Avv. Salvatore Providenti Bergamo University The slides are based on a common work with Avv. Alessandra Atripaldi

Transcription

1 Avv. Salvatore Providenti Bergamo University The slides are based on a common work with Avv. Alessandra Atripaldi

2 a. Introduction to European and national securities law 1) Freedom of movement 2) Rules and institutions in Italy b. The main set of rules 1) The MIFIR-MIFID framework 2) The MAR-MAD framework 3) The Transparency and Prospectus Framework 4) The Takeover Directive

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4 Art of the Treaty on the Functioning of the European Union The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.

5 Admission of securities to official stock exchange - listing and information to be published Rights of shareholders in listed companies Transparency of information about issuers of securities Prospectus to be published when securities are offered to the public or admitted to trading on a regulated market Takeover bids Market abuse Credit rating agencies Investment research and financial analysts Investment funds (UCITS): applicable rules organisational requirements and rules of conduct Investment services: MiFID and investment services Capital adequacy of investment firms and credit institutions Investor compensation schemes

6 Consolidated Law 58/1998 and executing regulations ( TUF ) Minister of the Economy and Finance (Treasury) Consob Bank of Italy Borsa Italiana S.p.A. Consob and Bank of Italy Regulations Central Depositary of Financial Instruments (Montetitoli) Compensation systems Judicial system (criminal, administrative and civil courts) Relationships with other Authorities

7 The Commissione Nazionale per le Società e la Borsa (CONSOB) is the public authority responsible for regulating the Italian securities market. Born in 1974 Main Law: LEGISLATIVE DECREE No. 58 OF 24 FEBRUARY 1998 Consolidated Law on Finance pursuant to Articles 8 and 21 of Law no. 52 of 6 February 1996 Its activity is aimed at the protection of the investing public. In this connection, the CONSOB is the competent authority for ensuring: transparency and correct behaviour by securities market participants disclosure of complete and accurate information to the investing public by listed Companies; accuracy of the facts represented in the prospectuses related to offerings of transferable securities to the investing public; compliance with regulations by auditors entered in the Special Register It conducts investigations with respect to potential infringements of insider dealing and market manipulation law.

8 ESMA is an independent EU Authority that contributes to safeguarding the stability of the European Union's financial system by ensuring the integrity, transparency, efficiency and orderly functioning of securities markets, as well as enhancing investor protection. In particular, ESMA fosters supervisory convergence both amongst securities regulators, and across financial sectors by working closely with the other European Supervisory Authorities competent in the field of banking (EBA), and insurance and occupational pensions (EIOPA). REGULATION (EU) No 1095/2010 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority - ESMA)

9 The objectives of supervisory activities indicated in this section shall be: a) the safeguarding of faith in the financial system; b) the protection of investors; c) the stability and correct operation of the financial system; d) competitiveness of the financial system; e) the observance of financial provisions For the pursuance of objectives indicated in subsection 1, the Bank of Italy shall be responsible for risk containment, asset stability and the sound and prudent management of intermediaries For the pursuance of objectives indicated in subsection 1, Consob shall be responsible for the transparency and correctness of conduct

10 Art. 74 Consob shall supervise regulated markets with the aim of ensuring the transparency of the market, the orderly conduct of trading and the protection of investors Art. 91 Consob shall exercise the powers provided for in this Part (ISSUERS) having regard to the protection of investors and the efficiency and transparency of the market in corporate control and the capital market

11 1) The MIFIR-MIFID framework 2) The MAR-MAD framework 3) The Prospectus Regulation 4) The Takeover Directive 16/06/17

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13 OLD REGIME MIFID1: Markets in financial instruments and investment services: Directive 2004/39/ of 21April 2004 on markets in financial instruments NOW MIFID2 Directive n. 2014/65 of harmonization: requires the Member States to harmonise the rules governing investment services and activities. To that end, the Member States must set up an authorisation system enabling investment firms to operate throughout the EU. These firms must be registered andthe register must be accessible to the public. Each authorisation is notified to the European Securities and Markets Authority (ESMA). Investor protection: considerably enhanced by setting business of conduct rules for providing investment services to clients and minimum standards for the mandate and powers that national competent authorities must have at their disposal. It also establishes effective mechanisms for real time cooperation in investigating and prosecuting breaches of the rules. MIFIR Regulation n. 600/2014 of (applicable as of ) PRODUCT INTERVENTION

14 In providing investment and non-core services and activities, authorised intermediaries must: a) act diligently, fairly and transparently in the interests of customers and the integrity of the market. b) acquire the necessary information from customers and operate in such a way that they are always adequately informed; c) use publicity and promotional communications which are correct, clear and not misleading, d) have resources and procedures, including internal control mechanisms, suitable for ensuring the efficient provision of services and activities

