4.1 Introduction

The Monetary and Financial Code (Code monétaire et financier, C.mon.fin.) requires an issuer to publish and distribute a prospectus before its securities can be listed on a regulated market or be offered to the public. This provision is the implementation of the Prospectus Directive 2003, which harmonises public law requirements with respect to the publication and distribution of prospectuses, in French law.

If a prospectus is misleading to investors, they may bring a liability claim against the issuer, the lead manager and/or the members of the syndicate of sponsoring banks for the losses suffered as a result. French private law does not have a special private law regulation with respect to prospectus liability. A prospectus liability claim is to be based on the general tort law provision of section 1382 of the French Civil Code (Code civil, FCC).

Investors rarely bring private law liability claims against issuing companies for publication and distribution of false or misleading information before French civil courts, probably because there is no provision for collective action based on an opt-out system. In such a system, investors do not have to start individual court proceedings because they are bound by the judgment on the collective damage claim or by the judgment endorsing the settlement reached between the issuer and a shareholders' association, unless they issue a written statement that they do not wish to be bound by the judgment or the settlement. Because there is no such provision in French law, investors need to start individual court proceedings, in which they bear the entire burden of proof. However, if the public prosecutor starts a criminal case against the offerding party, as a result, the investor who joins the case as a civil party bears a reduced burden of proof: he only needs to establish causation and individual losses; the defendant's tortious behaviour has to be proven by the public prosecutor.

Regarding the elements of causation and losses, French courts apply the notion of loss of chance (perte d'une chance) to (dis)invest more profitably. Thus, investors can be compensated for the opportunity lost as a result of the dissemination of false or misleading information, i.e. misinformation.

This chapter focuses on the provisions available in French law to bring private law prospectus liability claims by consumers against parties involved in an initial public offering (IPO). It examines the possibilities available to consumers to claim compensation before civil and criminal courts for the losses suffered as a result of misinformation as defined above. This chapter also considers how the French Authority for the Financial Markets (Autorité des marchés financiers, AMF) could enforce prospectus provisions under public law.

Section 4.2 enumerates the rules under French public law that apply to the publication and distribution of prospectuses. Section 4.3 deals with the administrative sanctions which the AMF can impose on issuers that violate the public law provisions regarding the publication of false or misleading information. In this chapter, the fictional issuing company X S.A. is used as an example. Section 4.3.2 elaborates on the facts that the public prospector has to prove in criminal law proceedings against issuer X S.A. and/or its directors. Section 4.5.3 deals with the key issue: the legal bases of the prospectus liability regime in French private law. The general tort law provision, section 1382 FCC, defines the conditions that consumers, when claiming damages from X S.A. and/or its directors, need to establish in order to obtain compensation for the losses incurred. Section 4.4.2 gives a brief overview of these facts. Section 4.5 discusses which parties involved in the IPO are liable for the losses incurred by the investors as a result of a misleading prospectus. In section 4.6 the required tortiousness of the defendant's behaviour is analysed. How French courts deal with the causation requirement in corporate misinformation cases is dealt with in section 4.7 Furthermore, this section states which categories of losses incurred by investors as a result of the publication of false or misleading information French private law allows compensation for. The element of causation and the question which categories of losses can be compensated are both related to the notion of loss of chance. Section 4.8 explains the relevant provisions in French law regarding the burden of proof in these damage claims. Concluding remarks are presented in section 4.9.