Davies Review of Issuer Liability - Discussion Paper

Liability for misstatements to the market: A discussion paper by Professor Paul Davies QC

In October 2006, the Economic Secretary to the Treasury invited Professor Paul Davies QC, the Cassel Professor of Commercial Law at the London School of Economics to carry out a review of the liability of issuers in respect of damage or loss suffered as a consequence of inaccurate, false or misleading information disclosed by issuers or their managements to the market or of failure to disclosure relevant information promptly or at all.

The Davies Review follows a Government consultation last year on extending the scope of the statutory damages regime for disclosures required under the FSA disclosure rules implementing the Transparency Directive (2004/109/EC). Responses to that consultation confirmed that this was a complex area in which it is vital to get the policy right, but were not conclusive. The Government therefore decided to include a power to amend, limit or extend the scope of the new liability regime introduced by Section 1270 of the Companies Act 2006 (as new Sections 90A and 90B to the Financial Services &
Markets Act 2000).

The aim of the Davies Review is to make recommendations to the Government on whether to exercise this power and, if so how.

If the Review recommends that the Government should introduce further provisions about liability for published information or that changes should be made to the existing statutory regime, the Government will, when it publishes its response to the Review:

• consult fully on the Government’s response to the review’s proposals;
• publish a full regulatory impact assessment of these proposals; and, subsequently
• bring forward legislation for the new regime.

The Government’s previous consultation documents, together with current information on the Davies Review can be found at www.hm-treasury.gov.uk/davies.