15 In the provision of investment services and activities and accessory services, Italian investment companies, non-eu investment companies, asset management companies, harmonised asset management companies, financial intermediaries registered in the list pursuant to Article 107 of the Consolidated Law on Banking, Italian banks and non-eu banks: a) shall adopt all reasonable measures to identify and manage conflict of interest which may arise with the customer or between customers, also by the adoption of appropriate organisational measures, in order to avoid a negative impact on the interests of the customer; b) shall clearly inform customers, prior to acting on their behalf, of the general nature and/or sources of conflict of interest where measures taken pursuant to paragraph a) are not sufficient to ensure, with reasonable certainty, that the risk of damaging the interests of the customer is avoided; c) shall perform independent, sound and prudent management and take measures to safeguard the rights of customers with regard to their assets

16 INVESTMENT CONSULTANCY AND PORTFOLIO MANAGEMENT The intermediaries must know from the customer a) awareness and experience of the investment sector relevant to the type of instrument or service; b) the financial position; c) the investment objectives. Where intermediaries providing investment consultancy or portfolio management services are unable to obtain the information required under this article, they shall abstain from providing said services

17 Based on information obtained from the customer, and taking into account the nature and characteristics of the service provided, the intermediaries shall assess whether the specific transaction recommended or executed as part of the provision of portfolio management services satisfies the following criteria: a) correspondence with the customer s investment objectives; b) the nature of the transaction is such that the customer is financially able to face any risk related with the investment compatible with his investment objectives; c) the customer has the necessary experience and awareness of the nature of the transaction to understand the risks involved in such a transaction or management of the portfolio Where the services are provided to a professional customer, intermediaries may presume that, with regard to the instruments, transactions and services for which said customer is classified as a professional customer, he has the necessary level of experience and awareness

18 1. In the provision of investment services other than investment consultancy and portfolio management intermediaries shall verify that the customer has the necessary level of experience and awareness to understand the risks deriving from the instrument or investment service offered or requested 2. Intermediaries may presume that a professional customer has the necessary level of experience and awareness to understand risks relating to the investment service or transactions or type of transaction or instruments according to which the customer was classified as professional. 3. Where for the purposes of subsection 1 the intermediary considers that the instrument or service is not appropriate to the customer or potential customer, the intermediary shall advise accordingly. Said advice may be provided in a standardised format 4. Where the customer or potential customer decides not to provide the information or where such information is insufficient, the intermediaries shall advise the customer or potential customer that such a decision inhibits any intermediary verification that the service or instrument is appropriate to the customer. Said advice may be provided in a standardised format

19 No adequacy and appropriateness but Conflict of interests rules apply Simple financial instruments shares admitted for trading on a regulated market, or equivalent market in another country, money market instruments, bonds or other debt securities (excluding bonds or debt securities with an underlying derivative), harmonised UCITS OTHER SIMPLE FINANCIAL INSTRUMENTS: no derivatives frequent opportunities to sell, redeem or otherwise obtain repayment such at prices openly available to market operators (not by the issuer) no liability for the customer which exceeds the cost; Information and characteristics allows the average retail customer to make an informed decision of investment

20 By regulation and after consulting the Bank of Italy, Consob shall identify private professional customers, together with the criteria to identify private persons who on request may be treated as professional customers, and related request procedures Annex 3 of Consob Regulation on Intermediaries

21 WRITTEN CONTRACTS AND GIVEN COPY Except for investment consultancy (often connected to other services) The executing orders may not be written No refer to usage for fees or any payment by the customer Nullity due to the violation of these rules may be enforced only by customer In actions for damages in respect of injury caused to the customer in the performance of investment services or noncore services, the burden of proof of having acted with the due diligence required shall be on the authorised intermediaries

22 Different decision by Italian Courts Supreme Court after different statements by local Courts: in case of violation of rules concerning the fairness of the behaviour REINBURSEMENT OF DAMAGES/CIVIL RESPONSIBILITY BUT NOT NULLITY OF THE CONTRACT (2007)

23 Consob can apply administrative sanctions to directors, managers, internal audit officers of intermediaries Sanctions go from to 10% of Turnover to the legal person Directors and other officers if conditions art. 190-bis (SEE BEFORE) are present All affected persons can oppose the sanctions in front of Courts of Appeal with a simplified procedure The customers can found on the breach of rule sanctioned by Consob (especially if confirmed by Courts) their civil action

24 9 General Guidelines 1. Investment firms should inform clients, clearly and simply, that the reason for assessing suitability is to enable the firm to act in the client s best interest. At no stage should investment firms create any ambiguity or confusion about their own responsibilities in the process. 2. Investment firms must have in place adequate policies and procedures to enable them to understand the essential facts about their clients and the characteristics of the financial instruments available for those clients (e.g. marital status, age, family, employment, need for liquidity in special moments)

25 5. Investment firms should take reasonable steps to ensure that the information collected about clients is reliable. In particular, firms should: (a) not rely unduly on clients self-assessment in relation to knowledge, experience and financial situation; (b) ensure that all tools employed in the suitability assessment process are appropriately designed (e.g. questions are not drafted in such a way that they lead the client to a specific type of investment); and (c) take steps to ensure the consistency of client information 6. Where an investment firm has an ongoing relationship with the client, it should establish appropriate procedures in order to maintain adequate and updated information about the client;

