SGS 4 (Prospectus)

Question 1

What is verification and why is it required?

Answer 1

Checking accuracy of all price-sensitive statement in prospectus and other marketing documentation.
To reduce risks of liability for false, misleading or inaccurate statements and omissions.

Question 2

What must verification questions do?

Answer 2

Check factual ACCURACY of statements.

Ensure no relevant info OMITTED

Ensure INFERENCES which may be drawn from documents are correct.

Question 3

Can information be omitted from a prospectus?

Answer 3

Yes provided the conditions in PR 2.5.2 are met and the issuer applies in WRITING.

Question 4

Are accountants responsible for the prospectus?

Answer 4

For 75-80% on average,

MUST take responsibility under 5.5.3(2)(c) or 5.5.3(2)(f) or 5.5.8 (in relation to PART of the contents)

Question 5

What is the responsibility of the Sponsor?

Answer 5

NOT for the prospectus but if breaches certain LRs, FCA may take enforcement action against the (s.88A FSMA)

Question 6

Difference between offeror and issuer?

Answer 6

Offeror is shareholder piggybacking off the IPO

Issuer is the selling company

Question 7

Are selling shareholders (offerors) always responsible?

Answer 7

Prima facie under PR 5.5.3(d) but not if 5.5.7 cumulative conditions apply

Question 8

Who is NOT responsible for a prospectus?

Answer 8

Solicitors giving advice as to its contents in a professional capacity (PR 5.5.9R)

Question 9

Requirements of a summary?

Answer 9

Key information
Liability under s.90(12) FSMA for misleading, inaccurate or inconsistent information.
Warning (PR 2.1.7R)

Question 10

What is the structure for a financial promotions question?

Answer 10

Is it an FP?

Made or approved by authorised person?

Exemptions in FPO 2005?

Penalties

Advertisement regime?

Question 11

What does NOT fall within advertisement regime?

Answer 11

Prospectus as it has been approved by the FCA.

Question 12

How can websites fall within the exemptions of the FPO?

Answer 12

Website restrictions or entry disclaimer

Question 13

Which type of prospectus does not fall within Art 70(1)(c)?

Answer 13

Pathfinder as not APPROVED by FCA.

Question 14

What are the heads of liability under the Fraud Act?

Answer 14

S.2 fraud by false representation

S.3 fraud by failing to disclose information

Question 15

What are the other heads of criminal liability?

Answer 15

S.21 FSMA

S.89 FSA

S.90 FSA

Question 16

Why is s.90 FSMA the most commonly used head of civil liability?

Answer 16

No need to show reliance (only need causal connection)

No need to show inducement

Available to original investors and subsequent purchasers

Applies to prospectuses and supplementary ones.

Question 17

What is the defence to s.90 FSMA?

Answer 17

Sch 10 para 1(2): if person reasonably believed that statement was true and not misleading.

Para 3: if mistake, change or new matter comes to light after admissions but correction published.

Question 18

What are the requirements for a claim under negligent misstatement?

Answer 18

Duty of care

Duty breached

Reliance

Loss

Question 19

Other heads of civil liability?

Answer 19

Breach of contract

Misrepresentation

Market abuse

Question 20

Structure for a supplementary prospectus question?

Answer 20

Call urgent BM (key representatives of sponsor and company’s solicitors) Any person responsible who is aware should give notice to issuer.

Within RP?

New factor, material mistake or inaccuracy arisen?

Is the factor ‘significant’, for the purposes of making an informed assessment?

Should a supplementary prospectus be published? i.e. what info and by when?

Penalties if not published

Publication a defence to s.90 FSMA?

Question 21

How is a supplementary prospectus a defence to s.90 FSMA?

Answer 21

Sch 10 para 3, amounts to a ‘correction’.

Question 22

What happens if the new info comes to light after the relevant period?

Answer 22

i.e. after trading has commenced.

Only possible defences are Sch 10 para 1 ‘reasonable’ belief or para 3, RIS NOTIFIED to prevent further liability for those acquiring shares in the FUTURE, (para 3)

Question 23

Why is a pathfinder a financial promotion?

Answer 23

Constitutes an invitation or inducement to engage in investment activity as it is encouraging investment and is a financial promotion.

Question 24

What is the relevant period?

Answer 24

For an institutional offer (i.e. with no offer to the public)

Period beginning with publication of the prospectus and ending the day trading begins.

Question 25

What market abuse liability could arise from failure to publish a supplementary prospectus when required?

Answer 25

Arts 12 and 15 - false or misleading impression being created in relation to the shares.

Question 26

What extra step is required if not within the relevant period?

Answer 26

Should the information have been disclosed in the prospectus under general s.87A(2) test or specific PR 2.3.1.