A more recent version of these Prospectus Liability Crib Sheet notes – written by Cambridge And Oxilp And College Of Law students – is available here.
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Prospectus Liability Has there been an omission of information in the prospectus, a misleading statement, incorrect information or information coming to light which should have triggered the production of a supplementary prospectus?
1) What claims can be brought?
a. Misrepresentation under the Misrepresentation Act 1967 b. Misrepresentation at common law for breach of contract if the misrepresentation has been incorporated as a term of the contract for the allotment of shares c. Negligent misstatement if the requisite duty of care to the subscriber can be established d. Tort of deceit e. Breach of directors' duties f. 118(7) FSMA market abuse f.i. Dissemination of information likely to give a false or misleading impression f.i.1. Applies once application for permission to trade is made g. Criminal charges if an untrue or misleading statement is made deliberately with the intent to deceive g.i. 397(2) & (3) FSMA g.ii. 19 Theft Act g.iii. 2, 3 & 12 Fraud Act h. Breach of DTR 2.2.1 if insider information had to be released to the market 2) Who can bring a claim?
a. Anyone who acquired the shares and subsequently suffered a loss a.i. EXPLAIN WHY THEY HAVE SUFFERED A LOSS 3) Who is potentially liable?
a. 90(1) FSMA any person responsible for the listing particulars must pay compensation to anyone who has acquired the shares and suffered a loss as a result a.i. 90(11) FSMA listing particulars applies equally in relation to a prospectus a.ii. 84(1)(d) FSMA defines persons responsible by referring to PR 5.5.3(2) a.ii.1.a. PR 5.5.2 these rules apply in respect of a prospectus in relation to an issue of transferable securities in a Home State that is the UK a.ii.1.a.i. APPLY TO THE FACTS a.ii.2. PR 5.5.3R(2)(a) the issuer (company) a.ii.3. PR 5.5.3R(2)(b)(i) directors of the company a.ii.4. PR 5.5.3R(2)(b)(ii) anyone who has agreed to be named, and is named, in the prospectus as a director, or having agreed to become a director, either immediately or in the future a.ii.5. PR 5.5.3R(2)(c) anyone who accepts, and is stated in the prospectus as accepting responsibility for the prospectus a.ii.6. PR 5.5.3R(2)(d) anyone other than the company who is offering the shares a.ii.6.a. PR 5.5.7R a person will not be responsible if the shareholder is making the offer in association with the issuer and it is primarily the issuer who draws up the prospectus a.ii.7. PR 5.5.3R(2)(e) the person requesting admission to trading of the shares a.ii.8. PR 5.5.3R(2)(f) anyone else who authorises the content of the prospectus a.ii.8.a. Includes accountants who must set out a statement in the prospectus that they are responsible for such content a.ii.8.a.i. PR 5.5.8 they will be responsible only for content in those paragraphs
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