26 8- In order to match clients with suitable investments, investment firms should establish policies and procedures to ensure that they consistently take into account: (a) all available information about the client that is likely to be relevant in assessing whether an investment is suitable, including the client s current portfolio of investments (and asset allocation within that portfolio); (b) all material characteristics of the investments considered in the suitability assessment, including all relevant risks and any direct or indirect costs to the client

27 Transparency (reporting obligations to customers; advertising and promotion; information on order execution) Correctness of conduct Fairness (knowledge of investors with aim of realize adequacy and appropriateness in transactions and services; best execution; interest of customer in portfolio management; respect of rules on management of collective schemes; incentives) Regulation after consulting with Bank of Italy Undertakings for Collective Investments in Transferable Securities

28 No adequacy and appropriateness but Conflict of interests rules apply Simple financial instruments shares admitted for trading on a regulated market, or equivalent market in another country, money market instruments, bonds or other debt securities (excluding bonds or debt securities with an underlying derivative), harmonised UCITS OTHER SIMPLE FINANCIAL INSTRUMENTS: no derivatives frequent opportunities to sell, redeem or otherwise obtain repayment such at prices openly available to market operators (not by the issuer) no liability for the customer which exceeds the cost; Information and characteristics allows the average retail customer to make an informed decision of investment

29 By regulation and after consulting the Bank of Italy, Consob shall identify private professional customers, together with the criteria to identify private persons who on request may be treated as professional customers, and related request procedures Annex 3 of Consob Regulation on Intermediaries

30 Consob can apply administrative sanctions to directors, managers, internal audit officers of intermediaries Sanctions go from to 10% of Turnover to the legal person Directors and other officers if conditions art. 190-bis (SEE BEFORE) are present All affected persons can oppose the sanctions in front of Courts of Appeal with a simplified procedure The customers can found on the breach of rule sanctioned by Consob (especially if confirmed by Courts) their civil action

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32 Before: Directive 2003/6/EC on insider dealing and market manipulation (MAD) Now: Market Abuse Regulation (MAR) n. 596 of 16 April 2014 ensures that rules keep pace with market developments, such as new trading platforms, as well as new technologies, such as high frequency trading (HFT). Market Abuse Directive (MAD2) n. 56 of 16 April 2014 on criminal sanctions complements MAR by requiring Member States to introduce common definitions of criminal offences of insider dealing and market manipulation, and to impose maximum criminal penalties for the most serious market abuse offences. Member States have to make sure that such behaviour, including the manipulation of benchmarks, is a criminal offence, punishable with effective sanctions everywhere in Europe. The revamped EU legal framework will ensure even more efficient, transparent and trustworthy European financial markets; increase investor protection and confidence by allowing deeper and more integrated financial markets, and contribute to the creation of the Capital Markets Union. strengthen the fight against market abuse across commodity and related derivative markets, explicitly ban the manipulation of benchmarks, such as LIBOR, and reinforce the investigative and sanctioning powers of regulators. strengthen and replace existing EU rules on market integrity and investor protection, first adopted in 2003.

33 Without prejudice to the information requirements established by specific provisions of law, listed issuers shall make available to the public, without delay, the inside information referred now in Art. 7 MAR that directly concerns such issuers and their subsidiaries Definition of Information: precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments

34 Information shall be deemed to be of a precise nature if: a) it refers to a set of circumstances which exists or may reasonably be expected to come into existence or an event which has occurred or may reasonably be expected to occur; and b) it is specific enough to enable a conclusion to be drawn as to the possible effect of the set of circumstances or event referred to in paragraph a) on the prices of financial instruments. Information which, if made public, would be likely to have a significant effect on the prices of financial instruments shall mean information a reasonable investor would be likely to use as part of the basis of his investment decisions

35 Insider dealing arises where a person possesses inside information and uses that information by acquiring or disposing of, for its own account or for the account of a third party, directly or indirectly, financial instruments to which that information relates The use of inside information by cancelling or amending an order concerning a financial instrument to which the information relates where the order was placed before the person concerned possessed the inside information, shall also be considered to be insider dealing.

36 For the purposes of this Regulation, recommending that another person engage in insider dealing, or inducing another person to engage in insider dealing, arises where the person possesses inside information and: (a) recommends, on the basis of that information, that another person acquire or dispose of financial instruments to which that information relates, or induces that person to make such an acquisition or disposal, or (b) recommends, on the basis of that information, that another person cancel or amend an order concerning a financial instrument to which that information relates, or induces that person to make such a cancellation or amendment. The use of the recommendations or inducements referred to in paragraph 2 amounts to insider dealing within the meaning of this Article where the person using the recommendation or inducement knows or ought to know that it is based upon inside information.

37 This Article applies to any person who possesses inside information as a result of: (a) being a member of the administrative, management or supervisory bodies of the issuer or emission allowance market participant; (b) having a holding in the capital of the issuer or emission allowance market participant; (c) having access to the information through the exercise of an employment, profession or duties; (d) being involved in criminal activities. This Article also applies to any person who possesses inside information under circumstances other than those referred to in the first subparagraph where that person knows or ought to know that it is inside information. Where the person is a legal person, this Article shall also apply, in accordance with national law, to the natural persons who participate in the decision to carry out the acquisition, disposal, cancellation or amendment of an order for the account of the legal person concerned.

