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Rules for advertisements of approved prospectuses For Issuers of securities

Research indicates that advertisements play an important role in investment decisions. Advertisements that are published in relation to offers or listings of securities for which an approved prospectus has been published must comply with certain rules. For example, the information in an advertisement shall not be inaccurate or misleading and shall be consistent with the information contained in the prospectus. Prior to publication we review these advertisements (as explained in more detail below). In this manner, we ensure that investors are properly informed. If necessary, may take enforcement action if (after publication) it turns out that advertisements did not comply.

Requirements of the Prospectus Regulation

As of 21 July 2019, all advertisements relating to a prospectus must meet the requirements of the Prospectus Regulation (EU) 2017/1129. These regulatory requirements also apply if the advertisement relates to a prospectus that is published under the (old) Prospectus Directive 2003/71/EC. Further information is provided by ESMA in their Q&As on the Prospectus Regulation.

What do we mean by advertisements relating to prospectuses?

An advertisements relating to a prospectus is a communication with both the following characteristics:

  • relating to a specific offer of securities to the public or to an admission to trading on a regulated market
  • aiming to specifically promote the potential subscription or acquisition of securities.

These advertisements may appear in the form of brochures, flyers, letters, e-mails, advertisements, Google ads, banners, billboards at public transport stops, websites, and radio and television commercials. Also oral and written statements made during roadshows and information sessions, such as presentations or interviews, count as advertisements.
The definition of an advertisement is broad and, consequently, a statement can easily be defined as an advertisement. For more information, see also the AFM policy guideline on advertisements ‘Beleidsregel Informatieverstrekking’ (in Dutch).

Assessment of draft advertisements by the AFM

The AFM wants to prevent that investors base their investment decisions on advertisements that do not comply with the law. To facilitate issuers of securities, the AFM allows them to submit draft advertisements (i.e. unpublished advertisements) for assessment. We will then inform you whether and on what grounds the advertisements do not comply with the law. With this assessment, we also aim to prevent that already published advertisements have to be withdrawn or corrected (which may cause financial loss or reputational damage to the issuer).

Submit your draft advertisements during the approval procedure

You can submit draft advertisements only during the prospectus approval procedure. You may submit the advertisements together with your application or send them to the supervision officer during the approval process. You will receive a prompt response from us if you submit the draft advertisements at least 5 working days prior to the approval of the prospectus. These draft advertisements are required to be finalized and formatted. The assessment of draft advertisements does not affect the competence of the AFM to carry out ongoing supervision of published advertisements. We may take enforcement action if published advertisements are in breach of the law, for example with an incremental order for penalty payments and/or a fine.

If you have questions about advertisements or wish to submit an advertisement outside of the prospectus approval procedure, then after consultation with us, please send the advertisement and a motivated question to service.prospectus@afm.nl.

Key rules for advertisements

Advertisements relating to an approved prospectus must meet the requirements of the Prospectus Regulation. These are listed in Article 22 of the Prospectus Regulation and Articles 13–17 of the Delegated Regulation (EU) 2019/979. Sections 1 and 6 of the ‘Beleidsregel Informatieverstrekking’ provide further details how these norms are interpreted.The norms that apply under Article 22(4) of the Prospectus Regulation and Article 16 of the Delegated Regulation apply to all oral or written information, even when not explicitly done for advertisement purposes. For instance, they also apply to analyst presentations of securities that are to be admitted to trading on a regulated market. Some of the key requirements are listed below.

Reference to the prospectus

Under Article 22(2) of the Prospectus Regulation, all advertisements must indicate where investors are or will be able to obtain the prospectus. This also includes advertisements of smaller size, such as banners. In most cases, a reference to the website is sufficient. The prospectus must therefore be available on the specific website page referred to. Article 13 of the Delegated Regulation (EU) 2019/979 provides further specifications with respect to prospectus references.

Not inaccurate

Information in an advertisement is inaccurate if it does not correspond to reality. Examples of incorrect information are:

  • The information is not true, such as the statement that an issuer of securities is subject to AFM supervision when this is not the case.
  • The information does not correspond with the conditions of the product.
  • The information contained in the advertisement is contradictory.

Not misleading

The information in an advertisement must not be misleading. This means that the impression given by the advertisement does not correspond to reality. This is not limited to textual information: images and figures can also be misleading. Examples of misleading information include:

  • Regulatory oversight as a “certification” of security offerings. For example, referring to regulatory prospectus approval can be perceived as an endorsement or recommendation of the product.
  • Stressing of scarcity in presentation. For example, by prominently presenting information on the size or availability of the issuance, or a potential period of discount on the price of the securities, thus increasing the chance that investors are persuaded to act quickly. Statements such as ‘act now to avoid disappointment’ or ‘limited stocks available’ fall within this category.
  • Failure to clearly formulate risks. For example, by emphasizing the transferability of the securities although the tradability is actually limited and described as a risk factor in the prospectus.
  • Comparing two different products with different risks while failing to explicitly state the differences in risk. For example, comparing an investment product with a savings product and not clarifying the risk difference.
  • Stating that a return, distribution or redemption is ‘fixed’ when in fact this is not fixed or guaranteed. This gives investors the incorrect impression that this is a certainty.
  • Stating historical returns that are not representative. For example, because they are based on too limited selected period or because not all the historical returns are included in the selected period.
  • Ignoring important conditions in favour of a positive feature. For example, think of limitations with respect to tradability, early redemption or options extending the maturity.
    Accordance with the prospectus
    Information in the advertisement must be substantially consistent with the prospectus. For instance, the information is not consistent if the advertisement gives an impression that does not correspond to the impression given by the prospectus.

Balance

Advertisements – and any other oral and written information – shall not present the information in the prospectus in a materially unbalanced way, including by way of negative aspects of such information with less prominence than the positive aspects, omission or selective presentation of certain information. An advertisement is unbalanced if:

  • The positive features of the product are presented more prominently than the negative features.
  • The information omits negative features while stating positive features.
  • The positive features of the product are specifically described while the negative features are referred to in general terms.
  • Features of the product that vary from market practice are not stated.

Recognisability

Advertisements must be recognizable as such. Article 14(1) (a) of the Delegated Regulation (EU) 2019/979 requires that all advertisements contain the word ‘advertisement’ in a prominent manner. Where an advertisement is disseminated in an oral form, the purpose of the communication shall be clearly identified at the beginning of the message. This is a new requirement compared to the (old) Prospectus Directive.

Different to the prospectus

Sometimes an advertisement, such as a brochure, closely resembles the prospectus. In such a case, the brochure is almost of the same length as the prospectus. Article 14(2) of the Delegated Regulation (EU) 2019/979 requires that a clear difference is made between advertising and the prospectus. The form and length of advertisements must therefore be such that investors do not confuse it with the prospectus. This is a new norm compared to the (old) Prospectus Directive.

Mandatory warnings

If the advertisement states that the prospectus has been approved by the AFM (through the use of the words ‘approved’ or ‘AFM’), then certain warnings have to be included under Article 14(1) (b) and (c) of the Delegated Regulation (EU) 2019/979. This requirement also applies to smaller advertisements such as banners. and is a new norm compared to the (old) Prospectus Directive.

Alternative performance measures in advertisements

In some cases, the prospectus mentions (alternative) performance measures that do not originate from the financial statements. These are known as Alternative Performance Measures or ‘APMs’, and must meet the criteria of ESMA’s Guidelines on Alternative Performance Measures. These APMs may be stated in advertisements, but only if they are also stated in the prospectus.

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