Opinions EN (menu position rule)

Mention of the target market in prospectuses of issuers not subject to MiFID II

FSMA_Opinion_2019_04
22/10/2019

The FSMA takes the view that it is preferable not to mention the target market in the prospectus of an issuer who is not subject to MiFID II as this information is not drafted by the issuer, does not concern the issuer and may be considered misleading. The Prospectus Regulation does not require the prospectus to contain information on the target market. Moreover, issuers who do not have the capacity of investment company are not subject to product governance rules. Even if this information could be considered useful, it cannot be denied that it might also be seen as circumventing the logic behind the MiFID II rules on investment product governance: MiFID II does indeed not require the publication of the target market of a product since responsibility for proposing a product to clients who fall in the target market lies with the distributor. Following the logic of MiFID II, it is not the task of the clients to evaluate whether or not they are part of the target market. Thus, including the target market in a prospectus could be regarded as a way for a company to evade responsibility for investment product governance under MiFID II.

However, if the issuer and the manufacturer still want to include a target market clause, the FSMA considers that the inclusion of such information in the prospectus or in other documents relating to the offer is only possible provided certain conditions are met:

  1. The description of the target market may not be used as a selling restriction.
  2. It is not appropriate to include information in the prospectus that bears no relation to the objective pursued by it. This applies in particular to exemption clauses that concern the relationship between the manufacturer and the distributor or the final investors.
  3. The information about the target market must be consistent throughout the prospectus. For instance, requirements regarding the knowledge and experience of the investor, as included in risk factors, may not be contrary to those mentioned in the target market clause.
  4. The description of the target market should clearly mention that the investment firm in question is responsible and not the issuer (or the prospectus should at most mention that this issuer is only responsible for the accurate reflection of the information received from the manufacturer).