38 For the purposes of this Regulation, unlawful disclosure of inside information arises where a person possesses inside information and discloses that information to any other person, except where the disclosure is made in the normal exercise of an employment, a profession or duties.

39 Different activities and behaviours, realized entering trades or using media, which leads (or it is likely to lead) to false or misleading prices, markets, information on issuers or financial instruments There are accepted market prices

40 EU legislation (MAD1 Directive 2003/6; now MAR Regulation 596/2014) requires that Member States adopt "effective, proportionate and dissuasive" administrative sanctions, without prejudice to their faculty to decide whether to also impose criminal sanctions ( double track system ) (Article 14 of MAD1)

41 MAD1 MAR set forth and took for granted the existence of a legal framework based on mandatory administrative sanctions, as the most efficient, timely and prompt system confirms the importance of administrative sanctions as an essential point of the regulatory framework

42 Recital 71 MAR A set of administrative sanctions and measures should be provided for to ensure a common approach in Member States and to enhance their deterrent effect. The possibility of a ban from exercising management functions within investment firms should be available to the competent authority. Sanctions imposed in specific cases should be determined taking into account where appropriate factors such as the disgorgement of any identified financial benefit, the gravity and duration of the infringement, any aggravating or mitigating factors, the need for fines to have a deterrent effect and, where appropriate, include a discount for cooperation with the competent authority

43 Recital 72 MAR Even though nothing prevents Member States from laying down rules for administrative as well as criminal sanctions for the same infringements, they should not be required to lay down rules for administrative sanctions for infringements of this Regulation which are already subject to national criminal law by 3 July In accordance with national law, Member States are not obliged to impose both administrative and criminal sanctions for the same offence, but they can do so if their national law so permits. However, maintenance of criminal sanctions rather than administrative sanctions for infringements of this Regulation or of Directive 2014/57/EU should not reduce or otherwise affect the ability of competent authorities to cooperate and access and exchange information in a timely manner with competent authorities in other Member States for the purposes of this Regulation, including after any referral of the relevant infringements to the competent judicial authorities for criminal prosecution

44 Article 30 Administrative sanctions and other administrative measures 1. Without prejudice to any criminal sanctions and without prejudice to the supervisory powers of competent authorities under Article 23, Member States shall, in accordance with national law, provide for competent authorities to have the power to take appropriate administrative sanctions and other administrative measures in relation to at least the following infringements: Member States may decide not to lay down rules for administrative sanctions as referred to in the first subparagraph where the infringements referred to in point (a) or point (b) of that subparagraph are already subject to criminal sanctions in their national law by 3 July Where they so decide, Member States shall notify, in detail, to the Commission and to ESMA, the relevant parts of their criminal law.

45 Recital 23 The scope of this Directive is determined in such a way as to complement, and ensure the effective implementation of, Regulation (EU) No 596/2014. Whereas offences should be punishable under this Directive when committed intentionally and at least in serious cases, sanctions for breaches of Regulation (EU) No 596/2014 do not require that intent is proven or that they are qualified as serious. In the application of national law transposing this Directive, Member States should ensure that the imposition of criminal sanctions for offences in accordance with this Directive and of administrative sanctions in accordance with the Regulation (EU) No 596/2014 does not lead to a breach of the principle of ne bis in idem

46 The nature of the administrative measures: fines; confiscation of assets for a value corresponding to that "used" by the transgressor plus the profit obtained; disqualification for offices or to practice activities in the financial markets sector; The purpose of the measures seems to be mainly that of restoring confidence in the markets, affecting the factors (the economic resources and the professional employment or position held by the offender in financial market sector) which such offences normally make possible, thus stimulating honest investors to operate, guaranteeing public confidence in the markets and in the correct trading on those markets There is no question of recovering damages

47 Market manipulation based on misleading information Parmalat, Antonveneta Parmalat: false accounts/continued actions CEO and other executive directors/ CFO and other key officers/ Accounting firm and its partners / Non executive directors (check duties) No administrative sanctions but interdicition to the accounting firm (which has been closed)

48 . Antonveneta manipulation based on market operations and on dissemination of misleading information Market operations: pre-arranged (by phone) contracts only formally closed by means of the market technological system / Price targeting /Continued actions False or misleading information: no disclosure on shareholder s agreements / Presentation of false alternative candidacy to the board of directors / Continued actions

49 Parmalat Partner of an accounting firm systematically using information received on extraordinary operations (mergers, takeover bids) of listed companies he was working in to invest Communication by the CEO to political allied of an important acquisition

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51 The Directive lays down detailed disclosure requirements: for issuers whose securities are already admitted to trading on a regulated market; to shareholders with voting rights; to natural or legal persons holding voting rights or financial instruments that influence voting rights. Competent authority Each Member State will designate a competent authority responsible in particular for implementing the Directive. Each competent authority shall have all the powers necessary for the performance of its functions, specifically: monitoring of disclosure of timely information by the issuer and publication on its own initiative of information not disclosed within the time limits set; request for further information and documents; verification of compliance with the disclosure requirements, by way of on site inspections; suspension for a maximum of ten days of trading in securities or prohibition of trading on a regulated market if it finds that the disclosure requirements laid down in the Directive have not been met or if it has reasonable grounds for suspecting that those requirements have been infringed.

