Related provisions for IFPRU 4.12.15

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FEES 6.7.6RRP
If a firm ceases to be a participant firm or carry out activities within one or more classes54 part way through a financial year6 of the compensation scheme:44(1) it will remain liable for any unpaid levies which the FSCS has already made on the firm; and41(2) the FSCS may make one or more levies4 upon it (which may be before or after the firm5 has ceased to be a participant firm or carry out activities within one or more classes5,4 but must be before it ceases to be an authorised
REC 2A.3.2GRP

The guidance in relation to the recognition requirements in the sections of REC 2 listed in Column A of the table below applies to an RAP in relation to the equivalent RAP recognition requirements listed in Column C and (if shown) with the modifications in Column B.

Table: Guidance on RAP recognition requirements

Column A

REC 2 guidance which applies to an RAP

Column B

Modification to REC 2 guidance for an RAP

Column C

Relevant RAP recognition requirement

REC 2.2.2 G to REC 2.2.7 G (Relevant circumstances and Outsourcing)

Reg 13

REC 2.3.3 G to REC 2.3.9 G (Financial resources)

Reg 14

REC 2.4.3 G to REC 2.4.6 G (Suitability)

In addition to the matters set out in REC 2.4.3 G to REC 2.4.6 G, the FCA3 will have regard to whether a key individual has been allocated responsibility for overseeing the auction platform of the UK recognised body.

3

Reg 15

REC 2.5.3 G to REC 2.5.20 G (Systems and controls and conflicts) and REC 2.5A (Guidance on Public Interest Disclosure Act: Whistleblowing)

Reg 16 and 17(2)(f)1

REC 2.6.26 G to REC 2.6.34 G (Safeguards for investors)

Reg 17

REC 2.7.3 G to REC 2.7.4 G (Access to facilities)

The FCA3 shall have regard to whether an RAP provides access to bid at auctions only to those persons eligible to bid under article 18 of the auction regulation.

3

Reg 17(2)(a) and1 20

REC 2.8.3 G to REC 2.8.4 G (Settlement and clearing services)

Reg 17(2)(d) and 21

REC 2.9.3 G to REC 2.9.4 G (Transaction recording)

Reg 17(2)(e)

REC 2.10.3 G to REC 2.10.4 G (Financial crime and market abuse)

Reg 17(2)(g)

REC 2.11.3 G to REC 2.11.4 G (Custody)

REC 2.11.4 G is replaced with the following for an RAP:

Where an RAP arranges for other persons to provide services for the safeguarding and administration services of assets belonging to users of its facilities, it will also need to satisfy the RAP recognition requirement in regulation 17(2)(h) of the RAP regulations (see REC 2A.2.1 UK).

Reg 17(2)(h)

REC 2.12.11 G to REC 2.12.12 G (Availability of relevant information)

REC 2.12.11 G to REC 2.12.12 G are replaced with the following for an RAP:

REC 2.12.11 G

In determining whether appropriate arrangements have been made to make relevant information available to persons engaged in dealing in emissions auction products2 the FCA3 may have regard to:

(1) the extent to which auction bidders are able to obtain information in a timely fashion about the terms of those emissions auction products2 and the terms on which they will be auctioned, either through accepted channels for dissemination of information or through other regularly and widely accessible communication media;

(2) what restrictions, if any, there are on the dissemination of relevant information to auction bidders; and

(3) whether relevant information is, or can be, kept to restricted groups of persons in such a way as to facilitate or encourage market abuse.

REC 2.12.12 G

An RAP does not need to maintain its own arrangements for providing information on the terms of emissions auction products2 to auction bidders where it has made adequate arrangements for other persons to do so on its behalf or there are other effective and reliable arrangements for this purpose.

2322

Reg 17(2)(c)

REC 2.13.3 G to REC 2.13.6 G (Promotion and maintenance of standards)

Reg 18

REC 2.14.3 G to REC 2.14.6 G (Rules and consultation)

Reg 19

REC 2.15.3 G to REC 2.15.6 G (Discipline)

Reg 22

REC 2.16.3 G to REC 2.16.4 G (Complaints)

Reg 23
EG 10.2.1RP
1The court may make three types of order under these provisions: to restrain a course of conduct, to take steps to remedy a course of conduct and to secure assets. As is explained below, the court may also make an order freezing assets under its inherent jurisdiction. In certain cases, the FCA may seek only one type of order, although in others it may seek several.
REC 2.9.3GRP
In determining whether a UK recognised body has satisfactory arrangements for recording the transactions effected on its facilities,3 or cleared or to be cleared by another person3 by means of, its facilities, the FCA3 may have regard to:3(1) whether the UK recognised body has arrangements for creating, maintaining and safeguarding an audit trail of transactions for at least five years4; and(2) the type of information recorded and the extent to which the record includes4: (a)
EG 11.3.2RP
1However, there may be circumstances in which the FCA will choose to use the powers under section 382 or section 383 of the Act to apply to the court for an order for restitution against a firm. Those circumstances may include, for example, where: (1) the FCA wishes to combine an application for an order for restitution with other court action against the firm, for example, where it wishes to apply to the court for an injunction to prevent the firm breaching a relevant requirement11;
LR 6.2.2GRP
(1) 1In determining what amounts to 75% of the applicant's business for the purpose of LR 6.2.1R(2), the FCA will consider the size, in aggregate, of all of the acquisitions that the applicant has entered into during the period required by LR 6.2.1R(1) and up to the date of the prospectus or listing particulars, relative to the size of the applicant as enlarged by the acquisitions.(2) In ascertaining the size of the acquisitions relative to the applicant for the purposes of LR
IPRU-INV 5.8.2RRP

1 Deductions and Ratios (Items 10, 11 and 15)

(a)

Notwithstanding IPRU-INV 5.8.1R and 5.8.2R for an exempt CAD firm, in calculating own funds, all of Item 8 must be deducted after the total of Tier 1 and Tier 2 capital and the following restrictions apply:

(i)

the total of fixed term cumulative preference shares (item 10) and long-term qualifying subordinated loans (item 11) that may be included in Tier 2 capital is limited to 50 per cent of Tier 1 capital;

(ii)

Tier 2 capital must not exceed 100 per cent of Tier 1 capital.

