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Capital market and supervision

For years the capital market has been the place where businesses can satisfy their financing needs. On the primary market, financing needs are met by means of issues (debt/equity), for example, by a listing on the stock exchange or by private placement. On the secondary market, money for financing is raised by refloating and secondary offerings. Supervision on the capital markets has increased enormously in recent years with the implementation of the European prospective directive, the European acquisition directive and the European market abuse directive as well as Dutch legislation and regulations.

Under securities’ legislation, supervision on the capital markets particularly involves the rules on offering securities (both debt and equity transactions) and other financial instruments, the prospectus obligation and the rules for public offerings. On the capital market, a distinction is made between primary and secondary market (over-the-counter market, secondary offerings, etc.). In addition to the financing aspects of the capital market, the supervision covers the location where capital market activities are allowed to be conducted. Thus the Financial Supervision Act requires operators on markets in financial instruments to have a licence for: regulated markets such as Euronext and multilateral trade facilities such as Alternext.

The Financial Supervision Acts accurately describes the cases in which a prospectus must be prepared and specifies the supervisor authorised to approve the prospectus. A prospectus of a Dutch issuing institution is generally subject to approval by the Netherlands Authority for Financial Markets. The issue of securities is often linked to a flotation to increase their merchantability. Since the enactment of the Markets in Financial Instruments Directive, securities may also be traded on a multilateral trading facility, which has become an alternative type of and an important competitor of the regulated market.

The Financial Supervision Act, in particular the related Public Offerings Decree, prescribes the formalities to be observed when a public bid is issued. In addition to preparation of a public offer (due diligence investigation), the issue of an offering memorandum and successful completion of the public bid, it is important to be alert on any breaches of the market abuse rules. Public bids in particular carry the risks of insider trading, price manipulation, and there are disclosure requirements for price-sensitive information. Experience has learned that supervisors are extra alert at such occasions.

Specialist assistance to gain access to and act on the capital markets is - in view of their complexity - indispensable. This applies to both the issuing institutions itself and the other parties involved in an issue, flotation and public bid, such as banks. Eversheds Sutherland can offer you that assistance. Our solid experience includes:

  • preparation of prospectuses and related documentation;
  • advice on the prospectus obligation and exemptions;
  • advice on listing agreements and the related documents;
  • assistance in issues (debt and equity) and initial public offerings private placements and secondary offerings;
  • assistance and advice regarding corporate bond issues (together with our notarial practice);
  • preparation of financing and issue documentation such as underwriting agreements;
  • advice on prospectus liability;
  • advice on and assistance in public offerings;
  • preparation of offering memorandums;
  • assistance in licence processes for regulated markets or multilateral trading facilities; and
  • advice on and assistance in the establishment of a regulated market and in obtaining a licence for multilateral trading facility.

Miriam Ee, van