The provisions for adaptation of the Consolidated Finance Law to the Prospectus Regulation and public offerings of securities
With Legislative Decree No. 17 of 3 February 2021, issued by virtue of Article 9 of the 2018 European delegation law (Law No. 117 of 2019), the Italian legislator amended domestic regulations as set forth in Legislative Decree 58/1998 (the “Consolidated Finance Law” or “TUF” in the Italian acronym) to align them with EU Regulation 2017/1129 on the prospectus that must be published when securities are offered to the public or admitted to trading on a regulated market (the “Prospectus Regulation”), revamping the relevant legislation by repealing the previous Directive 2003/71/EC and now fully governing the content and the procedure for authorising and publishing the prospectus.
The Prospectus Regulation was adopted with the aim of simplifying the obligations to publish the prospectus, reconciling the need to reduce costs and charges for companies wishing to access the markets but, at the same time, providing adequate information to investors, enabling them to make their investment choices in full knowledge of the circumstances.
The choice of regulatory instrument – directly applicable in the various national jurisdictions – achieved harmonisation and at the same time, imposed radical change in the structure of the legislation set out in the Consolidated Finance Law (on this point, it should be recalled that the CONSOB Issuers’ Regulation had already been adapted to the Prospectus Regulation by CONSOB Resolution No. 21016 of 24 July 2019). In this context, the alignment with European regulations called for a review of primary legislation and repealing of the provisions now directly governed by the Prospectus Regulation, as well as:
(i) verifying the full compliance of domestic law with the provisions of the Prospectus Regulation and the related regulatory and implementing technical standards adopted by the European Commission;
(ii) maintaining the regulatory, supervisory, investigative and penalty-imposing powers currently provided for CONSOB in the Consolidated Finance Law;
(iii) collating all the situations penalized under Article 38 of the Regulation and adapting the statutory minimum and maximum present penalties in the Consolidated Finance Law;
(iv) reviewing the rules on exemptions under Articles 1 and 3 of the Regulation;
(v) granting CONSOB powers to exercise the right provided in the second sub-paragraph of Article 7(7) of the Regulation (replacing a section of the summary with the key information document (KID) for investors;
(vi) updating the provisions on whistle-blowing.
The main changes
The most significant changes particularly concern the content of Part IV, Title II, Chapter I of the Consolidated Finance Law, “Offer to the public of subscription and sale”, with significant amendments of the wording – beginning with the definitions. As explained above, the definitions now refer directly to the Prospectus Regulation and its implementing provisions and have been adapted with a view to their coordination with the Prospectus Regulation itself – starting from the definition of “securities” which replaces the previous definition of Community financial instruments, now referring directly to the European legislation.
Notably, since the Prospectus Regulation concerns the offering to the public of “securities”, the provisions of the Consolidated Finance Law now represents a form of “duplication”; hence the Italian legislation relating to offers to the public of securities is largely subsumed by the Prospectus Regulation, to which the legislation makes extensive reference, while the Consolidated Finance Law continues to incorporate more extensive rules on public offerings of financial products other than securities (albeit with some adjustments, again to align with the Prospectus Regulation).
The legislation remains applicable, based on this definition, to securities, i.e., pursuant to the Prospectus Regulation which in turn refers to EU Directive 2014/65, known as MiFID 2, “classes of securities which are negotiable on the capital market with the exception of instruments of payment”, such as equities, bonds and derivatives, while excluding money market instruments with a maturity of less than 12 months. In addition to transferable securities, the definition of “securities” means units or shares in closed-end undertakings for collective investment in transferable securities.
As stated above, for offers of securities to the public, the amendments refer extensively to the Prospectus Regulations, focusing on Article 94 of the Consolidated Finance Law, which previously provided structured regulations on the publication obligation and the content of prospectuses for public offerings, as well as the content of Article 94-bis of the Consolidated Finance Law, which regulated approval of the prospectus (and now sets forth the provisions on public offerings of financial products other than securities). Thus Article 94 of the Consolidated Finance Law provides, in paragraph 1, for a general reference to the Prospectus Regulations, as a source governing prospectuses and their contents. By simply adjusting the terminology, paragraph 3 of the Consolidated Finance Law now includes a reference to applications for approval of a prospectus which must be submitted by persons intending to make a public offering of securities.
Certain profiles of interest may relate to the system of liability. Article 94, paragraph 5 of the Consolidated Finance Law now clarifies previous paragraph 8 of the same provision with reference to liability for information contained in the prospectus, maintaining the identification of responsible persons as the issuer, the guarantor and the offeror – clearly persons who in the context of the public offering have access to information instrumental to preparation of the prospectus. Indeed, the new provision makes it clear that at least one person (as the case may be, the issuer, offeror or guarantor) is responsible for all information contained in the prospectus (as also specified by ESMA in Questions & Answers on the Prospectus Regulation, 10.1), it being understood that those responsible exclusively for certain parts of the Prospectus are responsible solely for those sections.
Among the specific features retained in the Italian legal system following amendments to the Prospectus Regulations is that Article 94, paragraph 7, of the Consolidated Finance Law includes the placement intermediary who is responsible “for false information or omissions which could influence the decisions of a reasonable investor”. This responsibility is not directly referenced in Article 11 of the Prospectus Regulation, which establishes rather who are “at least” the persons responsible for the information provided – reflecting what is already incorporated in Italian legislation on the person responsible for placement, viewed as an entity that in practice is, given its position, able to exercise control over information of special relevance to the placement of public offerings in Italy, without prejudice to the case in which the intermediary (as, moreover, for the persons responsible for the prospectus already referred to) “proves that it has exercised full due diligence to verify that the information contained in the prospectus complies with the factual circumstances without any omissions that could alter its meaning”.
Similarly, Article 113 of the Consolidated Finance Law on the admission to trading of securities, in also referring to the Prospectus Regulation, extends the rules on liability to financial intermediaries responsible for applying for admission to trading on a regulated market (the sponsor), who during the listing process, perform a role similar to that performed for a public offering by the intermediary responsible for the placement of securities.
There is a radical amendment of Article 100 of the Consolidated Finance Law on exemptions, which is now “voided” with regard to public offerings of securities, since in this case also, exemptions are governed by the Prospectus Regulation, with the sole exception of the provision conferring on CONSOB the task of defining the maximum amount that gives exemption from publication of the prospectus for public offerings. Article 100 of the Consolidated Finance Law, as for Article 94-bis thereof now governs only exemptions for offers relating to financial products other than securities.
Finally, it should be noted that Article 117-bis of the Consolidated Finance Law is repealed, given the provisions of Article 1 of the Prospectus Regulation, which provide for a specific exemption from the obligation to publish a prospectus in the case of admission to trading of securities offered in the framework of mergers or demergers (except for what will be provided with regard to reverse combination transactions), subject to public availability of the so-called exemption document under a specific delegated regulation of the Commission.
There were further changes, which also affected Part IV, Title II, Chapter I of the Consolidated Finance Law, “Offers to the public for subscription and sale”, for example with regard to the role of the Supervisory Authority, the regulation of financial information (Article 154-ter of the Consolidated Finance Law) and the penalty system (Part V, Title II of the Consolidated Finance Law).
This article is for information purposes only and is not, and cannot be intended as, a professional opinion on the topics dealt with. For further information please contact Andrea Iovieno.