(b)

A firm which is not an exempt CAD firm and which is subject to a liquid capital requirement under IPRU-INV 5.4.1R may take into account qualifying subordinated loans in the calculation of liquid capital up to a maximum of 400% of its Tier 1 capital.

2 Non corporate entities

(a)

In the case of partnerships or sole traders, the following terms should be substituted, as appropriate, for items 1 to 4 in Tier 1 capital:

(i)

partners' capital accounts (excluding loan capital);

(ii)

partners' current accounts (excluding unaudited profits and loan capital);

(iii)

proprietors' account (or other term used to signify the sole trader's capital but excluding unaudited profits).

(b)

Loans other than qualifying subordinated loans shown within partners' or proprietors' accounts must be classified as Tier 2 capital under item 12.

(c)

For the calculation of own funds, partners' current accounts figures are subject to the following adjustments in respect of a defined benefit occupational pension scheme:

(i)

a firm must derecognise any defined benefit asset;

(ii)

a firm may substitute for a defined benefit liability the firm'sdeficit reduction amount. The election must be applied consistently in respect of any one financial year.

Note 1

A firm should keep a record of and be ready to explain to its supervisory contacts in the FCA the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme.

2A Reserves

For the calculation of own funds the following adjustments apply to the audited reserves figure:

(a)

a firm must deduct any unrealised gains or, where applicable, add back in any unrealised losses on cash flow hedges of financial instruments measured at cost or amortised cost;

(b)

in respect of a defined benefit occupational pension scheme, a firm must derecognise any defined benefit asset;

(c)

a firm may substitute for a defined benefit liability the firm's deficit reduction amount. The election must be applied consistently in respect of any one financial year.

Note 2

A firm should keep a record of and be ready to explain to its supervisory contacts in the FCA the reasons for any difference between the deficit reduction amount and any commitment the firm has made in any public document to provide funding in respect of a defined benefit occupational pension scheme.

(d)

a firm must not include any unrealised gains from investment property.

Note 3

Unrealised gains from investment property should be reported as part of revaluation reserves.

(e)

where applicable, a firm must deduct any asset in respect of deferred acquisition costs and add back in any liability in respect of deferred income (but exclude from the deduction or addition any asset or liability which will give rise to future cash flows), together with any associated deferred tax.

Note 4

Reserves must be audited unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts.

3 Intangible assets (Item 6)

Intangible assets comprise:

(a)

formation expenses to the extent that these are treated as an asset in the firm's accounts;

(b)

goodwill, to the extent that it is treated as an asset in the firm's accounts; and

(c)

other assets treated as intangibles in the firm's accounts.

Intangible assets do not include a deferred acquisition cost asset.

4 Material current year losses (Item 7)

Losses in current year operating figures must be deducted when calculating Tier 1 capital if such losses are material. For this purpose profits and losses must be calculated quarterly or monthly, as appropriate. If this calculation reveals a net loss it shall only be deemed to be material for the purposes of this Table if it exceeds 10 per cent of the firm's Tier 1 capital.

5 Material holdings in credit and financial institutions (Item 8)

Material holdings comprise:

(a)

where the firm holds more than 10 per cent of the equity share capital of the institution, the value of that holding and the amount of any subordinated loans to the institution and the value of holdings in qualifying capital items or qualifying capital instruments issued by the institution;

(b)

in the case of holdings other than those mentioned in (a) above, the value of holdings of equity share capital in, and the amount of subordinated loans made to, such institutions and the value of holdings in qualifying capital items or qualifying capital instruments issued by such institutions to the extent that the total of such holdings and subordinated loans exceeds 10 per cent of the firm'sown funds calculated before the deduction of item 8.

5A Material insurance holdings (Item 8)

(a)

A material insurance holding means the holdings of an exempt CAD firm of items of the type set out in (b) in any:

(i)

insurance undertaking; or

(ii)

insurance holding company;

that fulfils one of the following conditions:

(iii)

it is a subsidiary undertaking of that firm; or

(iv)

that firm holds a participation in it.

(b)

An item falls into this provision for the purpose of (a) if it is:

(i)

an ownership share; or

(ii)

subordinated debt or another item of capital that forms part of the tier two capital resources that falls into GENPRU 2 or, as the case may be, INSPRU 7, or is an item of “basic own funds” defined in the PRA Rulebook: Glossary.

6 Long term qualifying subordinated loans (Item 11)

Loans having the characteristics prescribed by IPRU-INV 5.6.1R may be included in item 11, subject to the limits set out in paragraph (1) above.

6A Perpetual cumulative preference share capital

Perpetual cumulative preference share capital may not be included in the calculation of own funds by an exempt CAD firm unless it meets the following requirements:

(a)

it may not be reimbursed on the holder's initiative or without the prior agreement of the FCA;

(b)

the instrument must provide for the firm to have the option of deferring the dividend payment on the share capital;

(c)

the shareholder's claims on the firm must be wholly subordinated to those of all non-subordinated creditors;

(d)

the terms of the instrument must provide for the loss-absorption capacity of the share capital and unpaid dividends, whilst enabling the firm to continue its business; and

(e)

it must be fully paid-up.

7 Qualifying arrangements (Item 13)

(a)

An exempt CAD firm may only include a qualifying undertaking or other arrangement in item 13 if it is a qualifying capital instrument or a qualifying capital item.

(b)

A firm which is not an exempt CAD firm may only include qualifying undertakings in its calculation of liquid capital if:

(i)

it maintains liquid capital equivalent to 6/52 of its annual expenditure in a form other than qualifying undertakings; and

(ii)

the total amount of all qualifying undertakings plus qualifying subordinated loans does not exceed the limits set out in paragraph (1)(b) above.

8 Net trading book profits (Item 14)

For firms which are not exempt CAD firms unaudited profits can be included at item 14.

This Item must not be included in the liquid capital calculation of a firm whose permitted business includes establishing, operating or winding up a personal pension scheme.

