5.4.1 General private law prospectus liability

First of all, it is noteworthy that, due to the exclusive nature of the special liability regulation in the German Stock Exchange Act, the application of the general private law prospectus liability rules is limited to cases where false and misleading information is published in a prospectus to which one of the aforementioned exceptions or exemptions applies, i.e. the prospectus is published without a legal duty to do so.1 The general private law prospectus liability rules also apply to cases where a false or misleading prospectus is provided to investors on an individual basis.2

The general private law prospectus liability (allgemein-zivilrechtliche Prospekthafiung) is based on the pre-contractual doctrine that parties have to negotiate in good faith (culpa in contrahendo). The basis for the eventual liability is the relationship of trust and confidence (Vertrauenshaftung) between the parties. Parties have a duty to give true information that is fairly presented with respect to the securities on sale. The party who breaches his precontractual obligation to provide information (Verletzung von vorvertragliche Aufklärungs- und Informationspflichten) is liable for losses incurred by his contractual counterparty as a result of it.

The range of persons owing such a duty to provide true and fair information in the general private law prospectus liability regime is broad.3 The general private law prospectus liability is divided in two categories: prospectus liability in a broad sense or improper prospectus liability (Prospekthafiung im weiten Sinne or uneigentliche Prospekthafiung) and prospectus liability in a narrow sense or proper prospectus liability (Prospekthaftung im engen Sinne or eigentliche Prospekthafung). Properness in this sense refers to the fact that liability is imposed upon those persons (directly) involved in the preparation of the prospectus, and the improperness refers to the fact that liability is imposed upon persons not directly involved in the preparation of the prospectus, but merely advising the investor on the basis of the information in that particular prospectus.