52 By regulation, in compliance with EU Law establishes -tresholds and terms of declaration publication terms of financial reporting (annual financial report; half-yearly) - cases of exemption from the requirement to publish the financial reports; - the content of information on significant related party transactions Where it is ascertained that documents comprising the financial statements do not comply with drafting regulations, Consob may request that the issuer publishes this fact and arrange publication of supplementary information as necessary in order to reinstate correct market information. Consob may challenge the resolution approving annual accounts on the grounds that the accounts fail to conform with the provisions governing the preparation thereof (IAS) or request the courts to verify the conformity of the consolidated accounts with the same provisions

53 Transparency tresholds Directive 109/2004/EC Transparency Reaching, exceeding or falling below 5 %, 10 %, 15%, 20 %, 25 %, 30 % (or 1/3), 50 % e 75 % (or 2/3) Minimum requirements Italy Exceeding or falling below 3% (2 % until D. Lgs. 25/2016) if not PMI; 5%PMI (in the law); Reaching, exceeding or falling below 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.6%, 90% and 95% (Consob Regulation)

54 1. Those who directly or through nominees, trustees or subsidiary companies, hold interests in shares of an issuer, disclose to the issuer and to Consob when: a) reaching or exceeding the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75%; b) the reduction of the potential investment to below the thresholds specified at letter a). 2. Those who directly or through nominees, trustees or subsidiary companies, hold an overall long position, disclose to the issuerand to Consob when: a) exceeding the thresholds of 10%, 20%, 30% and 50%; b) the reduction to below the thresholds specified at letter a).

55 Interest in shares: shares comprising the underlying capital of derivative financial instruments listed under Article 1, paragraph 3, of the Consolidated Law and all other financial instrument or contract, which, by virtue of a legally binding agreement, attributes the holder, on its exclusive initiative, the unconditional right to purchase, by physical delivery, the underlying shares or the discretion to buy, by means of physical delivery, the underlying shares

56 other long positions: shares which constitute the underlying item of derivative financial instruments listed by article 1, paragraph 3 of the Consolidated Law and all other financial instrument or contract, other than those relevant for potential investments, able to determine the assumption of an financial interest, positively linked to the trend of the underlying item, including the case of the counterparty of the holder of a short position overall long position: the aggregate position held in shares, potential investments and other long positions

57 The Authority authorizes the publication of prospectuses and the fulfilment of the duty to publish integration and supplement can suspend or forbid the offer can punish with administrative sanctions Prospectuses: Before 2015: from 1/4 to the double of the total value of the offer (or from eur to 2 millions eur) Now: from eur to 5 million Eur Disqualification (directors of intermediaries, listed companies, other open companies; from 2 months to 3 years) Other violations: from eur to eur Shareholdings: from eur to 1,5 millions eur ; from to eur if there is a late of no more than 2 months

58 Criminal violation: false prospectus Possibility of informative manipulation Civil responsibility for prospectuses: issuer (directors, board of statutory auditors, important offers, e.g. CFO), intermediaries placing financial products, accounting firm, Authority

59 Statutory auditors Surveillance board Audit Committee Accounting firm

60 securities shall only be offered to the public in the Union after prior publication of a prospectus Prospectuses are legally required documents presenting the information necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses, and prospects of the issuer and of any guarantor, and of the rights attached to investment products. Any person who intends to make a public offering shall give advance notice thereof to NCA (Consob for Italy), attaching the prospectus to be published The prospectus shall be drafted in compliance with models provided in EU regulations on this matter Offerors or issuers may request the issue of the authorisation in order to have the prospectus published in a MS recognized abroad

61 The prospectus shall contain the information that, depending on the characteristics of the financial products and the issuer, is necessary for investors to make an informed assessment of the issuer's assets and liabilities, profits and losses, financial position and prospects and of the financial products and related rights. The prospectus also contains a securities note which briefly gives key information, in non-technical jargon, in the language in which the prospectus was originally drafted. The format and content of the securities note, together with the prospectus, give adequate information on the fundamental features of the financial products in order to aid the investors to decide whether or not to invest in such products

62 Regulation (UE) 2017/ Exempting the smallest capital raisings does not apply to issues of securities with a value below 1 million (PD set that limit at 100,000). MS now able to exempt issuers they consider to be small from the obligation to publish a prospectus by setting a higher threshold - up to 8 million - for their domestic markets. This change makes it easier and cheaper for SMEs to raise funding in the EU. EU growth prospectus - a lighter prospectus for smaller companies and small issuances For smaller companies wishing to tap into European markets, the regulation provides a considerably lighter regime and less complex requirements for issuing a prospectus. The EU growth prospectus, a new type of prospectus, will be available for SMEs, companies with up to 499 employees (small mid-caps) admitted to an SME growth market or small issuances by unlisted companies. Shorter prospectuses and better investor information PR specifies, with greater clarity, the amount of information needed in order to make prospectuses shorter and clearer. Simplifying secondary issuance for listed firms Companies already listed on a public market that wish to issue additional shares (secondary issuance) or raise debt (corporate bonds) are now able to benefit from a simplified prospectus. Fast-track and simplified frequent issuer regime Companies that frequently issue securities are also able to use the 'Universal Registration Document' (URD). sort of 'shelf registration' containing all the necessary information about the company. Issuers that regularly maintain an updated URD with their supervisors can benefit from five day fast-track approval when they need to raise capital on the markets. simplifies the procedure for issuers already known to the market. Single access point for all EU prospectuses ESMA will, for the first time, provide free of charge and searchable online access to all prospectuses approved in EEA. Paper prospectuses are no longer required, unless a potential investor requests them.