Note 5

Non-trading book interim profits may only be included in Tier 1 of the calculation if they have been independently verified by the firm’s external auditors, unless the firm is exempt from the provisions of Part VII of the Companies Act 1985 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts.

For this purpose, the external auditor should normally undertake at least the following:

(a)

satisfy himself that the figures forming the basis of the interim profits have been properly extracted from the underlying accounting records;

(b)

review the accounting policies used in calculating the interim profits so as to obtain comfort that they are consistent with those normally adopted by the firm in drawing up its annual financial statements;

(c)

perform analytical review procedures on the results to date, including comparisons of actual performance to date with budget and with the results of prior periods;

(d)

discuss with management the overall performance and financial position of the firm;

(e)

obtain adequate comfort that the implications of current and prospective litigation, all known claims and commitments, changes in business activities and provisions for bad and doubtful debts have been properly taken into account in arriving at the interim profits; and

(f)

follow up problem areas of which the auditors are already aware in the course of auditing the firm’s financial statements.

A firm wishing to include interim profits in Tier 1 capital in a financial return should submit to the FCA with the financial return a verification report signed by its external auditor which states whether the interim results are fairly stated, unless the firm is exempt from the provisions of Part VII of the Companies Act 198 (section 249A (Exemptions from audit)), or where applicable, Part 16 of the Companies Act 2006 (section 477 (Small companies: Conditions for exemption from audit)) relating to the audit of accounts.

Profits on the sale of capital items or arising from other activities which are not directly related to the investment business of the firm may also be included within the calculation of liquid capital, but (unless the firm is exempt as above) only if they can be separately verified by the firm’s auditors. In such a case, such profits can form part of the firm’s Tier 1 capital as profits.

9 Short term qualifying subordinated loans (Item 15)

Loans having the characteristics prescribed by IPRU-INV 5.6.3R may be included in item 15 subject to the limits set out in paragraph (1) above. Tier 2 capital which exceeds the ratios prescribed by paragraph (1)(a) and (b) may be included in item 15 subject to paragraph (1) above.

10 Illiquid assets (Item 16)

Illiquid assets comprise:

(a)

tangible fixed assets.

Note 6

In respect of tangible fixed assets purchased under finance leases the amount to be deducted as an illiquid asset shall be limited to the excess of the asset over the amount of the related liability shown on the balance sheet.

(b)

holdings in, including subordinated loans to, credit or financial institutions which may be included in the own funds of such institutions unless they have been deducted under item 8;

(c)

any investment in undertakings other than credit institutions and other financial institutions where such investments are not readily realisable;

(d)

any deficiency in net assets of a subsidiary;

(e)

deposits not available for repayment within 90 days or less (except for payments in connection with margined futures or options contracts);

Note 7

Where cash is placed on deposit with a maturity of more than 90 days but is repayable on demand subject to the payment of a penalty, then this is not required to be deducted as an illiquid asset but a deduction is required for the amount of the penalty.

(f)

loans, other debtors and accruals not falling due to be repaid within 90 days or which are more than one month overdue by reference to the contractual payment date;

(g)

physical stocks (except where subject to the position risk requirement as set out in IPRU-INV 5.11; and

(h)

prepayments to the extent that the period of prepayment exceeds six weeks in the case of a firm subject to the 6/52 expenditure based requirement or thirteen weeks in the case of a firm subject to the 13/52 expenditure based requirement.

(i)

if not otherwise covered, any holding in eligible capital instruments of an insurance undertaking, insurance holding company, or reinsurance undertaking that is a subsidiary or participation. Eligible capital instruments include ordinary share capital, cumulative preference shares, perpetual securities and long-term subordinated loans that are eligible for insurance undertakings under INSPRU 1.

Illiquid assets do not include a defined benefit asset or a deferred acquisition cost asset.

11 Qualifying property (Item 17)

This item comprises the qualifying amount calculated in accordance with IPRU-INV 5.7.1R.
COLL 6.3.6GRP

Table: This table belongs to COLL 6.3.2 G (2) (a) and COLL 6.3.3 R (Valuation)1.

Valuation and pricing

1

The valuation of scheme property

(1)

Where possible, investments should be valued using a reputable source. The reliability of the source of prices should be kept under regular review.

(2)

For some or all of the investments comprising the scheme property, different prices may quoted according to whether they are being bought (offer prices) or sold (bid prices). The valuation of a single-priced authorised fund should reflect the mid-market value of such investments. In the case of a dual-priced authorised fund, the issue basis of the valuation will be carried out by reference to the offer prices of investments and the cancellation basis by reference to the bid prices of those same investments. The prospectus should explain how investments will be valued for which a single price is quoted for both buying and selling.1

1

3(2A)

Schemes investing in approved money-market instruments5should value such instruments on an amortised cost basis on condition that:5

55

[Note:CESR's UCITS eligible assets guidelines with respect to article 4(2) of the UCITS eligible assets Directive]

(2B)

[deleted]12

7

12

7

(3)

Any part of the scheme property of an authorised fund that is not an investment should be valued at a fair value, but for immovables this is subject to COLL 5.6.20 R (3) (f) (Standing independent valuer and valuation).

(4)

For the purposes of (2) and (3), any fiscal charges, commissions, professional fees or other charges that were paid, or would be payable on acquiring or disposing of the investment or other part of the scheme property should, in the case of a single-priced authorised fund,2 be excluded from the value of an investment or other part of the scheme property. In the case of a dual-priced authorised fund, any such payments should be added to the issue basis of the valuation, or subtracted from the cancellation basis of the valuation, as appropriate. Alternatively, the prospectus of a dual-priced authorised fund may prescribe any other method of calculating unitprices that ensures an equivalent treatment of the effect of these payments.2

(5)

Where the authorised fund manager has reasonable grounds to believe that:

it should value an investment at a price which, in its opinion, reflects a fair and reasonable price for that investment (the fair value price);

(6)

The circumstances which may give rise to a fair value price being used include:

  • no recent trade in the security concerned; or
  • the occurrence of a significant event since the most recent closure of the market where the price of the security is taken.
In (b), a significant event is one that means the most recent price of a security or a basket of securities is materially different to the price that it is reasonably believed would exist at the valuation point had the relevant market been open.

