Ireland: Changes To Final Terms Following The Implementation Of Directive 2010/73/EU In Ireland

Last Updated: 12 February 2014
Article by Helen Berrill, Kate Boyle and John Wright

Directive 2010/73/EU (the "Amending Directive") was implemented in Ireland on 1st July 2012. The purpose of the Amending Directive is to update Directive 2003/71/EC (the "Prospectus Directive") and Directive 2004/109/EC (the "Transparency Directive").

Following the implementation of Annexes XX and XXI of the Amending Directive, the European Securities and Markets Authority ("ESMA") have provided guidance on the Annexes V, VI, VIII, XII and XIII to the Commission Regulation No. 809/2004 (the "Commission Regulations"). Annex 2a of the updated Commission Regulations details the categories of information that should be contained in the Base Prospectus and the Final Terms.

Clear guidance has now been provided on what can and cannot be included in Final Terms. The Central Bank of Ireland (the "CBI") has also provided guidance as to what they expect to see in Final Terms.

ESMA has categorised the disclosure requirements in the Commission Regulations as Category A, B or C information as follows:

  • Category A information cannot be contained in the Final Terms and therefore must be contained in the Base Prospectus or a Supplement to the Base Prospectus. Any change to Category A information must be dealt with by way of an updated Base Prospectus or a Supplement to the Base Prospectus.
  • Category B information which is unknown at the date of approval of the Base Prospectus, may be included in the Final Terms so long as the general principles relating to Category B information is included in the Base Prospectus.
  • Category C information may be included in the Final Terms. Where information in relation to Category C information is known at the time of approval of the Base Prospectus, this information should be addressed in the Base Prospectus and not the Final Terms. The CBI will only allow placeholders for specific Category C information and they will not allow a placeholder to be left for general information (e.g. "others – please state" is no longer acceptable).

Final Terms cannot be used to amend or replace any information in the Base Prospectus.

Below are examples of information that falls under Category A, Category B and Category C.

CATEGORY A INFORMATION

Category A Information, which must be included in the Base Prospectus, includes the following:

  • All issuer information
  • Responsibility statements
  • Risk factors
  • Governing law of the securities
  • Ranking of the securities
  • Full disclosure on any guarantor of the securities

CATEGORY B INFORMATION

Category B Information, which must be included in the Base Prospectus, if known, at the time of the approval of the Base Prospectus, includes the following:

  • General terms and conditions of the securities
  • The method(s) used to calculate the return on the securities
  • Details of the representatives of the security holders (i.e. the Trustee)
  • Indication of whether the securities will seek an admission to trading on a regulated market
  • A description of any guarantee given on the return on the securities
  • In the case of asset-backed securities, details of the underlying assets that will back the securities

CATEGORY C INFORMATION

Category C Information, which may be included in the Final Terms, includes the following:

  • The issue terms of the securities (e.g. amount, currency, maturity date, ISIN code, minimum denomination, etc)
  • The interest payment dates and an indication of the yield
  • Terms and conditions of the public offer
  • The date on which the securities will be admitted to trading on a regulated market
  • The credit rating of the securities
  • In the case of asset-backed securities, the governing law, maturity date and amount of the underlying assets that will back the securities, together with the name and address of the originator of the underlying assets
  • An indication of whether or not the issuer intends to provide post issuance information in relation to the securities or, in the case of asset-backed securities, the underlying assets

ANNEX XXI

Annex XXI of the updated Commission Regulations allows for the provision of some further minor information to be included in the Final Terms, including the following:

  • Additional provisions relating to the underlying;
  • Country(ies) where the offer(s) to the public takes place;
  • Country(ies) where admission to trading on the regulated market(s) is being sought;
  • Country(ies) into which the relevant Base Prospectus has been notified

FINAL TERMS SUMMARY

Since the implementation of the Amending Directive, any Final Terms issuing retail securities must include a Final Terms Summary. This Summary is different from the Base Prospectus Summary.

The Final Terms Summary should, in accordance with Article 24 of the updated Commission Regulations, contain:

  1. The information of the summary of the Base Prospectus, which is only relevant to the individual issue;
  2. The options contained in the Base Prospectus, which are only relevant to the individual issue as determined in the Final Terms; and
  3. The relevant information given in the Final Terms, which has previously been left blank in the Base Prospectus.

The Final Terms Summary is completed and read with any Final Terms issuing retail securities.

IMPACT

Final Terms can no longer cater for terms such as "specify other" and "other final terms". The Base Prospectus and Final Terms must comply fully with Article 2a and Annexes XX and XXI of the updated Commission Regulations.

All formulas and reference rates contemplated should also be disclosed in the Base Prospectus.

CONCLUSION

While the changes are quite extensive, we have not encountered any major difficulties in relation to an approval of a Base Prospectus by the CBI, since these changes were implemented.

We do not see these requirements as having a major impact on Base Prospectuses approving in Ireland and securities listing by way of Final Terms.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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