What is a securities prospectus and what can I learn from it?

Looking through glasses

A securities prospectus is a document that contains information that potential investors need in order to make an informed decision about whether to invest in a security (i.e. a bond or share).

The prospectus is required for all public offers of securities or when the securities are admitted to trading on a regulated market. 

The Central Bank, or another competent authority in the EU, must approve the prospectus before the security can be made available to retail investors. 

After approval, the prospectus must be published and made available free of charge.

What to look for

Most importantly, the prospectus describes the risks of investing in the security, including your potential losses.

The prospectus also includes:

  • A summary for retail investors
  • A description of the issuer
  • The business and financial position of the issuer
  • A description of the security
  • Your rights and obligations as an investor.

While the summary mentioned above provides a useful overview, investors should read the whole prospectus and consult their financial adviser before deciding to invest.

The Central Bank’s role

The Central Bank is not responsible for verifying the information the issuer includes in the prospectus. 

Responsibility for the accuracy and completeness of this information lies with the issuer i.e. the company that issues the bonds or shares.

The Central Bank can only act upon the information provided and we approve the prospectus based upon the issuer including all the disclosures required by the Prospectus Regulations.

The issuer is legally liable for any misleading information contained in, or omitted from, the prospectus.

Investors who buy a security based on this misleading information, and suffer losses as a result, can seek compensation through the courts.

The Central Bank’s approval of the prospectus is not an indication that the security is a good investment for you or anyone else.

That is for you and for your financial adviser to decide. 

See also: Prospectus Regulation