Under the provisions of the Prospectus Directive, the publication of a prospectus for an offer of securities to the public, or an admission of securities to trading on a regulated market, is subject to the prior approval of the prospectus by the competent authority of the issuer's home Member State. This article examines the approval system as envisaged under the Directive. The aim is two-fold. First, the article conceptualises the approval system as a regulatory instrument. By studying the provisions relating to the prior approval in the Prospectus Directive, and by drawing on the literature on regulation, the approval system will be conceptualised as an ex ante enforcement system. Second, the article examines the approval system critically as an investor protection measure and as a risk reduction strategy for issuers. Proceeding on the premise that in order to justify the prior approval, the approval system must not only improve upon the quality of disclosure but that this improvement must matter if considered from the perspective of the recipient of the approved prospectus, the benefits and costs of the prior approval will be assessed for investors and issuers. These two points will be developed hereunder by examining in turn the regulatory nature and the purpose of the approval system.