Guidelines on risk factors under the Prospectus Regulation

CySEC has issued Circular C.344 (available in English here) addressed to those persons who are   responsible for the preparation and issuing of an investment prospectus. Circular C.344 adopts the European Securities and Markets Authority (ESMA) guidelines, on risk factors under the Prospectus Regulation {Regulation (EU) 2017/1129 of the European Parliament and of the Council, of 14 June 2017, on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market and repealing Directive 2003/71/EC ‘Regulation (EC) 2017/1129’)}.

These guidelines are addressed to the Competent Authorities designated by each Member State in accordance with Article 31 of the Regulation (EU) 2017/1129 and apply from 4 December 2019. CySEC is the Competent Authority for Cyprus. It should be noted that, in order to expedite the approval process,  persons responsible for creating a prospectus should also consider these guidelines when preparing the relevant material for submission to CySEC.

As stated in Regulation (EC) 2017/1129, the primary purpose of including risk factors in a prospectus and/or a supplement is to ensure that investors can assess the relevant risks related to their investment and can therefore make informed investment decisions in full knowledge of the facts. Consequently, the C.344 guidelines state that the risk factors to be included in a prospectus and/or supplement should be limited to those which are material and specific to the issuer and/or its securities and which are corroborated by the content of the prospectus.

The aim of the guidelines is to ensure an appropriate, focused, and more streamlined disclosure of risk factors in the prospectus. This will assist the Competent Authorities in their review of specific and material aspects of these factors and in assessing the adequateness of their presentation to potential investors.

For further information on this matter, please contact Ioannis Sidiropoulos or any member of our Financial Services team or your usual contact at Elias Neocleous & Co LLC.