(7)

In determining whether to use such a fair value price , the authorised fund manager should include in his consideration:

4(7A)

Where the authorised fund manager, the depositary or the standing independent valuer have reasonable grounds to believe that the most recent valuation of an immovable does not reflect the current value of that immovable, the authorised fund manager should consult and agree with the standing independent valuer a fair and reasonable value for the immovable.

(8)

The authorised fund manager should document the basis of valuation (including any fair value pricing policy) and, where appropriate, the basis of any methodology and ensure that the procedures are applied consistently and fairly.

(9)

Where a unit price is determined using properly applied fair value prices in accordance with policies in (8), subsequent information that indicates the price should have been different from that calculated will not normally give rise to an instance of incorrect pricing.

2

The pricing controls of the authorised fund manager

(1)

An authorised fund manager needs to be able to demonstrate that it has effective controls over its calculations of unit prices.

(2)

The controls referred to in (1) should ensure that:

  • asset prices are accurate and up to date;
  • investment 1transactions are accurately and promptly reflected in valuations;
  • the components of the valuation (including stock, cash, and units in issue1), are regularly reconciled to their source or prime records and any reconciling items resolved promptly and debtors reviewed for recoverability;
  • the sources of prices not obtained from the main pricing source are recorded and regularly reviewed;
  • compliance with the investment and borrowing powers is regularly reviewed;
  • dividends are accounted for as soon as securities1 are quoted ex-dividend (unless it is prudent to account for them on receipt):
  • fixed interest dividends, interest and expenses are accrued at each valuation point1;
  • tax positions are regularly reviewed and adjusted, if necessary;
  • reasonable tolerances are set for movements in the key elements of a valuation and movements outside these tolerances are investigated;5
  • the fund manager regularly reviews the portfolio valuation for accuracy5; and5
  • the valuation of OTC derivatives is accurate and up to date and in compliance with the methods agreed with the depositary.5

(3)

In exercising its pricing controls, the authorised fund manager may exercise reasonable discretion in determining the appropriate frequency of the operation of the controls and may choose a longer interval, if appropriate, given the level of activity on the authorised fund1or the materiality of any effect on the price.

(4)

Evidence of the exercise of the pricing controls should be retained.

(5)

Evidence of persistent or repetitive errors in relation to these matters, and in particular any evidence of a pattern of errors working in an authorised fund manager's favour, will make demonstrating effective controls more difficult.

(6)

Where the pricing1function is delegated to a third party, COLL 6.6.15 R (1) (Committees and delegation) will apply.

3

The depositary's review of the authorised fund manager's systems and controls

(1)

This section provides details of the types of checks a depositary should carry out to be satisfied that the authorised fund manager adopts systems and controls which are appropriate to ensure that prices of units are calculated in accordance with this section and to ensure that the likelihood of incorrect prices will be minimised. These checks also apply where an authorised fund manager has delegated all or some of its pricing1 functions to one or more third parties5.

5

(2)

A depositary should thoroughly review an authorised fund manager's systems and controls to confirm that they are satisfactory. The depositary's review should include an analysis of the controls in place to determine the extent to which reliance can be placed on them.

(3)

A review should be performed when the depositary is appointed and thereafter as it feels appropriate given its knowledge of the robustness and the stability of the systems and controls and their operation.

(4)

A review should be carried out more frequently where a depositary knows or suspects that an authorised fund manager's systems and controls are weak or are otherwise unsatisfactory.

(5)

Additionally, a depositary should from time to time review other aspects of the valuation of the scheme property of each authorised fund for which it is responsible, verifying, on a sample basis, if necessary, the assets, liabilities, accruals, units in issue1, securities prices (and in particular the prices of OTC derivatives,5unapproved securities and the basis for the valuation of unquoted securities) and any other relevant matters, for example an accumulation factor or a currency conversion factor.

(6)

A depositary should ensure that any issues, which are identified in any such review, are properly followed up and resolved.

4

The recording and reporting of instances of incorrect pricing

(1)

An authorised fund manager should record each instance where the price of a unit is incorrect as soon as the error is discovered, and report the fact to the depositary together with details of the action taken, or to be taken, to avoid repetition as soon as practicable.

(2)

In accordance with COLL 6.6.11 G (Duty to inform the FCA), the depositary should report any breach of the rules in COLL 6.3 immediately to the FCA. However, notification should relate to instances which the depositary considers material only.

(3)

A depositary should also report to the FCA immediately any instance of incorrect pricing1where the error is 0.5% or more of the price of a unit, where a depositary believes that reimbursement or payment is inappropriate and should not be paid by an authorised fund manager.

(4)

In accordance with SUP 16.6.8 R, a depositary should also make a return to the FCA on a quarterly basis which summarises the number of instances of incorrect pricing1 during a particular period.

5

The rectification of pricing breaches

(1)

COLL 6.6.3R(3)(c)10(Functions of the authorised fund manager) places a duty on the authorised fund manager to take action to reimburse affected unitholders, former unitholders, and the scheme itself, for instances of incorrect pricing1, except if it appears to the depositary that the breach is of minimal significance.

(2)

A depositary may consider that the instance of incorrect pricing1is of minimal significance if:

(3)

In determining (2), if the instance of incorrect pricing1 is due to one or more factors or exists over a period of time, each price should be considered separately.

(4)

If a depositary deems it appropriate, it may, in spite of the circumstances outlined in (2), require a payment from the authorised fund manager or from the authorised fund to the unitholders, former unitholders, the authorised fund or the authorised fund manager (where appropriate).

(5)

The depositary should satisfy itself that any payments required following an instance of incorrect pricing1 are accurately and promptly calculated and paid.

(6)

If a depositary considers that reimbursement or payment is inappropriate, it should report the matter to the FCA, together with its recommendation and justification. The depositary should take into account the need to avoid prejudice to the rights of unitholders, or the rights of unitholders in a class of units.

