a) Legal basis

Under Article 8(1) of Regulation (EU) 2017/1129 (EU Prospectus Regulation), the base prospectus may be drawn up for non-equity securities, including warrants in any form. It is a prospectus that can be used for multiple issues of non-equity securities with similar structures; this means that information that can only be determined at the time of a particular issue may, as a general rule, be presented as one of several options. With each issue, the information is then completed in the final terms of the offer and published and filed with BaFin. The information to be included in the prospectus is set out in Articles 8(2) et seq. of the EU Prospectus Regulation, Article 25 of the Commission Delegated Regulation (EU) 2019/980 of 14 March 2019 (the Delegated Regulation) and Article 26 of the Delegated Regulation with the relevant annexes to the Delegated Regulation, in particular Annex 14 (Securities note for retail non-equity securities) and Annex 17 (Securities giving rise to payment or delivery obligations linked to an underlying asset).

b) Structure, options, features

Base prospectuses may be drawn up as separate documents. In particular, this may be appropriate if the non-equity securities to be offered do not all have similar structures, and their presentation in a single base prospectus would therefore not be possible for comprehensibility reasons, for example. The multi-document structure means that a single registration document can be used for multiple base prospectuses and prospectuses.

The structure of the base prospectus is governed by Article 25(1) of the Delegated Regulation (base prospectus drawn up as a single document) or, in the case of several separate documents, Article 25(2) of the Delegated Regulation (base prospectus drawn up as separate documents). The main difference between the two types of prospectus is that, in the case of a base prospectus drawn up as a single document, the registration document or universal registration document (URD) is an integral part of the prospectus. It is either incorporated by reference in accordance with Article 19 of the EU Prospectus Regulation or printed in full in the prospectus.
A base prospectus can also be drawn up in separate documents. The main difference in relation to the base prospectus drawn up as a single document is that both the securities note and the registration document or universal registration document (URD) are approved in a separate process and thus constitute two separate documents.
The legal provisions regarding the universal registration document (URD) are found in Article 9 of the EU Prospectus Regulation. The universal registration document is a multi-functional registration document. It can be used by issuers whose securities are admitted to trading on a regulated market or on a multilateral trading facility (MTF). Unlike the “normal” registration document, the universal registration document can be filed without BaFin’s prior approval. However, the universal registration document must have been submitted for approval and approved for two consecutive financial years in the past. If the universal registration document is not filed in the following year, the condition for filing without the need for prior approval no longer applies. With a universal registration document, an issuer can gain frequent issuer status and (provided additional requirements are met) benefit from an accelerated approval process. If the issuer decides to use the universal registration document as an integral part of a prospectus, the universal registration document already filed must be approved by BaFin retrospectively. The requirements regarding the contents of registration documents are governed in particular by Annex 6 (Registration document for retail non-equity securities), Annex 7 (Registration document for wholesale non-equity securities) and Annex 2 (Universal Registration Document).
For a base prospectus drawn up as a single document, information from the registration document or URD may, under Article 19 of the EU Prospectus Regulation, be incorporated into the prospectus by reference. Information falling within the scope of Article 19(1) (a) to (k) of the EU Prospectus Regulation may, as a general rule, be included in the base prospectus; issuers make use of this possibility particularly for the historical financial information required.
More details regarding the incorporation of information by reference can be found in Q 5.1 ff. in ESMA Questions and Answers on the Prospectus Regulation (ESMA/2019/ESMA31-62-1258). The procedure for notifying registration documents or the URD is explained in Drawing up the prospectus, approval process.
A further point to note is that, for each offer programme, information specified in the relevant annexes must be included in the prospectus. For retail non-equity securities, the annex in question is Annex 14 and for derivative products Annex 17 to the Delegated Regulation. However, the information referred to in the annexes does not have to be included in the prospectus in the order in which that information is presented in the annexes. If, however, the information is given in a different order, the issuer must, under Article 25(6) of the Delegated Regulation, attach a list of cross references to the submission for the prospectus approval process.
A key aspect of the base prospectus is the comprehensibility of the product description (e.g. Annex 17 item 2.1.1 of the Delegated Regulation ), particularly in the case of derivative products. The description of each product type is to be made in a separate section of the base prospectus and include an explanation of the general functioning of the security. It is not sufficient to simply refer to the terms of the securities, risk factors or final terms. The description of the product options is to be presented in the form of a continuous text, without the use of square brackets; it must include, for example, a detailed textual description of the development of the security when the price of the underlying rises, falls or moves sideways and the influence of caps, floors, barriers, participation factors, etc., together with a description of how they interact. Moreover, the table of contents should clearly indicate where the information on each product type can be found in the prospectus and what kind of information is included. Example calculations and scenarios relating to the actual issue may be presented in the final terms.

c) Securities note categorisation A-C

The categorisation determines which information in the base prospectus may be optionally included or must be included on a mandatory basis in the securities note and in the final terms. Furthermore, the regulation contains mandatory specifications regarding form and content of the final terms. The categorisation is governed by Article 8(3) of the EU Prospectus Regulation, Article 26 of the Delegated Regulation in conjunction with the respective annexes. When submitting the draft prospectus, the cross-checklists/lists of cross references must be attached, explaining whether a securities note belongs to category A, B or C. This is done to enable the issuers to carry out their own examination of the categorisation and simplify the review process for BaFin. The base prospectus may contain almost all information that the issuer chooses to include. However, the information must be formulated to the extent required by the corresponding categorisation under Article 26 of the Delegated Regulation. As a general rule, information classified as category A must be included in full in the main body of the prospectus, while information referred to as category B or C may be included on an optional basis, see Article 26(2) and (3) of the Delegated Regulation. The options may then be selected in the final terms by way of reference or repetition. However, to enable options to be selected from these categories, each item of information must be included in the main body of the prospectus.
For more details on information classified as category B, see Q 11.2 in ESMA Questions and Answers on the Prospectus Regulation (ESMA/2019/ESMA31-62-1258).