63 The Regulation shall not apply to the following types of securities: (a) units of UCITS other than the closed-end type; (b) non-equity securities issued by a Member State, ECB or alike; (c) shares in the capital of central banks of the Member States; (d) securities guaranteed by a Member State or alike; (e) securities issued by associations with legal status or non-profit-making bodies; (f) non-fungible shares of capital whose main purpose is to provide the holder with a right to occupy an apartment, or other form of immovable property or a part thereof and where the shares cannot be sold on without that right being given up

64 The PR lays down requirements for the drawing up, approval and distribution of the prospectus to be published when securities are: offered to the public or admitted to trading on a regulated market situated or operating within a Member State. a prospectus shall contain the necessary information which is material to an investor for making an informed assessment of: (a) the assets and liabilities, profits and losses, financial position, and prospects of the issuer and of any guarantor; (b) the rights attaching to the securities; and

65 Definitions (Article 2) 'small and medium-sized enterprises'. For the purposes of the regulation, the 100 million threshold that previously defined 'companies with reduced market capitalisation' has been raised to 200 million, as stipulated in Directive 2014/65/EU. Voluntary prospectuses (Article 4) allows issuers to opt in for the EU prospectus, even when the offer of securities to the public or an admission of securities to trading on a regulated market is outside the scope of the regulation (in effect making the issuer eligible for an EU passport), provided that the competent authority approves such a 'voluntary' prospectus. Subsequent resale of securities (Article 5) tackles the issue of subsequent resale of securities. as long as the prospectus is valid and duly supplemented and the issuer consents to its subsequent use, financial intermediaries subsequently reselling the securities should be entitled to.

66 In view of the specificities of different types of securities, issuers, offers and admissions a) standard prospectus: Single document Separate documents: Summary provides an introduction containing warnings, as well as key information on the issuer, the offeror or the person asking for admission, on the securities and on the offer itself and/or the admission to trading. Registration document (a) identifies the directors, senior management, advisers and auditors; (b) summarises essential information about the issuer (financial situation, capitalisation and risk factors); (c) provides information on the company (business operations, products/services, factors affecting the business); (d) makes available an operating and financial review (and prospects); (e) supplies extra information on the directors, senior management and employees; (f) provides information regarding the major shareholders and related-party transactions; and (g) specifies what financial information must be included in the document (periods to be covered, age of financial statements and other information of a financial nature). securities note names the directors, senior management, advisers and auditors; presents offer statistics as well as an expected timetable; supplies essential information about the issuer; discloses the interests of experts or advisers the company is dealing with; provides information on the details of the offer and admission to trading; and discloses additional information of a statutory nature that is not covered elsewhere in the prospectus. Once the competent authority of EEA MS approves a prospectus, it can be used for raising capital by means of a public offer or admission to a regulated market in other MS. Frequent issuers should be incentivised to draw up their prospectus as separate documents, since that can reduce their cost of compliance with this Regulation and enable them to swiftly react to market windows. All constituent parts of the prospectus should be subject to approval. b) URD for Frequent Issuers c) base prospectus (art. 8) d) simplified prospectus for secondary issuances e) EU Growth prospectus f) wholesale prospectus for non-equity securities,

67 A self-contained part of prospectus that should be read together with other parts which should be a useful source of info for investors, mainly retail Nature and risks of issuer & guarantor Securities focus on key info that investors need in order to be able to decide. convey the essential characteristics of, and risks associated with, the issuer, any guarantor, and the securities offered or admitted to trading on a regulated market. provide the general terms and conditions of the offer 4 sections: Warnings Info on issuer Info on securities Info on offer or admission Maximum lenghts: 7 sides of A4 FORM: easy to read in format and style Where a KID is required under PRIIPs Regulation, it may replace the content of summary under PR package retail and insurance-based investment products From rationale comes the derogation: no summary for listing prospectus of non-equity securities if: Only to be traded on a regulated mkt only for qualified investori Denomination per unit > 100,000 (per public offer prospectus these are exempt)

