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Cross-border Enforcement of Listed Companies' Duties to Inform (IVOR nr. 87) 2012/6.4.2
6.4.2 Statutory liability section 90 FSMA 2000
mr.drs. T.M.C. Arons, datum 07-05-2012
- Datum
07-05-2012
- Auteur
mr.drs. T.M.C. Arons
- JCDI
JCDI:ADS369669:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
S. 87G FSMA 2000 deals with the duty to publish a supplementary prospectus if, between the approval of the prospectus and trading of the securities, there arises or is noted a significant new factor, material mistake or inaccuracy relating to the information included in the approved prospectus. Subsection 6 prescribes that the supplementary prospectus must provide sufficient information to correct any mistake or inaccuracy which gave rise to the need for it.
S. 90 FSMA 2000 does apply only to misstatements in prospectuses, not to advertisements. Davies (2008), para. 25-32.
It is noteworthy that the statute does not specify during which time span the securities must have been acquired so as to give rise to a right of comepnsatino under s. 90 FSMA 2000.
PR 5.5.3.2R enumerates which persons are responsible for the prospectus. The Prospectus Rules are issued by the FSA on the basis of ss 73A(1) and (4) FSMA 2000.
Clerk & Lindsell/Tettenbom (2010), para. 18-54.
It is important to note that a claim based on s. 90 FSMA 2000 cannot be brought after the expiration of six years from the date on which this cause of action accrued (s. 9(1) Limitation Act 1980). A cause of action for damages is only complete when damage has been caused. In Hall v Cable, the defendants argued, by reference to the House of Lords ruling in Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd (No.2) [1997] 1 W.L.R. 1627 at 1632C-D, that in cases where the claimants allege to have purchased shares in reliance upon negligent misstatements, the market price was higher than it would have been had the market known the misinformation. Therefore, the claimants suffered losses when they purchased the shares. However, Justice Teare allowed the claimant's argument that the non-diclosure might not have affected the share price until it became very significant because it confirmed to the market that there had been material non-disclosure before (paras 30; 35). Under s. 32 of the Limitation Act 1980 the running of any applicable time limit is suspended where the action is based upon the fraud of the defendant, where the defendant has deliberately concealed any fact relevant to the claimant's right of action or where the action is for relief from the consequences of a mistake (of fact or law). In corporate misinformatino cases, the claimants need to prove that the defendants knew they were under disclosure duties and decided not to disclose. See: Alcock (2011), p. 247.
Hudson (2008), para. 23-33.
Hudson (2008), para. 23-15.
Section 90(1) renders the person responsible for a prospectus liable to pay compensation to a person who has acquired securities to which the prospectus applies and suffered loss in respect of them as a result of any untrue or misleading statement in the prospectus or an omission from the prospectus of any matter required to be included by section 87A or 87G1 FSMA 2000.
The elements to be proven by the claimant are that:
the prospectus2 contains untrue or misleading information and/or required information is omitted;
the claimant must have acquired the securities to which the prospectus applies;3
the defendant is a person responsible;4
the claimant suffered a loss as a result of the untrue, misleading or information omitted.
The standard for breach of duty is negligence: to avoid liability, defendants need to prove that they reasonably believed, having made enquiries they should reasonable have made, that the statement was true and not misleading.5
With respect to the element that the claimant must have acquired the securities to which the prospectus applies, we must take notice that it is not yet established in court whether purchasers in the secondary market qualify as such. The question has to be answered whether these secondary market purchasers are entitled to claim on the basis of section 90 FSMA 2000 and rely on an untrue or misleading statement or omission in the prospectus.6
Hudson argues, in my opinion correctly so, that the persons responsible for the prospectus probably owe a duty towards these secondary market purchasers.7 However, the element of causation, i.e. that the losses incurred were the result of the misstatements in the prospectus, may be more difficult to prove if the securities were acquired a considerable period after publication of the prospectus. It is very likely that other market factors affected the stock market price in the time span between the publication of the prospectus and the acquisition of the securities in the secondary market.8