(7)

It may not be practicable, or in some cases legally permissible, for the authorised fund manager to obtain reimbursement from unitholders, where the unitholders have benefited from the incorrect price.

(8)

In all cases where reimbursement or payment is required, amounts due to be reimbursed to unitholders for individual sums which are reasonably considered by the authorised fund manager and depositary to be immaterial, need not normally be paid.
PR 2.3.1EURP

Articles 3 to 23 of the PD Regulation provide for the minimum information to be included in a prospectus:

Note: the Annexes (including schedules and building blocks) referred to in these articles are set out for information in PR App 3.

Article 3

Minimum information to be included in a prospectus

A prospectus shall be drawn up by using one or a combination of the schedules and building blocks set out in this Regulation.2

2

A prospectus shall contain the information items required in Annexes I to XVII and Annexes XX to XXX depending on the type of issuer or issues and securities involved. Subject to Article 4a(1), a competent authority shall not require that a prospectus contains information items which are not included in Annexes I to XVII or Annexes XX to XXX.3

1223

In order to ensure conformity with the obligation referred to in Article 5(1) of Directive 2003/71/EC, the competent authority of the home Member State, when approving a prospectus in accordance with Article 13 of that Directive, may, on a case by case basis, require the information provided by the issuer, the offeror or the person asking for admission to trading on a regulated market to be completed, for each of the information items.2

2

2Where the issuer, the offeror or the person asking for the admission to trading on a regulated market is required to include a summary in a prospectus, in accordance with Article 5(2) of Directive 2003/71/EC, the competent authority of the home Member State, when approving the prospectus in accordance with Article 13 of that Directive, may, on a case by case basis, require certain information provided in the prospectus, to be included in the summary.

3[Note: See transitional provisions in Regulation (EU) No 862/2012]

Article 4

Share registration document schedule

1.

For the share registration document information shall be given in accordance with the schedule set out in Annex I.

2.

The schedule set out in paragraph 1 shall apply to the following:

(1)

shares and other transferable securities equivalent to shares;

(2)

other securities which comply with the following conditions:

(a)

they can be converted or exchanged into shares or other transferable securities equivalent to shares, at the issuer’s or at the investor’s discretion, or on the basis of the conditions established at the moment of the issue, or give, in any other way, the possibility to acquire shares or other transferable securities equivalent to shares, and

(b)

provided that these shares or other transferable securities equivalent to shares are or will be issued by the issuer of the security and are not yet traded on a regulated market or an equivalent market outside the Community at the time of the approval of the prospectus covering the securities, and that the underlying shares or other transferable securities equivalent to shares can be delivered with physical settlement.

1Article 4a

Share registration document schedule in cases of complex financial history or significant financial commitment

1.

Where the issuer of a security covered by Article 4(2) has a complex financial history, or has made a significant financial commitment, and in consequence the inclusion in the registration document of certain items of financial information relating to an entity other than the issuer is necessary in order to satisfy the obligation laid down in Article 5(1) of Directive 2003/71/EC, those items of financial information shall be deemed to relate to the issuer. The competent authority of the home Member State shall in such cases request that the issuer, the offeror or the person asking for admission to trading include those items of information in the registration document.

Those items of financial information may include pro forma information prepared in accordance with Annex II. In this context, where the issuer has made a significant financial commitment any such pro forma information shall illustrate the anticipated effects of the transaction that the issuer has agreed to undertake, and references in Annex II to “the transaction” shall be read accordingly.

2.

The competent authority shall base any request pursuant to the first subparagraph of paragraph 1 on the requirements set out in item 20.1 of Annex I, item 15.1 of Annex XXIII, item 20.1 of Annex XXV, item 11.1 of Annex XXVII and item 20.1 of Annex XXVIII as regards the content of financial information and the applicable accounting and auditing principles, subject to any modification which is appropriate in view of any of the following factors:2

2

(a)

the nature of the securities;

(b)

the nature and range of information already included in the prospectus, and the existence of financial information relating to an entity other than the issuer in a form that might be included in a prospectus without modification;

(c)

the facts of the case, including the economic substance of the transactions by which the issuer has acquired or disposed of its business undertaking or any part of it, and the specific nature of that undertaking;

(d)

the ability of the issuer to obtain financial information relating to another entity with reasonable effort.

Where, in the individual case, the obligation laid down in Article 5(1) of Directive 2003/71/EC may be satisfied in more than one way, preference shall be given to the way that is the least costly or onerous.

(3)

Paragraph 1 is without prejudice to the responsibility under national law of any other person, including the persons referred to in Article 6(1) of Directive 2003/71/EC, for the information contained in the prospectus. In particular, those persons shall be responsible for the inclusion in the registration document of any items of information requested by the competent authority pursuant to paragraph 1.

(4)

For the purposes of paragraph 1, an issuer shall be treated as having a complex financial history if all of the following conditions apply:

(a)

its entire business undertaking at the time that the prospectus is drawn up is not accurately represented in the historical financial information which it is required to provide under item 20.1 of Annex I, item 15.1 of Annex XXIII, item 20.1 of Annex XXV, item 11.1 of Annex XXVII and item 20.1 of Annex XXVIII;2

2

(b)

that inaccuracy will affect the ability of an investor to make an informed assessment as mentioned in Article 5(1) of Directive 2003/71/EC; and

(c)

information relating to its business undertaking that is necessary for an investor to make such an assessment is included in financial information relating to another entity.

(5)

For the purposes of paragraph 1, an issuer shall be treated as having made a significant financial commitment if it has entered into a binding agreement to undertake a transaction which, on completion, is likely to give rise to a significant gross change.

In this context, the fact that an agreement makes completion of the transaction subject to conditions, including approval by a regulatory authority, shall not prevent that agreement from being treated as binding if it is reasonably certain that those conditions will be fulfilled.

In particular, an agreement shall be treated as binding where it makes the completion of the transaction conditional on the outcome of the offer of the securities that are the subject matter of the prospectus or, in the case of a proposed takeover, if the offer of securities that are the subject matter of the prospectus has the objective of funding that takeover.

