The European Securities and Markets Authority has published Guidelines on risk factors under the EU Prospectus Regulation that will provide guidance to Member State national regulators when reviewing prospectuses. The Guidelines will apply from December 4, 2019. Within two months of the date of publication of the guidelines in all EU official languages, national regulators must notify ESMA whether they comply with the guidelines and, if they do not, whether they intend to comply. If they do not intend to comply, national regulators must explain why that is the case.
 
ESMA sets out 12 guidelines on risk factors, which focus on the following areas:

• Specificity – the specificity of the risk factor should be clear from the disclosure and national regulators should challenge “disclaimer” risk factors;
• Materiality – the materiality of the risk factor should be clear from the disclosure and national regulators should challenge prospectuses that do not make clear the potential negative impact of a given risk factor;
• Corroboration of the specificity and materiality – the materiality and specificity of a risk factor should be corroborated by the overall picture presented by the prospectus;
• Presentation of risk factors across categories – risk factors should be presented in a way that helps investors to navigate the risk factors section;
• Focused/concise risk factors – risk factor disclosure should be presented in a concise form; and
• Risk factors in the summary – where risk factors are included in a summary section, their presentation should be consistent with the risk factor section.

The guidelines also include examples of specific and material risk factors that national regulators may consider when reviewing disclosure.
 
View ESMA's Guidelines.

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