68 VERA NOVITA Issuers whose securities are admitted to trading on: regulated markets or MTFs Option to publish every financial year a universal registration document (URD) containing info on the issuer for that financial year. Similar to US Shelf registration: Enable the issuer to keep the information up-to-date and draw up a prospectus by adding only a securities note and a summary. when market conditions become favorable for an offer or an admission to trading issuer should be deemed to be a frequent issuer as from the moment when the issuer submits URD for approval to the competent authority. Fast track for approval if NCA pre-allerted (main content already known): 5 days Approval of URD for 2 consecutive years, considered well known to NCA: filing without ex ante approval, only ex post review loose after 1 year without filing As long as it has not become a constituent part of an approved prospectus: possibility of amendment Voluntariry (i.e. a material change in the organisation or financial situation of the issuer ) Upon request NCA (during ex post review) URD content: disclosure standards are based on those for equity securities: EU Growth prospectus Specific disclosure regime for secondary issues wholesale prospectus for non-equity securities

69 Option only for issuer of: non equity securities (already existed for this) warrants BP + Final terms: contain same info of standard prospectus BP: everything but terms not known at the time of drawing up Final terms: only info relating to securities note specific of the issue: ISIN no. Price Maturity date Coupon Exercise date Exercise price Redemption price Other terms not known at the time of drawing up of BP When not in the BP, no approval by NCA only filing

70 Once a class of securities is admitted to trading on a regulated market, investors are provided with ongoing disclosures by the issuer under MAR+TD The need for a full prospectus is less acute At least 18 months of trading Info presented in an easily analysable, concise and comprehensible form SP content is alleviated, taking into account the information already disclosed: EC delegated acts in accordance with Article 44 to supplement this Regulation by setting out the schedules specifying the reduced information, which shall include in particular: (a) the annual and half-yearly financial information published over the 12 months prior to the approval of the prospectus; (b) where applicable, profit forecasts and estimates; (c) a concise summary of the relevant information disclosed under Regulation (EU) No 596/2014 over the 12 months prior to the approval of the prospectus; (d) risk factors; (e) for equity securities, the working capital statement, the statement of capitalisation and indebtedness, a disclosure of relevant conflicts of interest and related-party transactions, major shareholders and, where applicable, pro forma financial information.

71 in order to encourage the use of capital market financing by SMEs, this Regulation should ensure that special consideration is given to SME growth markets, which are a promising tool to allow smaller, growing companies to raise capital. The success of such venues depends, however, on their ability to cater for the financing needs of growing SMEs. Therefore, it is appropriate that this Regulation establishes a specific proportionate EU Growth prospectus regime which is available to such companies. A proper balance should be struck between costefficient access to financial markets and investor protection (recital 51)

72 SMEs MID Caps Reduced info required Proportionate disclosure a document of a standardised format, written in a simple language and which is easy for issuers to complete. It shall consist of: specific summary based on Article 7, specific registration document and specific securities note. The information in the EU Growth prospectus shall be presented in a standardised sequence in accordance with the delegated act referred to in paragraph 2 Content left to RTS by the EC Mandate to ESMA

73 The risk factors featured in a prospectus shall be limited to risks which are specific to the issuer and/or to the securities and which are material for taking an informed investment decision, as corroborated by the content of the registration document and the securities note. When drawing up the prospectus, the issuer, the offeror or the person asking for admission to trading on a regulated market shall assess the materiality of the risk factors based on the probability of their occurrence and the expected magnitude of their negative impact. Each risk factor shall be adequately described, explaining how it affects the issuer or the securities being offered or to be admitted to trading. The assessment of the materiality of the risk factors provided for in the second subparagraph may also be disclosed by using a qualitative scale of low, medium or high. The risk factors shall be presented in a limited number of categories depending on their nature. In each category the most material risk factors shall be mentioned first according to the assessment provided for in the second subparagraph.

74 A prospectus shall not be published unless the relevant competent authority has approved it, NCA shall notify issuer/offeror /person asking for admission of its decision regarding the approval of the prospectus within 10 working days of the submission of the draft prospectus. extended to 20 working days where the offer to the public involves non listed securities for the first offer to the public Reduced to 5 working days in case of a URD NO silence = approval NCA shall notify ESMA of the approval of the prospectus ASAP.

75 The issuer, offeror or any guarantor, as applicable, or the persons responsible for the information contained in the prospectus, shall be liable, each in relation to the extent of their own duties, for damages caused to the investor placing reasonable faith in the truth and accuracy of information contained in the prospectus, unless it is proved that all due diligence was adopted for the purpose of guaranteeing that the information in question complied with the facts and that no information was omitted that could have altered the sense thereof. The intermediary responsible for placement shall be liable for false information or omissions that could influence the reasoned decisions of an investor, unless said intermediary proves that all due diligence was adopted pursuant to the previous subsection.