(6)

For the purposes of paragraph 5 of this Article, and of item 20.2 of Annex I, item 15.2 of Annex XXIII and item 20.2 of Annex XXV, a significant gross change means a variation of more than 25%, relative to one or more indicators of the size of the issuer's business, in the situation of an issuer.2

2

Recital 9

Pro forma financial information is needed in case of significant gross change, i. e. a variation of more than 25% relative to one or more indicators of the size of the issuer's business, in the situation of an issuer due to a particular transaction, with the exception of those situations where merger accounting is required.

Article 5

Pro-forma financial information building block

For pro-forma financial information, information shall be given in accordance with the building block set out in Annex II.

Pro forma financial information should be preceded by an introductory explanatory paragraph that states in clear terms the purpose of including this information in the prospectus.

Article 6

Share securities note schedule

1.

For the share securities note information is necessary to be given in accordance with the schedule set out in Annex III.

2.

The schedule shall apply to shares and other transferable securities equivalent to shares5

53.

Where shares with warrants give the right to acquire the issuer’s shares and these shares are not admitted to trading on a regulated market, the information required by the schedule set out in Annex XII except item 4.2.2 shall also be given.

[Note: See transitional provisions in Regulation (EU) No 759/2013]5

Article 7

Debt and derivative securities registration document schedule for securities with a denomination per unit of less than EUR 100 0002

2

For the debt and derivative securities registration document concerning securities which are not covered in Article 4 with a denomination per unit of less than EUR 100 0002 or, where there is no individual denomination, securities that can only be acquired on issue for less than EUR 100 0002 per security, information shall be given in accordance with the schedule set out in Annex IV.

22

Article 8

Securities note schedule for debt securities with a denomination per unit of less than EUR 100 0002

2

1.

For the securities note for debt securities with a denomination per unit of less than EUR 100 0002 information shall be given in accordance with the schedule set out in Annex V.

2

2.

The schedule shall apply to debt where the issuer has an obligation arising on issue to pay the investor 100% of the nominal value in addition to which there may be also an interest payment.5

53.

Where debt securities are exchangeable or convertible into shares already admitted to trading on a regulated market, the information required by item 4.2.2 of the schedule set out in Annex XII shall also be given.

54.

Where debt securities are convertible or exchangeable into shares which are or will be issued by the issuer of the debt security or by an entity belonging to its group and these underlying shares are not already admitted to trading on a regulated market, information on the issuer of the underlying shares shall also be given in accordance with items 3.1 and 3.2 of the schedule set out in Annex III or, as the case may be, of the proportionate schedule set out in Annex XXIV.

55.

Where debt securities with warrants give the right to acquire the issuer’s shares and these shares are not admitted to trading on a regulated market, the information required by the schedule set out in Annex XII except item 4.2.2 shall also be given.

[Note: See transitional provisions in Regulation (EU) No 759/2013]5

Article 9

Guarantees building block

For guarantees information shall be given in accordance with the building block set out in Annex VI.

2Item 3 of Annex VI shall not apply where a Member State acts as guarantor.

Article 10

Asset backed securities registration document schedule

For the asset backed securities registration document information shall be given in accordance with the schedule set out in Annex VII.

Article 11

Asset backed securities building block

For the additional information building block to the securities note for asset backed securities information shall be given in accordance with the building block set out in Annex VIII.

Article 12

Debt and derivative securities registration document schedule for securities with a denomination per unit of at least EUR 100 0002

2

For the debt and derivative securities registration document concerning securities which are not covered in Article 4 with a denomination per unit of at least EUR 100 0002 or, where there is no individual denomination, securities that can only be acquired on issue for at least EUR 100 0002 per security, information shall be given in accordance with the schedule set out in Annex IX.

22

Article 13

Depository receipts schedule

For depository receipts issued over shares information shall be given in accordance with the schedule set out in Annex X.

Article 14

Banks registration document schedule

1.

For the banks registration document for debt and derivative securities and those securities which are not covered by article 4 information shall be given in accordance with the schedule set out in Annex XI.

2.

The schedule set out in paragraph 1 shall apply to credit institutions as defined in point (a) of Article 1(1) of Directive 2000/12/EC as well as to third country credit institutions which do not fall under that definition but have their registered office in a state which is a member of the OECD.

These entities may also use alternatively the registration document schedules provided for under in Articles 7 and 12.

Article 15

Securities note schedule for derivative securities

1.

For the securities note for derivative securities information shall be given in accordance with the schedule set out in Annex XII.

2.

The schedule shall apply to securities which are not in the scope of application of the other securities note schedules referred to in articles 6, 8 and 16, except for the cases mentioned in article 6(3), Article 8(3) and (5) and article 16 (3) and (5). The schedule shall apply to certain securities where the payment and/or delivery obligations are linked to an underlying.5

5

[Note: See transitional provisions in Regulation (EU) No 759/2013]5

Article 16

Securities note schedule for debt securities with a denomination per unit

of at least EUR 100 0002

2

1.

For the securities note for debt securities with a denomination per unit of at least EUR 100 0002 information shall be given in accordance with the schedule set out in Annex XIII.

2

2.

The schedule shall apply to debt where the issuer has an obligation arising on issue to pay the investor 100% of the nominal value in addition to which there may be also an interest payment.5

53.

Where debt securities are exchangeable or convertible into shares already admitted to trading on a regulated market, the information required by item 4.2.2 of the schedule set out in Annex XII shall also be given.

54.

Where debt securities are convertible or exchangeable into shares which are or will be issued by the issuer of the debt security or by an entity belonging to its group and these underlying shares are not already admitted to trading on a regulated market, information on the issuer of the underlying shares shall also be given in accordance with items 3.1 and 3.2 of the schedule set out in Annex III or, as the case may be, of the proportionate schedule set out in Annex XXIV.

55.

Where debt securities with warrants give the right to acquire the issuer’s shares and these shares are not admitted to trading on a regulated market, the information required by the schedule set out in Annex XII except item 4.2.2 shall also be given.

[Note: See transitional provisions in Regulation (EU) No 759/2013]5

Article 17

Additional information building block on the underlying share

1.

