4 - Liabilities for Share Issues

Question 1

What acts as an inducement / invitation to engage in an investment activity?

Answer 1

• Both a price range prospectus
• & path finder will be inducements / invitations to engage in investment activity
• In addition, they will both be non-real time communications
• Both will prima facie require authorisation unless an exemption can be found under the FPO.

Question 2

What are roadshow presentations?

Answer 2

• The presentations (made by directors to prospective investors) will be communications as they are an invitation or inducement to engage in investment activity, made in the course of a business
• Real-time communications, i.e. personal visits in response to an express request
• As investors are deemed to invite the directors of the company to make presentation to them

Question 3

What are the characteristics of publications on the internet?

Answer 3

• Fall within the definition of non-real time communication - Article 6 and 7 FPO
• Internet so accessible
• Documents on the internet could be subject to worldwide regulation
• But , if it is possible to restrict the communication to specified parties who can fall within an exemption under the FPO (e.g. sophisticated investors or investment professionals), the communication may be exempt

Question 4

How could access to a website be restricted?

Answer 4

• By including a filter
• Warning viewers in which jurisdictions and offer is being made and requiring investors to disclose their country of residence or indicate that they are not resident in a particular country or jurisdiction
• Viewers would then have to click through to access the relevant part of the website

Question 5

What is verification, and why is it necessary?

Answer 5

• involves checking the accuracy of all price sensitive statements in the prospectus and other marketing documentation in order to reduce the risks of liability for false, misleading or inaccurate statements or omissions

Question 6

Why is verification necessary?

Answer 6

• Because of the potential liabilities which could result from the publication of a prospectus, the document must be carefully checked

Question 7

What must verifications do?

Answer 7

• Check the factual accuracy of the statements; o Ensure that no relevant information has been omitted;
• Ensure that inferences which may be drawn from statements in the document are correct; and
• Check accuracy with particular emphasis on business activities and financial performance

Question 8

Should solicitors accept responsibility for any part of the document?

Answer 8

• PR 5.5.9 - lawyers liability - do this in the same row but in a different colour
• No
• Their role is to advise on the contents, not to accept responsibility
• They are protected so long as they are advising on the contents of the prospectus in a professional capacity