3.9 Concluding remarks

Concluding, the archetypical structure of the legal proceedings of a prospectus liability claim of a consumer against the issuer and / or lead manager after an IPO will be as follows: first investors request the court in a collective action to declare the prospectus to be misleading on the basis of section 3:305a DCC; secondly the investors will have to seek monetary compensation in individual proceedings. In these proceedings the elements of causation are crucial. The public law obligation to publish a prospectus is required by the Prospectus Directive 2003. Furthermore, the Unfair Commercial Practices Directive determines the private law relationship between the issuer and the consumer. The (draft) prospectus is an important instrument to determine the introduction price of the securities in the pre-listing market.

Any liability in tort claim requires the following elements: tortious behaviour; accountability; loss and causation. The advantages of the lex specialis provisions that constitute the unfair commercial practices are the double reversal of proof tule laid down in section 6:193j DCC, the protective nature of the Directives belonging to the consumer acquis and the national court's obligation to interpret the national implementation in conformity with the purpose of the Directive.

Information can be held to be misleading if it is either false or incomplete (misleading omission). A commercial practice is misleading when the information provided is factually incorrect or when the information is presented in such a manner that the average consumer is misled or could be misled even though the information might factually be correct and the average consumer makes a transactional decision he would not have made otherwise. Furthermore, a commercial practice is misleading if there is a misleading omission. A misleading omission is every commercial practice whereby material information is missing that the average consumer needs, according to the context, in order to take an informed transactional decision and thereby causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise. A trader is any natural or legal person who is acting for purposes relating to his trade or profession. In an IPO process the issuer, lead manager and the other sponsoring banks that distribute the prospectus via their network of offices qualify as traders. For that reason, they are subject to the unfair commercial practices rules. The information published with respect to the issuer and its commercial activities in the time span around the IPO are directly connected to the securities. As a consequence, this information is subject to the unfair commercial rules unlike the company's information that is not published in the time span around the IPO, e.g. a press release about the company's expected results.

Section 6:193j states that if the investor claims on the basis of sections 6:193b up to and including 6:193i DCC that the trader conducts a misleading commercial practice the tortiousness of his behaviour is a given, unless the trader proves the material correctness and completeness of the information by him to the consumer. According to section 6:193j(2) DCC, the trader is liable for the losses caused by his act/omission, if the trader behaved tortiously, unless he claims and proves that he cannot be held accountable for the tort committed or that the tort committed is not due to his fault. Notice that the application of these reversal of proof rules do no longer require that the defendant himself, in whole or in part, has determined or has caused to be determined the content and the presentation of the prospectus. It is impossible to ascertain the continuing legal relevance of the disclaimer added by the lead manager with respect to the application of the double reversal of proof rules.

If the prospectus is declared misleading by the court, the misleading nature of the prospectus contains a causation element, i.e. the average investor took a transactional decision that he would not have taken if the information in the prospectus had been correct and complete. The due diligence duty makes it possible for the lead manager to claim that he cannot be held accountable for the prospectus or that the publication and distribution thereof is not due to his fault. This claim is not easily accepted. The other sponsoring banks may, however, be more successful in this claim depending on their role in the IPO process and the communication towards the investors of their particular role.

The recurring question is whether the establishment of causation requires the claimant to have actually read the misleading prospectus such that he directly relied upon the misleading information. In this chapter, it has been discussed that the answer to this question depends on the basis of the investor's claim: acquisition of the securities that is too high as a result of the misleading prospectus or (in)direct reliance by the investor on the contents of the misleading prospectus.