d) Risk factors

Under subparagraph 2 of Article 16(1) of the EU Prospectus Regulation, the materiality of risk factors is to be assessed on the basis of the probability of their occurrence and the expected magnitude of their negative impact. This provision applies to both individual prospectuses and base prospectuses. It is therefore not permitted to limit the information to the extent that an assessment of the risks does not take the probability of their occurrence into account. Only specific and material risks of the issuer and/or securities are to be explained. The contents of the registration document or securities note should confirm the specificity or materiality of the risks.
However, in the case of base prospectuses, it is understandable that an applicant describing securities-specific risks will typically be able to provide less specific information on materiality, since – unlike with individual prospectuses – the relevant parameters are not yet known. In this respect, a more abstract or more general description of the materiality of risks – in view of individual, not yet established, optional features – is permitted, and also necessary. The description of the materiality can, for example, make use of statements with regard to trends, showing that a risk – e.g. that the instrument will fall below a barrier or that a knock-out event will occur – will develop depending on a certain x-factor and that the risk may continue to increase in combination with a leverage factor.
Insofar as the large number of products and types of features in a base prospectus and, consequently, an even larger number of possible interdependencies make it unfeasible to clearly describe the materiality of risks, even in more abstract terms, it might be necessary to divide the various products up into several prospectuses.
The ESMA Guidelines on Risk Factors under the Prospectus Regulation of 1 October 2019 (ESMA31-62-1293) are used as part of the prospectus review.
Further information on the presentation of risk factors in prospectuses, especially in connection with preparing the individual categories or sub-categories, and further details on ways to present materiality, can be found under Drawing up the prospectus, approval process.

e) Form of the Final Terms

The base prospectus must contain a template entitled “Form of the Final Terms”. All information in the main body of the prospectus that falls under categories B, C or has been included optionally is to be presented in the Form of the Final Terms. A statement in accordance with Article 8(5) of the EU Prospectus Regulation must also be included in this template.

f) Continuation of offers

The continuation of offers to the public after a base prospectus has expired is set out in Q 1.6 of ESMA Questions and Answers on the Prospectus Regulation (ESMA/2019/ESMA31-62-1258). The continuation of offers to the public after a base prospectus has expired is governed by Article 8(11) of the EU Prospectus Regulation. The requirements for the continuation of offers to the public under Article 8(11) of the EU Prospectus Regulation are as follows:

• The succeeding base prospectus must be approved and published before the previous base prospectus has expired;
• the final terms of such an offer must contain a prominent warning on their first page, indicating the last day of validity of the previous base prospectus and where the succeeding base prospectus will be published;
• the succeeding base prospectus must include the form of the final terms from the initial base prospectus or this form is incorporated by reference and
• the succeeding base prospectus must refer to the final terms that are relevant for the continuing offer.
  

In accordance with the practices described in ESMA Questions and Answers on the Prospectus Regulation (ESMA/2019/ESMA31-62-1258), a list of the ISINs of all the securities for which the offer to the public is to be continued is to be included in the succeeding base prospectus.

Alternatively, the succeeding base prospectus can then also refer to an ISIN list that it does not contain.
However, this requires the following:

• The succeeding base prospectus must specify the exact location of the list;
• the list must specify all the final terms relevant to the continuing offer, indicating the respective ISIN and
• a list of the relevant ISINs must be sent to BaFin directly before the approval of the succeeding prospectus at the latest
  

g) Supplement to the base prospectus or the registration document

Each supplement must specify as precisely as possible the time at which the circumstance triggering the supplement occurred as set out in Article 23(1) of the EU Prospectus Regulation. Furthermore, the supplement must contain a prominent statement concerning the right of withdrawal. Where the securities are purchased or subscribed through a financial intermediary, Article 23(3) of the EU Prospectus Regulation must also be observed.
Specific reasons for publishing a supplement are set out in Article 18 of Commission Delegated Regulation (EU) 2019/979 of 14 March 2019 (RTS).

h) Proportionate approach

Under Article 41(1) of the Delegated Regulation, the prospectus review can be limited to the changes made to the previous version of the same prospectus, provided the prospectus is substantially similar to the prospectus that has already been scrutinised or reviewed by the same supervisory authority (referred to as the "proportionate approach"). A declaration is required here confirming that the securities prospectus submitted for approval corresponds to the previously approved securities prospectus with the exception of the marked changes. The declaration should read as follows: "It is confirmed that the securities prospectus submitted for approval on [date] corresponds to the approved securities prospectus of [date] with the exception of the marked changes."
This approach may only be adopted in the review of base prospectuses, since experience has shown that these are generally substantially similar to previous base prospectuses. In concrete terms, this concerns base prospectuses that are regularly updated when the term of their validity expires so that the products contained in the previous base prospectus can continue to be offered.