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III.Production and delivery of a prospectus
A prospectus is an explanatory written statement that an issuer provides to the general public for the purpose of offering or selling securities (Securities and Exchange Act §13), for investors to rely on in making investment judgments in subscribing. Below is an analysis on the production and delivery of a prospectus:
- Production and particulars:
In its application for approval to publicly offer and issue securities, an issuer is required to submit a prospectus, in addition to items required by the Company Act. The information required to be supplied in the prospectus is as stated in the FSC Regulations Governing Information to be Published in Public Offering and Issuance Prospectuses. Furthermore, where a company applies for listing its securities on a stock exchange or trading them on an over-the-counter market, it shall submit a prospectus, in addition to items required by the Company Act, in its application for approval. he rules governing the information required to be included in the prospectus shall be prescribed by the stock exchange and over-the-counter securities exchange, respectively, and submitted for approval by the FSC (Securities and Exchange Act §30).
- Delivery and liability for non-delivery:
In an offer of securities, the issuer or underwriter (Securities and Exchange Act §79) shall first deliver a prospectus to the subscribers, and shall bear civil liability under Article 31, Paragraph 2 of the Securities and Exchange Act for indemnifying investors against damage suffered from their failure to obtain a prospectus and be informed of the financial and business information etc. of the issuer.
- Liabilities for false or withholding of information in the prospectus (Securities and Exchange Act §32):
In the event the prospectus contains false or concealed information in its material contents, the following persons shall be held jointly liable with the issuer to any counterpart for damage sustained by from ignorance of such information:
- Promoters and their responsible persons (Company Act §8).
- Staff of the issuer who have signed or sealed the prospectus proving the whole or part of the content of the prospectus.
- Underwriter of the security concerned.
- Accountants, lawyers, engineers or other professionals or technical personnel who have signed or sealed the prospectus proving the whole or part of the content of the prospectus or have stated their opinion.
- Persons identified in Paragraphs 1 to 3 above, with the exception of promoters, are exempted if, with respect to portions not certified by the professionals in Paragraph 4, they are able to prove they have exercised due care and are satisfied, with good cause, that none of the essential contents of the prospectus are false or concealed or that the certified opinions are true.
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