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Potential Liabilities Relating To Share Issues Notes

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3. Potential liabilities relating to share issues a. Financial Promotions with reference to FSMA and the FPO s. 21 FMSA

General prohibition on all types of investment activity but does not apply if falls within any of the


exemptions set out in FPO or if A is authorized person or content approved by authorized person Applies to communication sin UK and communications originating outside but capable of having

Key terms

affect in UK "communication" = telephone, email, meetings, presentations, websites, radio, TV, etc.. "invitation" = includes invitation to treat so inviting someone to enter into investment agreement would be invitation, e.g. prospectus with application form attached

"inducement" = FCA Guidance says depends on context and reasonable person, must contain an objective element of "persuasion or incitement". Exemptions (s 21(5) FSMA empowers FPO) Articles Communications made to persons sufficiently expert to understand the risks involved, eg 19,47,49


Professional investors (Art 19)



Substantial companies (Art 49)

Article 48 FPO

* Financial press (Art 47) Cert High Net Worth Individuals (unlisted companies only): Aims to cover communications betwee

Article 50 FPO

new companies and rich individuals wishing to invest in new enterprises Sophisticated Investors, i.e persons certified by an authorized person as being sufficiently

Article 62 FPO

knowledge to understand risks Communication relating to transaction to acquire or dispose of controlling shares of a company or acquire or dispose of shares which when aggregated take total shareholdings to a level which

Article 70 FPO

amounts to a controlling interest. Non-real time communications included in a prospectus or supplementary prospectus or "any othe

Article 71 FPO

document required or permitted to be published by...prospectus rules under part VI of the Act Limited non-real time communications relating to a prospectus or supplementary prospectuses

offering transferable securities (listed or unlisted) (Reference to a "public offer of unlisted securitie in heading is misleading) Consequences if breach FSMA s. 25 FSMA s. 30 Unenforceability of agreements resulting from unlawful communications and entitlement to FSMA s 137S

recovery unless court thinks it's just to enforce (subs (4)) If an FCA authorized person has made communication or has appropsed communication which FCA considers would be likely to breach fin promotion rules, regulator can make a direction

FSMA s. 400

under this section to require authorized person to inter alia withdraw communication Offences by bodies corporate under this Act

b. The Advertisement Regime in the Prospectus Rules

PR 3.3

Who do rules apply to? An advertisement must not be issued if rules apply unless conditions satisfied, and anyways information disclosed must be consistent with prospectus

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