Securities Alert
October 2010
Authors:
Tom R. Wallace
tom.wallace@klgates.com
+44.(0).20.7360.8292
Alex R. Gibson
alex.gibson@klgates.com
+44.(0).20.7360.8245
K&L Gates includes lawyers practicing out
of 36 offices located in North America,
Europe, Asia and the Middle East, and
represents numerous GLOBAL 500,
FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies, entrepreneurs,
capital market participants and public
sector entities. For more information,
visit www.klgates.com.
Extension of Statutory Civil Liability Regime
for Official List and AIM Issuers
On 1 October 2010, an extended statutory civil liability regime for misstatements and
omissions in periodic and ad hoc disclosures made by issuers whose securities are
admitted to trading on a securities market came into effect. The regime substantially
expands the statutory liability for issuer companies for misstatements to the market
set out in Section 90A of the Financial Services and Markets Act 2000, including:
•
Scope of issuer — The extended regime applies to: (i) all issuers of securities
traded on UK multilateral trading facilities (such as AIM and PLUS); and (ii) all
UK issuers of securities traded on equivalent markets both in and outside the
EEA. Accordingly, for example, AIM issuers and UK incorporated issuers with
securities admitted to trading on a US market will fall within the scope of the
extended regime.
•
Basis of liability — Under the new regime, liability may arise either in relation
to untrue or misleading statements or omissions in the information published, or
as a result of a dishonest delay by the issuer in publishing the information.
However, the basis for liability remains fraud and has not moved to a negligence
test. In relation to dishonest delay, an issuer will only be liable where a person
discharging managerial responsibilities was aware his conduct would be
regarded by regular users of the market as dishonest.
•
Scope of information — The extended regime covers a broader range of
disclosures. All information published (or made available) by issuers via a
recognised information service will be caught under the extended regime, not
just periodic financial information (RIS) as is the case currently under Section
90A. Ad hoc announcements, prospectuses, listing particulars, takeover-related
documents, circulars and information published on an issuer's website are all
capable of falling within the new regime. It is immaterial whether the
information is required to be published. In addition, a person who has suffered
loss would not have to show that he obtained the information from the RIS,
merely that he suffered loss as a result of relying on a fraudulent statement in
that information.
•
Scope of investor — This has been expanded. Issuers may now be liable to
buyers, sellers or holders of securities whereas, under the existing statutory
liability regime, issuers were only liable to buyers of securities. A holder will
need to demonstrate that he relied on the information published by the issuer in
deciding to continue to hold the securities.
Securities Alert
•
Exclusion of other liabilities — Importantly, the
new regime continues to provide that the issuer
is not subject to any other liability for loss
resulting from reliance by any person on any
misstatement or omission in published
information or from any delay in publishing the
information. Similarly, no other person
(including directors and advisers) has any
liability to any third party (other than the issuer)
in respect of any such loss. It should be noted
that the public enforcement regime is left
untouched by the extended regime. Specifically,
the extended regime does not affect criminal
liability, civil penalties imposed by the FSA or
liability under a restitution order made under
sections 382 and 3.4 of the FSMA.
Contacts:
Alex R. Gibson
+44.(0)20.7360.8245
alex.gibson@klgates.com
Jeremy J. Landau
+44.(0)20.7360.8114
jeremy.landau@klgates.com
Owen E. Waft
+44.(0)20.7360.8132
owen.waft@klgates.com
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Washington, D.C.
K&L Gates includes lawyers practicing out of 36 offices located in North America, Europe, Asia and the Middle East, and represents numerous
GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market
participants and public sector entities. For more information, visit www.klgates.com.
K&L Gates comprises multiple affiliated entities: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and
maintaining offices throughout the United States, in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), in
Dubai, U.A.E., in Shanghai (K&L Gates LLP Shanghai Representative Office), in Tokyo, and in Singapore; a limited liability partnership (also named
K&L Gates LLP) incorporated in England and maintaining offices in London and Paris; a Taiwan general partnership (K&L Gates) maintaining an
office in Taipei; a Hong Kong general partnership (K&L Gates, Solicitors) maintaining an office in Hong Kong; a Polish limited partnership (K&L
Gates Jamka sp.k.) maintaining an office in Warsaw; and a Delaware limited liability company (K&L Gates Holdings, LLC) maintaining an office in
Moscow. K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners or members in each
entity is available for inspection at any K&L Gates office.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon
in regard to any particular facts or circumstances without first consulting a lawyer.
©2010 K&L Gates LLP. All Rights Reserved.
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