectus is, and why the contents may vary. She also gives a brief  introduction to the Prospectus Regulation and summarises the key disclosure requirements, highlighting the different standards for retail and for wholesale bond offerings. 

In this video, Kate discusses what a Prospectus is, and why the contents may vary. She also gives a brief  introduction to the Prospectus Regulation and summarises the key disclosure requirements, highlighting the different standards for retail and for wholesale bond offerings. 

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Introduction to the Prospectus in a Securities Offering

8 mins 20 secs

Overview

The offering prospectus is a key document in the securities offering process. It is critical to have a thorough grasp of the issuer's needs, the structure of the transaction, and the investors to be targeted in order to accurately draft the Prospectus.

Key learning objectives:

  • Define prospectus

  • Understand the overview of Prospectus Regulation

  • Understand what should appear in a bond prospectus

  • Understand what the Prospectus Regulation says about the contents of the prospectus

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Summary

What is a prospectus?

The prospectus is a key document in the securities offering process. The content on a prospectus may vary depending on what type of securities are being offered, where the securities are being listed, what category of investor is being targeted and where the offer is being made.

What are the key purposes of a prospectus?

The key purpose of a prospectus is to provide

  • An overview of the company issuing the securities
  • The relevant terms and conditions of those securities

Why do investors look at the prospectus?

  • To make an informed assessment of both the company and the securities
  • To use it as a basis for making their investment decision

What was the Goal of the Prospectus Regulation of 2017?

The goal was to create adequate and equivalent disclosure standards across the EU so that investors benefit from standardised disclosure to underpin the transparency and investor protection that are among the goals of the EU's Capital Markets Union.

What is the purpose of the Prospectus Regulation of 2017?

The purpose of the Prospectus Regulation of 2017 is to:

  • Set out in detail what must appear in the prospectus and the order in which it must appear
  • To make the content included in prospectuses simple to navigate and easy to understand

What should appear in a bond prospectus?

A description of the transaction should be on the cover page, followed by a clear and precise table of contents. Risk factors covering the issuer’s ability to fulfil its obligations under the securities, and material factors allowing an assessment of the market risk associated with them, need to be upfront.

What is Stabilisation?

Stabilisation is when the underwriters support the price of the bonds and could constitute market abuse for example, insider dealing.

What does the Prospectus Regulation say about the contents of the prospectus?

A prospectus shall contain the necessary information which is material to an investor for making an informed assessment of:

  • The assets and liabilities, profits and losses, financial position, and prospects of the issuer and of any guarantor
  • The rights attaching to the securities
  • The reasons for the issuance and its impact on the issuer

That information may vary depending on any of the following:

  • The nature of the issuer
  • The type of securities
  • The circumstances of the issuer
  • Where relevant, whether or not the non-equity securities have a denomination per unit of at least 100 000 euros or are to be traded only on a regulated market, or a specific segment thereof, to which only qualified investors can have access for the purposes of trading in the securities.

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Expert
Kate Craven

Kate Craven

Kate is a senior member of ICMA and consults on various projects including the recent update of the Primary Market Handbook. Kate previously served as Director at Barclays Plc in the Legal Department. She was responsible for the team specialising in debt capital markets. Prior to joining Barclays, she served as Director at Merrill Lynch. Kate had started in the Transaction Management Group at Merrill Lynch International in 1993 before spending two years in Tokyo with Merrill Lynch Japan Securities. She later headed the team responsible for the documentation of syndicated Eurobonds and EMTN programmes. Kate became chair of the Legal & Documentation Committee of the ICMA in 2001 and was listed as one of the 8 top in-house lawyers in the 2001 edition of Chambers and Partners Index to Leading Lawyers.

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