PRM 4.5 Risk factors

The risk factors featured in a prospectus must be limited to risks which are specific to the issuer and/or to the transferable securities and which are material for making an informed investment decision as corroborated by the content of the registration document and the securities note.

When drawing up the prospectus, the issuer or the person asking for admission to trading must assess the materiality of the risk factors based on the probability of their occurrence and the expected magnitude of their negative impact.

Each risk factor must be adequately described, explaining how it affects the issuer or the transferable securities being admitted to trading. The assessment of the materiality of the risk factors provided for in PRM 4.5.2R may also be disclosed by using a qualitative scale of low, medium or high.

The risk factors must be presented in a limited number of categories depending on their nature. In each category, the most material risk factors must be mentioned first, according to the assessment provided for in PRM 4.5.2R.

Risk factors must also include those resulting from the level of subordination of a transferable security and the impact on the expected size or timing of payments to holders of the transferable securities in the event of bankruptcy, or any other similar procedure, including, where relevant, the insolvency of a credit institution or its resolution or restructuring in accordance with the UK law which implemented the RRD.

Where the transferable securities are supported by a guarantee, the prospectus must contain the specific and material risk factors pertaining to the guarantor to the extent that they are relevant to the guarantor's ability to fulfil its commitment under the guarantee.

Where the transferable securities are non-equity securities described in regulation 23(4) of the Public Offers and Admissions to Trading Regulations, regulation 23(5) of the Public Offers and Admissions to Trading Regulations requires a prospectus to contain the necessary information which is material to an investor for making an informed assessment of the underlying assets, including:

(1) the creditworthiness of the obligor of the underlying assets; or

(2) where the underlying assets are shares or securities equivalent to shares, the prospects of the issuer of the underlying assets.