For the additional information on the underlying share, the description of the underlying share shall be given in accordance with the building block set out in Annex XIV.

In addition, if the issuer of the underlying share is an entity belonging to the same group, the information required by the schedule referred to in Article 4 shall be given in respect of that issuer.

2.

The additional information referred to in the first subparagraph of paragraph 1 shall only apply to those securities which comply with both of the following conditions:

(1)

they can be converted or exchanged into shares or other transferable securities equivalent to shares, at the issuer’s or at the investor’s discretion, or on the basis of the conditions established at the moment of the issue or give, in any other way, the possibility to acquire shares or other transferable securities equivalent to shares; and

(2)

provided that these shares or other transferable securities equivalent to shares are or will be issued by the issuer of the security, by an entity belonging to the group of that issuer or by a third party and are not yet traded on a regulated market or an equivalent market outside the Union at the time of the approval of the prospectus covering the securities, and that the underlying shares or other transferable securities equivalent to shares can be delivered with physical settlement.5

5

[Note: See transitional provisions in Regulation (EU) No 759/2013]5

Article 18

Registration document schedule for collective investment undertakings of the closed-end type

1.

In addition to the information required pursuant to items 1, 2, 3, 4, 5.1, 7, 9.1, 9.2.1, 9.2.3, 10.4, 13, 14, 15, 16, 17.2, 18, 19, 20, 21, 22, 23, 24, 25 of Annex I, for the registration document for securities issued by collective investment undertakings of the closed-end type information shall be given in accordance with the schedule set out in Annex XV.

2.

The schedule shall apply to collective investment undertakings of the closed-end type holding a portfolio of assets on behalf of investors that:

(1)

are recognised by national law in the Member State in which it is incorporated as a collective investment undertaking of the closed end type; or

(2)

do not take or seek to take legal or management control of any of the issuers of its underlying investments. In such a case, legal control and/or participation in the administrative, management or supervisory bodies of the underlying issuer(s) may be taken where such action is incidental to the primary investment objective, necessary for the protection of shareholders and only in circumstances where the collective investment undertaking will not exercise significant management control over the operations of that underlying issuer(s).

Article 19

Registration document schedule for Member States, third countries and their regional and local authorities

1.

For the registration document for securities issued by Member States, third countries and their regional and local authorities information shall be given in accordance with the schedule set out in Annex XVI.

2.

The schedule shall apply to all types of securities issued by Member States, third countries and their regional and local authorities.

Article 20

Registration document schedule for public international bodies and for issuers of debt securities guaranteed by a member state of the OECD

1.

For the registration document for securities issued by public international bodies and for securities unconditionally and irrevocably guaranteed, on the basis of national legislation, by a state which is a member of the OECD information shall be given in accordance with the schedule set out in Annex XVII.

2.

The schedule shall apply to:

- all types of securities issued by public international bodies;

- to debt securities unconditionally and irrevocably guaranteed, on the basis of national legislation, by a state which is a member of the OECD.

3Article 20a

Additional information building block for consent given in accordance with Article 3(2) of Directive 2003/71/EC

1.

For the purposes of the third subparagraph of Article 3(2) of Directive 2003/71/EC, the prospectus shall contain the following:

(a)

the additional information set out in Sections 1 and 2A of Annex XXX where the consent is given to one or more specified financial intermediaries;

(b)

the additional information set out in Sections 1 and 2B of Annex XXX where the issuer or the person responsible for drawing up the prospectus chooses to give its consent to all financial intermediaries.

2.

Where a financial intermediary does not comply with the conditions attached to consent as disclosed in the prospectus, a new prospectus shall be required in accordance with the second paragraph of Article 3(2) of Directive 2003/71/EC.

[Note: See transitional provisions in Regulation (EU) No 862/2012]

Article 21

Combination of schedules and building blocks

1.

The use of the combinations provided for in the table set out in Annex XVIII shall be mandatory when drawing up prospectuses for the types of securities to which those combinations correspond according to this table. However, for securities not covered by those combinations further combinations may be used.

2.

The most comprehensive and stringent registration document schedule, i.e. the most demanding schedule in term of number of information items and the extent of the information included in them, may always be used to issue securities for which a less comprehensive and stringent registration document schedule is provided for, according to the following ranking of schedules:

(1)

share registration document schedule;

(2)

debt and derivative securities registration document schedule for securities with a denomination per unit of less than EUR 100 0002;

2

(3)

debt and derivative securities registration document schedule for securities with a denomination per unit at least EUR 100 0002.

2

23.

The issuer, the offeror and the person asking for admission to trading on a regulated market may choose to draw up a prospectus in accordance with the proportionate schedules set out in Annexes XXIII to XXIX instead of the schedules set out in Annexes I, III, IV, IX, X and XI as described in the second subparagraph provided that the respective conditions laid down in Articles 26a, 26b and 26c are fulfilled.

Where the issuer, the offeror and the person asking for admission to trading on a regulated market makes that choice:

(a)

the reference to Annex I in Annex XVIII shall be read as a reference to Annexes XXIII or XXV;

(b)

the reference to Annex III in Annex XVIII shall be read as a reference to Annex XXIV;

(c)

the reference to Annex IV in Annex XVIII shall be read as a reference to Annex XXVI;

(d)

the reference to Annex IX in Annex XVIII shall be read as a reference to Annex XXVII;

(e)

the reference to Annex X in Annex XVIII shall be read as a reference to Annex XXVIII;

(f)

the reference to Annex XI in Annex XVIII shall be read as a reference to Annex XXIX.

Article 22

Minimum information to be included in a base prospectus and its related final terms

1.