76 False with special purposes can lead to a criminal sanction Any person who, with a view to obtaining an undue profit for himself or for others, in prospectuses required for public offerings or for admission to trading on regulated markets, with the intention of deceiving the recipients of the prospectus, includes false information or conceals data or news in a way that is likely to mislead such recipients, shall be punished by imprisonment for between one and five years The breach of the general obligation to publish prospectuses can lead to an administrative sanction up to 5 million Euros The breach of rules concerning the content and other rules issued by Consob can lead to an administrative sanction up to euros Sometimes the sanction can be applied to directors or officers working for the company issuing or offering securities (violations of personal duties with serious effects on firms, risks, investor protection or integrity and fairness of the market art. 190 bis Italian Consolidated Law)

77 Consob can suspend or inhibit offers in course without prospect or breaching rules on fairness and disclosure during public offers

78 16/06/17

79 "It is necessary to create Community-wide clarity and transparency in respect of legal issues to be settled in the event of takeover bids and to prevent patterns of corporate restructuring within the Community from being distorted by arbitrary differences in governance and management cultures" Preamble of Takeover Directive Legal certainty on the conduct of takeover bids and communitywide clarity and transparency in respect of takeover bids; Protection of the interests of shareholders, in particular minority shareholders, and of employees and other stakeholders through transparency and information rights, when a company is subject to a takeover bid or change of control; Facilitation of takeover bids, through reinforcement of the freedom to deal in and vote on securities of companies and prevention of operations which could frustrate a bid; Reinforcing the single market, by enabling free movement of capital throughout the EU. 79

80 Little detail principle based approach or mere face-saving compromise? Differing implementation in Member States Defence measures Thresholds Time period for determination of price Type of securities triggering mandatory bids Exclusion of foreign shareholders Leaves Member States a wide field of action To protect domestic companies? 80

81 1. Mandatory bid after reaching a certain threshold (UK model); 2. Barriers for bidders (defensive measures); a) Structural b) tecnicacl 3. Determination of equitable price. 81

82 Event triggering the compulsory tender offer: threshold, extensions, exemptions (art. 5); Conditions of the compulsory tender offer: in particular, the price (art. 5); Action in concert (art. 2); Passivity rule (art. 9 & art. 12); Breakthrough rule (art. 11 & art. 12); sell-out and squeeze-out (art. 16 & art. 15).

83 30 percent as triggering threshold: but underlines control; now also 25% Extensions: acquisition of an empty shell whose most important asset is 30% of a listed corporation; tender offer for acquisition of 3% in between 30 and 50%; Exemptions: art. 5, 2 of the directive, voluntary bid on all the securities ; other exemptions (temporary acquisitions, acquisitions for turn-around, involuntary acquisitions ).

84 Art. 106 of TUF: average of the market price and highest price paid in the last 12 months; Art. 5, 4 of the Directive: highest price paid in the last 6-12 months; Problem of hidden prices: e.g. when a bidder buys a non-listed corporation controlling a listed one, which represents its major asset, and the consideration for the purchase is neither cash nor securities, but the obligation to pay the debts of the non-listed corporation.

85 Art. 2, 1 (d) of the Directive: the goal of the agreement is relevant; Art. 109 of TUF: objectively identifies specific relationships (shareholders agreements, groups of companies, directors and chief executives) that represent a irrefutable presumption of action in concert.

86 minimum requirements that have to be observed by Member States Member States are free to introduce additional more stringent conditions and requirements principle of flexibility 86

87 Rule: Where a natural or legal person, as a result of his/her own acquisition or the acquisition by persons acting in concert with him/her, holds securities of a company which, added to any existing holdings of those securities of his/hers and the holdings of those securities of persons acting in concert with him/her, directly or indirectly give him/her a specified percentage of voting rights in that company, giving him/her control of that company, Member States shall ensure that such a person is required to make a bid: Addressed to all holders of securities for all their holdings : at the earliest opportunity at the equitable price (cfr. infra) Derogation : mandate to MS of the registered office to: Determinate the percentage of voting rights which confers control and the method of its calculation shall be determined by the rules of the Member State in which the company has its. Provide for deroghe (nel rispetto dei princ. generali): 87

88 Basic characteristics only one situation where an acquirer has an obligation to publish a takeover bid acquiring voting control is necessary the way of acquiring is irrelevant the percentage of voting rights which confers control is not defined further instruments cannot replace MBR must be addressed to all holders of voting securities acting in concert introduced w/o further explanations short time for launching MB sanctions are left to Member States Exception voluntary full bid other exceptions Equitable price presumption highest price paid (6-12 months) possible derogations by MS ex post purchase 88

89 Thresholds approach UK: 30% of the voting rights of a company France: 1/3 of a company's equity securities or voting rights ( equity securities means voting securities if a company's equity capital consists partly of non-voting securities ) Germany: 30% of the voting rights in the target company Hungary: 33% + 25% for diluted shareholding companies Mixed approach Threshold + de facto control also below threshold o Es. criterion appointment of majority of direcors in former 24 o months ES + DK + ET + CK: Other countries: voting shares. 89

90 Objective of the EC proposal Open companies to market by outlawing defence measures against takeover bids Creation of a fully integrated market in financial services Takeover Directive was one of the priorities of the FSAP Directive solution Commission approach as basic principle set forth in Arts. 9 and 11 BUT Art. 12 making Arts. 9 and 11 optional Practical Impact of the Takeover Directive 12 May

91 Art. 9 of the Directive similar to art. 104 of TUF, but: Period in which the issuer is subject to the passivity rule: even before full disclosure? Vote in the shareholders meeting: Supermajority (same threshold that triggers the compulsory bid); Majority of the minority : exclusion of the controlling shareholder and of the bidder; Article 11 directive: opt-out (or reciprocity).