In November 2014 the UKLA published guidance, in the form of a technical note, on drawing up retail bond prospectuses, with a view to the prospectuses being as accessible and as easily navigable as possible. The guidance does not apply to prospectuses relating to bonds that will be admitted to trading on a regulated market, and which have a denomination of at least €100,000, or less than €100,000 if the offer is made only to qualified investors.
Five things are emphasised as key in the guidelines:
- The language should be one that a retail investor can comprehend.
- Where the document relates to more than one type of security, this should be clearly stated, and parts of the prospectus dealing with each respective security should be delineated deliberately – an introductory summary is suggested.
- Where the prospectus outlines a structured product that is dependent on an underlying derivative, it must clearly explain how the two are linked, and how the value of one is affected by the other.
- FAQs are deemed useful but not mandatory.
- Prospectuses in which the securities are secured or subordinated, or in any way unusual, should be clear in specifying what kind of bondholder protections apply, and what kinds of features the bonds contain. Useful definitions and/or diagrams are encouraged.
The guidance is available at:
http://www.fca.org.uk/static/documents/ukla/knowledge-base/tn-632-1-final.pdf.
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.