A base prospectus shall be drawn up using one or a combination of schedules and building blocks provided for in this Regulation according to the combinations for various types of securities set out in Annex XVIII.2

2

A base prospectus shall contain the information items required in Annexes I to XVII, Annex XX and Annexes XXIII to XXX depending on the type of issuer and securities involved. Competent authorities shall not require that a base prospectus contains information items which are not included in Annexes I to XVII, Annex XX or Annexes XXIII to XXX.3

223

In order to ensure conformity with the obligation referred to in Article 5(1) of Directive 2003/71/EC, the competent authority of the home Member State, when approving a base prospectus in accordance with Article 13 of that Directive, may, on a case by case basis, require the information provided by the issuer, the offeror or the person asking for admission to trading on a regulated market to be completed for each of the information items.2

2

2Where the issuer, the offeror or the person asking for the admission to trading on a regulated market is required to include a summary in a base prospectus, in accordance with Article 5(2) of Directive 2003/71/EC, the competent authority of the home Member State, when approving the base prospectus in accordance with Article 13 of that Directive, may, on a case-by-case basis, require certain information provided in the base prospectus to be included in the summary.

21a.

The base prospectus may contain options with regard to information categorised as Category A, Category B and Category C, required by the relevant securities note schedules and building blocks, and set out in Annex XX. The final terms shall determine which of these options is applicable to the individual issue, by referring to the relevant sections of the base prospectus or by replicating such information.

2.

The issuer, the offeror or the person asking for admission to trading on a regulated market may omit information items which are not known when the base prospectus is approved and which can only be determined at the time of the individual issue.

3.

The use of the combinations provided for in the table in Annex XVIII shall be mandatory when drawing up base prospectuses for the types of securities to which those combinations correspond according to this table. However, for securities not covered by those combinations further combinations may be used.

4.

The final terms attached to a base prospectus shall only contain the following:2

2

2(a)

within the various securities notes schedules according to which the base prospectus is drawn up, the information items in Categories B and C listed in Annex XX. When an item is not applicable to a prospectus, the item shall appear in the final terms with the mention "not applicable;

2(b)

on a voluntary basis, any “additional information” set out in Annex XXI;

2(c)

any replication of, or reference to options already provided for in the base prospectus which are applicable to the individual issue.

2The final terms shall not amend or replace any information in the base prospectus.

5.

In addition to the information items set out in the schedules and building blocks referred to in Articles 4 to 20 the following information shall be included in a base prospectus:

(1)

indication on the information that will be included in the final terms;2

2(1a)

a section containing a template, the "form of the final terms", which has to be filled out for each individual issue;

(2)

the method of publication of the final terms; if the issuer is not in a position to determine, at the time of the approval of the prospectus, the method of publication of the final terms, an indication of how the public will be informed about which method will be used for the publication of the final terms;

(3)

in the case of issues of non equity securities according to [PR 2.2.7R (1)], a general description of the programme.

6.

Only the following categories of securities may be contained in a base prospectus and its related final terms covering issues of various types of securities:

(1)

asset backed securities;

(2)

warrants falling under Article 17;

(3)

non-equity securities provided for under [PR 2.2.7R (2)];

(4)

all other non-equity securities including warrants with the exception of those mentioned in point (2).

In drawing up a base prospectus the issuer, the offeror or the person asking for admission to trading on a regulated market shall clearly segregate the specific information on each of the different securities included in these categories.

7.

Where an event envisaged under [section 87G(1) of the Act (Supplementary prospectus)] occurs between the time that the base prospectus has been approved and the final closing of the offer of each issue of securities under the base prospectus or, as the case may be, the time that trading on a regulated market of those securities begins, the issuer, the offeror or the person asking for admission to trading on a regulated market shall publish a supplement prior to the final closing of the offer or the admission of those securities to trading.

2Where the issuer needs to prepare a supplement concerning information in the base prospectus that relates to only one or several specific issues, the right of investors to withdraw their acceptances pursuant to Article 16(2) of Directive 2003/71/EC shall only apply to the relevant issues and not to any other issues of securities under the base prospectus.

2[Note: See transitional provisions in Regulation (EU) No 862/2012]3

5

Article 23

Adaptations to the minimum information given in prospectuses and base prospectuses

1.

Notwithstanding Articles 3 second paragraph and 22(1) second subparagraph, where the issuer’s activities fall under one of the categories included in Annex XIX, the [FCA], taking into consideration the specific nature of the activities involved, may ask for adapted information, in addition to the information items included in the schedules and building blocks set out in 4 to 20, including, where appropriate, a valuation or other expert’s report on the assets of the issuer, in order to comply with the obligation referred to in [sections 87A(2),(3) and (4) of the Act]. The [FCA] shall forthwith inform the Commission thereof.

In order to obtain the inclusion of a new category in Annex XIX a Member State shall notify its request to the Commission. The Commission shall update this list following the Committee procedure provided for in Article 24 of [the prospectus directive].

2.

By way of derogation of Articles 3 to 22, where an issuer, an offeror or a person asking for admission to trading on a regulated market applies for approval of a prospectus or a base prospectus for a security which is not the same but comparable to the various types of securities mentioned in the table of combinations set out in Annex XVIII, the issuer, the offeror or the person asking for admission to trading on a regulated market shall add the relevant information items from another securities note schedule provided for in Articles 4 to 20 to the main securities note schedule chosen. This addition shall be done in accordance with the main characteristics of the securities being offered to the public or admitted to trading on a regulated market.

3.

By way of derogation of Articles 3 to 22, where an issuer, an offeror or a person asking for admission to trading on a regulated market applies for approval of a prospectus or a base prospectus for a new type of security, the issuer, the offeror or the person asking for admission to trading on a regulated market shall notify a draft prospectus or base prospectus to the [FCA].

The [FCA] shall decide, in consultation with the issuer, the offeror or the person asking for admission to trading on a regulated market, what information shall be included in the prospectus or base prospectus in order to comply with the obligation referred to in [sections 87A(2),(3) and (4) of the Act]. The [FCA] shall forthwith inform the Commission thereof.

The derogation referred to in the first subparagraph shall only apply in case of a new type of security which has features completely different from the various types of securities mentioned in Annex XVIII, if the characteristics of this new security are such that a combination of the different information items referred to in the schedules and building blocks provided for in Articles 4 to 20 is not pertinent.

4.

By way of derogation of Articles 3 to 22, in the cases where one of the information items required in one of the schedules or building blocks referred to in 4 to 20 or equivalent information is not pertinent to the issuer, to the offer or to the securities to which the prospectus relates, that information may be omitted.
3