Responsibility

Question 1

Is a person responsible for purposes of s. 90 FSMA?

Answer 1

• It is important to establish whether your client is caught in the liability “net” under s.90 FSMA
• PRR 5.3.2R(2) sets out those persons who may be responsible for an equity prospectus. They include:
  i) the issuer;
  ii) all directors of the issuer at the time the prospectus is published;
  iii) all future directors, to be appointed immediately or at a future time, who are named in the prospectus;
  iv) each person who accepts, and is stated in the prospectus as accepting, responsibility for the prospectus;
  v) for Test 1 offers to the public - the offeror, if this is not the issuer (e.g. an existing shareholder who is offering to sell shares through an offer to the public – although note the potential exemption in PRR 5.3.8R), as well as the directors, if any, of such offeror; - NOTE No – if their shares are being sold by the issuer on its behalf, the company is the primary force behind selling these shares and therefore not person responsible
  vi) for Test 2 admissions to trading – the person requesting admission, if this is not the issuer, together with the directors, if any, of the person requesting admission (note that this is very unlikely to apply to an equity prospectus); and
  vii) each person (not otherwise covered) who has authorised the contents of the prospectus.
• PRR 5.3.9R – any person who accepts responsibility, or authorizes contents of p, may state that they do so only in relation to specific parts of the prospectus
• PRR 5.3.10R – solicitors will not be liable, their liability is to their client and not investors
• S87G FSMA: Persons responsible for P who become aware of need for SP must give notice to the issuer

Question 2

What is responsibility statement?

Answer 2

• Item 1.2 of Annex 1, PR Regulation and item 1.2 of Annex 11, PR Regulation each require a prospectus to contain a declaration of responsibility by those persons who are deemed to be responsible for the prospectus by virtue of PRR 5.3.
• Pursuant to PR 5.3.2R(2) (a) and (b), both the company and its directors are deemed to be “persons responsible” for the whole of an equity prospectus.
• The standard wording now generally used in a prospectus to satisfy this requirement is as follows:-
  “The Company and the Directors[, whose names are set out in [ ],] … accept responsibility for the information contained in this Prospectus. To the best of the knowledge of the Directors and the Company, the information contained in this Prospectus is in accordance with the facts and this Prospectus contains no omission likely to affect its import.”
• In practice, this means that each director has PERSONAL responsibility for all of the contents of the prospectus, whether or not he/she was heavily involved in its drafting.

Question 3

Directors and responsibility

Answer 3

• Under PRR 5.3.2(2)(b)(i)R –all Ds are persons responsible for the prospectus:
  1) Ds cannot limit their liability – if a director requests to be excluded from liability or have their liability limited, this should not be allowed. They are liable to the same extent as any of the other directors
  2) If a director will be leaving the company, they should be removed from the Board prior to the prospectus being published so there is no liability arising
  Director’s knowledge or consent (PRR 5.3.7R)
• A director will not be responsible for the contents of a prospectus if it is published “without their knowledge or consent and on becoming aware of its publication they, as soon as practicable, give[s] reasonable public notice that it was published without their knowledge or consent”.
  In practice, this is extremely unusual.

Potentially advise to resign earlier bc all directors at the time prospectus is published are responsible.

Question 4

Other parties authorising content

Answer 4

• Other parties authorising contents PR 5.3.2R(2)(f) envisages that anyone authorising the contents of a prospectus will be a “person responsible”.
• For example, the reporting accountants will be required by both Item 1.3 of Annex 1, PR Regulation and Item 1.3 of Annex 11, PR Regulation to authorise the contents of the financial information sections of the prospectus.
  • They will therefore be “persons responsible” for those parts only under PR 5.3.2R(2)(f).
• It is therefore possible in limited circumstances to be liable for part or parts only of the prospectus
• However, they would not be responsible for incorrect or misleading information in any other part of the prospectus.
• Note that it would be very unusual for a sponsor to be a “person responsible” for a prospectus.

Question 5

Limitations to authorisation

Answer 5

Limitations to authorisation (PRR 5.3.9R)

• Save for the issuer or the directors, any person who either accepts responsibility for, or authorises the contents of, a prospectus may state that they do so only in relation to specified parts of the prospectus.
• There is no way for the issuer or the directors to avoid taking responsibility for the whole prospectus, including information sourced from third parties. Therefore, as explained in paragraph 4.2 above, the responsibility statement should not be modified to limit the directors’ responsibility.

Question 6

Can a solicitor be a person responsible?

Answer 6

• PRR 5.3.10R indicates that persons giving advice about a prospectus’ contents in a professional capacity (e.g. solicitors) will not be considered as a person responsible.
• In practice, a firm of solicitors will be advising the company or investment bank and its liability is owed to its client, not investors in general.
  • Solicitors should not accept responsibility for any part of the document. 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.