UK Treasury Launches Consultation On Protecting Investors' Rights

by Robert Lee, Tax-News.com, London

21 July 2008

The UK Treasury announced on Thursday that it is launching a consultation on extending the statutory regime on liability for fraudulent misstatement by issuers of securities.

This consultation responds to last year's review by Professor Paul Davies of the statutory regime, which recommended that the scope of the system should be extended, to provide greater security for both investors and issuers.

According to the Treasury, in his review Professor Davies recommended that the regime should be extended to include:

• More issuers (the extended regime will include issuers with securities admitted to trading on UK multilateral trading facilities, such as AIM and the PLUS-quoted market, and UK issuers with securities admitted to trading on other EEA markets);
• A wider range of ad hoc and periodic disclosures made by issuers to markets;
• Losses arising from sales (as well as purchases) of securities; and
• Losses arising from a dishonest delay in disclosure.

By clarifying rights and obligations, it is hoped that an extended statutory regime will improve the quality of corporate disclosure and reduce the risks facing investors and issuers.

Economic Secretary to the Treasury, Kitty Ussher MP, commented:

"There is a strong appetite from both issuers and investors to see progress in this area."

"Through extensive consultation and analysis, Professor Davies has developed a set of proposals to extend the statutory liability regime. These will improve the incentives to issuers for prompt and accurate disclosure, while providing both issuers and investors with greater clarity as to the scope of their liability."

She concluded: "These changes will improve the efficiency and competitiveness of the UK's capital markets."

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