The Financial Supervisory Authority (FIN-FSA) is changing its current practice of commenting on marketing material related to listing prospectuses during the prospectus scrutiny period. Regulations do not require prior approval of or commenting on marketing material. The change in practice underlines issuers' responsibility for the appropriateness of the material and enables the FIN-FSA to allocate its resources to actual prospectus scrutiny and other statutory tasks.

Challenges related to commenting on marketing material

Regulations require that prospectus-related marketing material used in Finland must be submitted to the FIN-FSA at the latest when marketing begins.¹ Regulations do not, however, require the FIN-FSA to approve marketing material in the same way as it approves a prospectus. As a rule, the FIN-FSA has not reviewed or commented on prospectus-related marketing material in advance. An exception to this has been listings of new companies, in connection with which it has been the practice of the FIN-FSA to comment on marketing material in advance, during the prospectus scrutiny period. In 2021, the FIN-FSA also streamlined this procedure by ending the detailed review of marketing brochure texts, as the texts are generally based, for the most part, on the texts of the prospectus.

Initial public offerings (IPOs) involve the preparation of a wide variety of marketing materials for different channels. Typically, at least a marketing brochure, an investor presentation, a media and social media campaign comprising numerous advertisements, and company and subscription site campaign pages are prepared. There has been much material to comment on, because all versions of all materials have been submitted to the FIN-FSA, even though they have often been quite similar in content.

Although the FIN-FSA has required that marketing materials take into account regulations and applicable guidelines as well as the FIN-FSA’s prospectus comments, marketing materials have regularly contained quite a number of shortcomings and inconsistencies. For example, texts required by regulations have been added to marketing material only on the basis of the FIN-FSA’s comments, and changes made to the prospectus text and the FIN-FSA’s comments on marketing material have not always been comprehensively taken into account. Moreover, previous views² expressed by the FIN-FSA have not in all cases been taken into account.

In practice, commenting on marketing material during prospectus scrutiny has been very time-consuming. In order to allow the FIN-FSA’s prospectus scrutiny resources to be allocated to actual prospectus scrutiny and other statutory tasks, advance commenting covering all marketing material will be discontinued. The change underlines issuers’ responsibility for the appropriateness of marketing material as well as the need to ensure smooth flow of information between preparers of the prospectus and marketing material during the prospectus process.

How will listing prospectus marketing material be supervised in the future?

Listing prospectus marketing material will be mainly subject to ex post supervision in the future. In practice, ex-post supervision means that the FIN-FSA can address any deficiencies it observes afterwards in marketing material or, for example, conduct a thematic review covering multiple entities of the appropriateness of marketing material. Possible observations may lead to various types of follow-up measures.

In practice, marketing material is, in addition to the prospectus, an important source of information for retail investors, and the issuer is responsible for ensuring that it complies with regulations. All marketing material must be submitted in its final form to the FIN-FSA no later than when marketing begins. The material should be submitted to the FIN-FSA’s Registry at registry(at)fiva.fi.

Notwithstanding the above, marketing material for which the FIN-FSA’s view on specific issues is sought may still be submitted to the FIN-FSA for comment in advance. Such specific issues may relate to, for example, campaign slogans, radio and TV commercial scripts, company presentations, and graphs depicting financial information.

The FIN-FSA emphasises that it does not require the submission of any material in advance. If any material is to be submitted, the draft material to be submitted and its schedule must be agreed with the FIN-FSA no later than the beginning of prospectus scrutiny. As a rule, the FIN-FSA comments on any marketing material submitted to it only after prospectus scrutiny is approximately halfway complete.

Regulations and guidelines on marketing material

The applicable regulations and guidelines must be followed in the preparation of marketing material. Preparers of prospectuses and marketing materials should therefore pay more attention to regulations, ESMA guidelines and views expressed by the FIN-FSA. Particularly:

• Chapter 1, sections 2 and 3 and chapter 3, section 3 of the Securities Markets Act
• Article 22 Advertisements of the Prospectus Regulation
• Chapter IV Advertisements of Commission Delegated Regulation 2019/979
• ESMA Guidelines on Alternative Performance Measures (ESMA/2015/1415) (APM)
• The guidelines given on the FIN-FSA’s website Offering of securities and prospectuses
• Market Newsletter 1/2022 Marketing of initial public offerings
• Market Newsletter 4/2016: Use of Twitter and other social media in the marketing of share issues.

