3.1 Introduction

The Financial Supervision Act (Wet op het financieel toezicht, FSA) requires an issuer to publish and distribute a prospectus before its securities can be admitted to listing on a regulated market or offered to the public. This provision implements the Prospectus Directive 2003 that harmonises public law requirements with respect to the publication and distribution of a prospectus.

If a prospectus is misleading to investors, these investors may bring a liability claim against the issuer and/or the lead manager and/or the other members of the syndicate of sponsoring banks for the losses they suffered as a result of the misleading prospectus.

Dutch private law does not have a special regulation with respect to prospectus liability. A prospectus liability claim is normally based on the general tort law provision of section 6:162 of the Dutch Civil Code (Burgerlijk Wetboek, DCC). Furthermore, consumers can base their claim on the lex specialis with respect to unfair commercial practices (section 6.3.3a DCC), which implements the Unfair Commercial Practices Directive ("UCPD"). Section 6.3.3a DCC has been in effect since 15 October 2008.1 The unfair commercial practices rules are only applicable to claims by consumers. Before the entry into force of the unfair commercial practices rules, prospectus liability claims by professionals and consumers alike were subject to the rules of misleading and comparative advertising (section 6.3.4 DCC). Since the implementation of the unfair commercial practices rules the misleading advertising rules remain only relevant for professionals. The aforementioned section implemented the Misleading Advertising Directive.

A commercial practice, including the publication and distribution of a prospectus, is regarded as unfair if it is misleading to the average consumer. A prospectus is misleading if it causes or is likely to cause the average consumer to take a transactional decision, i.e. purchase of the securities on the terms of the offer, which he would not have taken otherwise.

This chapter focuses on the prospectus liability claims available to consumers against the parties involved in an initial public offering (IPO). In section 3.2, the origin of the public law legal obligation to publish and distribute a prospectus is discussed. Section 3.3 deals with the administrative proceedings in regard to the prospectus. Furthermore, it explains the interrelationship between public law enforcement and private law enforcement with respect to the content requirements of the prospectus. Section 3.4 deals with the legal bases of the prospectus liability regime in Dutch private law. Furthermore, this subsection emphasises the importance of the unfair commercial practices rules for consumers intending to bring a prospectus liability claim against the issuer and/or the lead manager. In this chapter, the fictional company X N.V. is the issuing company and company Y N.V. is the lead manager. It contains a brief overview of the system of unfair commercial practices rules.2

In order to determine who can be held liable for the publication and distribution of a misleading prospectus on the basis of these rules, we have to determine which parties in the IPO process qualify as a `trader' (section 3.5). In section 3.6, an answer will be given to the question of when a commercial practice is unfair. Section 3.6.2 elaborates on the private law misleading norm; which type of investor does the issuer and/or the lead manager need to have in mind when drawing up a prospectus. Furthermore, section 3.6.3 deals with the question of whether the publication and distribution of information outside the prospectus in the timespan around the IPO are subject to the unfair commercial practices rules. Some information aspects in the prospectus are deemed material; the omission of this kind of information qualifies the prospectus as misleading. Section 3.6 discusses which information aspects are deemed material by law. The causation element in the abstract theoretical test of whether the prospectus is misleading for the average investor is dealt with in section 3.6.4. Section 3.6.5 discusses the condition that the issuing company X N.V. and/or the lead manager Y N.V. is only liable for the losses suffered by investors as a result of the misleading prospectus if the publication and distribution of the misleading prospectus is due to his fault and if he can be held accountable for the commission of the tort.

Section 3.7 discusses the two bases on which one can make a prospectus liability claim. The basis of a damage claim is crucial with respect to the causation to be proven and the composition of the damages to be awarded. Section 3.8 explains the double reversal of proof in section 6:193j DCC. In section 3.8.2 the use and effectiveness of disclaimers in prospectuses is briefly discussed. Section 3.9 contains some concluding remarks.