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The guidelines aim to encourage more appropriate, focused and streamlined risk factor disclosures for securities, which is presented in an easy to analyse, concise and comprehensible form.
The purpose of including risk factors in a prospectus is to ensure that investors can assess the risks related to their investment, therefore allowing them to make informed investment decisions. Risk factors generally include information concerning:
the issuer's financial situation;
the nature of the security or its underlying;
the issuer's business activities and industry;
legal and regulatory risk;
internal control risk; and
environmental, social and governance risks.
The guidelines on risk factors will assist NCAs in their review of risk factor disclosure.
Next steps
In 2019, ESMA will focus on the consistency of application of the guidelines on risk factors by national competent authorities.