HM Treasury

Consultations & legislation

Statutory regime for Issuer Liability

In 2006, a new section 90A of the Financial Services and Markets Act 2000 (FSMA) established a statutory civil liability regime for misstatements to the market by issuers of securities admitted to trading on regulated markets, under which issuers would be liable for fraudulent misstatements in periodic disclosures to the market as required under the Transparency Directive (2004/109/EC).

In response to stakeholder concerns about the consistency of the new statutory liability regime and whether common law rights of shareholders were at risk, Professor Paul Davies of the London School of Economics was asked to advise on potential changes to ensure that the regime was comprehensive and soundly based.

The Government issued a consultation based on Professor Davies' recommendations in July 2008, in which it set out proposals for the extension of the statutory regime for issuer liability, including draft Regulations. 

The Government has responded to the consultation including publishing final Regulations. These Regulations were laid before Parliament on 08 March 2010 and need to be debated in both Houses of Parliament before they can come into force.

The consultation document is available in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website. For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.

Consultation on extending the statutory regime

The Government published its proposals to extend the statutory regime on issuer liability on 17 July 2008. The extensions proposed to the scope of the statutory regime followed Professor Davies' recommendations, with adjustments to reflect the implementation issues arising during preparation of the proposals.

Final report of the Davies Review

The Final Report of Professor Davies’ review was published on 4 June 2007, providing a thorough analysis and clear explanation of the recommendations to the Government. The Review made the case for exercising the powers conferred by the new section 90B of FMSA 2000.

Responses to Professor Davies' Discussion Paper

In March 2007, having reviewed in more depth the issues raised by respondents to the Government's previous consultation, as well as considered research and information from other interested parties, Professor Davies published his analysis by way of a discussion paper. The purpose of his paper was to invite further comments from interested parties and to seek views on a number of questions arising.

Professor Davies received over 40 responses to his discussion paper. Unless respondents asked for their submission not be posted on the Davies Review website, these can be viewed through the following link:

Responses to the Davies Review

Academic reviews of issuer liability in foreign markets

Professor Davies commissioned academic reviews of the liability for misstatements to markets in France, Germany, Australia and the US.

Professor Paul Davies QC: biography

Paul Davies has been the Cassel Professor of Commercial Law at the London School of Economics since 1998 and is one of the foremost company law experts. He has written widely on company law and is editor of Gower's Principles of Modern Company Law. He played a major part in the recent Company Law Review and other policy working groups. Professor Davies was appointed an honorary Queen's Counsel (QC) in October 2006, an award made in recognition of outstanding contribution to English law.

Background papers and related links

The full text of the Ministerial statements relating to developing a liability regime for damage suffered by reliance upon disclosures required by the Transparency Directive and the full Terms of Reference for the Davies Review are available below.

Government's previous consultation documents on the Transparency Directive and extending the scope of the statutory damages regime.

Full text of the Companies Act 2006 and section 1270 (OPSI website, opens in new browser window)

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