On 31 January 2020, the European Securities and Markets Authority (ESMA) published a letter to the European Commission in response of its request for technical advice on general equivalence criteria for prospectuses drawn up under the laws of third countries under Article 29(3) of the Prospectus Regulation.

After careful analysis of its mandate, ESMA concludes that the operation of an equivalence regime under Article 29 of the Prospectus Regulation would raise serious practical challenges.

One of ESMA’s main objections is that Article 29(1)(a) entitles EU home competent authorities to approve prospectuses from third countries, if the information requirements imposed by those third country laws are equivalent to the requirements of the Prospectus Regulation (equivalent third countries). ESMA argues that this significantly limits the added value of the equivalence regime because, while third country prospectuses would be drawn up under the disclosure rules of the equivalent third country, they would have to be scrutinised and approved under the disclosure rules of the Prospectus Regulation. ESMA also asserts that while Article 29(3) establishes a list of the articles of the Prospectus Regulation which should form the basis of the general equivalence criteria, the list leaves out certain key aspects of the prospectus regime, such as disclosure rules on risk factors, and does not clarify central elements of the equivalence regime, for example the rights and obligations connected to a third country prospectus in the EU.