EU PROSPECTUS REGULATION – UKSPA INITIATIVE

Delta Capita inSPire engages with leading banks in UK Structured Products Association to work on a common consistent approach.

Delta Capita inSPire is working with members of the UK Structured Products Association to assist in the creation of a market standard for applying EU Prospectus Regulation and in particular certain aspects of investor disclosure.

Under the Regulation, which went live in July 2019 but will only fully apply to structured product issuances under the latest 2020 programme updates, issuers of structured products in scope of the regulation, are required to provide more concise and clearly comprehensible disclosures of risks to their investors. The specific rules relate to a new format for the Issue Summary, which must now include only the most relevant risk disclosures that are specific and material to the product, and be limited to 15 risks in total (the document itself will be subject to a 7 page limit).

Delta Capita inSPire has been working with the members of the UK Structured Products Association (UKSPA), with the goal of forming a common approach to the materiality assessment of the risk factors (following ESMA guidelines) and a standardised logic for selection of security specific risk factors in the Issue Summary document.

The exercise is currently still underway, however the solution is expected to be based on use of a tool that provides originators with an effective and transparent mechanism to link relevant features of a structured product to the risk factors that are relevant for those features. The tool (see illustration below) can form the basis of a clear auditable decision process for selection and disclosure of the risks, and issuers expect end investors to benefit from a consistent approach, for products that are commonly traded in the market.

For more details of how we can can help you implement an effective process around these or other aspects of EU regulations for structured products, please contact Ben Pugh.