On 28 October 2016 CONSOB issued Recommendation n. 0096857 (the “Recommendation”) on the drafting and inclusion of a paragraph “Warning for the Investor” (the “Warning”) in Italian prospectuses for public offering and/or admission to trading of financial instruments.

This Recommendation replaces the relevant provisions contained in the existing CONSOB Communication n. 0010807 of 10 February 2014 and is the outcome of one of the three public consultations launched on 9 May 2016 (see our Newsflash n. 7) for the purpose of strengthening investor protection in case of public offering.

On the understanding that the Warning is not required by EU law regulation and is distinct from and does neither replace nor complement the prospectus, the Authority stresses out that its goal is to highlight those risk factors – concerning the issuer, the financial instruments and/or the proposed investment – that it is advisable that the investor immediately and clearly understands. To this end, such Warning shall not be a mere selective reproduction of the contents already included in the prospectus, rather an alert containing comprehensible though concise information. In addition, the Warning should be kept up to date in the event of publication of a supplement to the relevant prospectus.

The Recommendation does not provide for a predetermined content of the Warning, and it just sets out the criteria according to which the issuer shall assess the relevance of specific factors on a case-by-case basis, such as:

• The increased likelihood of certain key factors to affect the business operation of the issuer or its continuity;
• The criticality embedded in the specific features of the financial instruments, which could have an impact on the probability of a successful investment recovery;
• Complexity of the financial instrument.

In any case, the Warning should prompt the potential investors to carefully consider the information contained in the prospectus and, in particular, the relevant risk factors section.

In order to achieve the purpose of clarity and immediacy, CONSOB specifies also certain drafting criteria :

• To describe the information in informal and concise form, using a clear and easily comprehensible language;
• To avoid duplications of information;
• To expressly and precisely cross-refer to the relevant parts of the prospectus, where the critical elements are described in detail.
• To insert the Warning on the page immediately following the cover of the prospectus (in case of single document prospectus) or of the registration document and of the securities note (in case prospectuses consisting of separate documents);
• To graphically highlight the heading “Avvertenze per l’Investitore” and add page borders around the text;
• To use easily readable font’s size.

Finally, on the basis of the latest prospectuses’ approvals by CONSOB, the Recommendation offers a non-exhaustive list of samples of the main types of information (concerning (i) investment objective, (ii) issuer’s conditions, (iii) supervisory measures likely to affect the issuer, (iv) features of the financial instruments) that the person responsible of the drafting of the prospectus should take into account when assessing the key factors to be anticipated in the Warning.

The Recommendation shall be taken into account as from 30 days from its publication.

Please do not hesitate to contact us should you need any further clarification about this Recommendation.

Contacts:

Vito Vittore
Senior Partner

Elena Pagnoni
Of counsel

Luigi Bonifacio
Associate