FIN-FSA’s comments on marketing material

In its previous comments on listing prospectus marketing materials, the FIN-FSA has presented the following observations and views, which should also be taken into account in subsequent arrangements.

About the prospectus

- Marketing material must refer to the prospectus and state where the prospectus is available. Advertisements must state where the prospectus is available so that investors can fully acquaint themselves with the information presented in the prospectus.

• Marketing material must be based on the prospectus.
• In practice, advertisements must mention the website on which the prospectus has been or will be published.
  • In some situations, it is not technically possible to include a reference to the prospectus in marketing material. For example, a reference to the prospectus may not necessarily fit into the banner on a website. In that case, according to the interpretation of the FIN-FSA, the reference to the prospectus may be elsewhere on the same page or on a page that can be accessed by clicking on the advertisement.

- The comments made on the draft prospectus must also be taken into account in the marketing material.

About the term IPO

- The use of the term initial public offering might be misleading if a sale of shares is also involved, as the term initial public offering gives investors the impression that the funds being raised will ultimately be at the disposal of the company. In such a situation, the term initial public offering and sale should be used.

• In share sales, shareholders sell existing shares that they own, while an offering refers to a share offering pursuant to the Limited Liability Companies Act, in which a company raises funds by offering new shares for subscription.

About First North listing and use of the term stock exchange

- With regard to a First North listing, the marketing material must indicate that this is a listing on the First North market. The marketing material must not give the impression that the company is listing on a regulated market.
- For example, the use of the terms stock exchange or stock exchange listing in connection with the marketing of an initial public offering gives investors the impression that the company is listing on a regulated market. The use of the terms is misleading if the listing in question is not on a regulated market but on a multilateral trading facility, such as the First North list.

• Nasdaq First North Growth Market companies are not subject to the same rules as on regulated main markets; they follow the lower requirement level rules applied to small growth companies. Investing in a Nasdaq First North Growth Market company may therefore involve a higher risk than investing in companies on regulated main markets.

About claims

- Claims related to a company’s market position and business activities, such as “largest”, “top-level expertise”, “leading” and “strong market position”, must be substantiated. For example, the following should be stated:

• By what criterion is the company the largest?
• What is the time period in question?
• In which geographical area/industry is the company the market leader?
• On what source or whose opinion is the claim based?

- Marketing material must not make claims that are not included in the prospectus.
- Marketing material should clearly indicate which business activities and revenue streams already exist/have been realised and which are new plans or goals of the company.
- The impression must not be given that, for example, business growth is certain.

About graphs

- Marketing material also must not present information about the issuer in the form of graphs or tables that are not included in the prospectus.
- Graphs included in marketing materials should clearly indicate

• what information and what time period is being depicted (titles and information about the graphs) and
• where the information presented comes from (source references).

About financial information

- Selective presentation of financial figures in marketing material must not be misleading.
- Alternative performance measures should not be emphasised (relative to what is presented in the financial statements).

• If, for example, adjusted EBITA margin is presented, corresponding information on operating profit must be shown alongside it.

- Financial information included in marketing material must clearly indicate whether the figures are audited or unaudited.

About risks

- Marketing material must not give more attention to positive aspects than to negative ones; it should focus on a balanced description of the characteristics of the company and its share. In practice, this means that if marketing material describes, for example, the company’s growth, strengths and the expected development of the market, the corresponding risks must also be highlighted in the same context.

• In particular, risk factors should also be included in the marketing brochure and investor presentation.

In general

- Marketing material must be consistent throughout and based on the prospectus.
- Attention must be paid to clear presentation and readability of texts (including text size).

For further information, please contact:

• Marianne Demecs, Chief Supervisor, marianne.demecs(at)fiva.fi or tel. +358 9 183 5366
• Ossi Eräkivi, Chief Specialist, ossi.erakivi(at)fiva.fi or tel. +358 9 183 5262
• Jenni Granlund,6 Supervisor, jenni.granlund(at)fiva.fi or tel. +358 9 183 5470
• Minna Toiviainen, Senior Supervisor, minna.toiviainen(at)fiva.fi or tel. +358 9 183 5219
• Kirsi Vuorela, Senior Supervisor, kirsi.vuorela(at)fiva.fi or tel. +358 9 183 5399.

^{1) Chapter 3, section 3 of the Securities Markets Act
2) For more details, see Market Newsletter 1/2022 Marketing of initial public offerings and Market Newsletter 4/2016: Use of Twitter and other social media in the marketing of share issues.}