90A: Fuel for litigation

Author: | Published: 6 Jan 2009

The new Section 90A of the Financial Services and Markets Act (FSMA), introduced by the Companies Act 2006 as part of implementing the Transparency Directive, marks a paradigm shift. For the first time, an investor has a statutory cause of action against the issuer for loss caused by a purchase based on a false or misleading statement in a periodic report by the issuer (as opposed to in a prospectus). The framework of Section 90A is not dissimilar to that of Section 10(b) of the Securities Exchange Act 1934, which has spawned much securities litigation in the US. Section 90A opens the way for US-style stock-drop claims to be brought in the UK. 
While there is not yet any reported litigation under Section 90A, the new issuer liability regime may assume greater importance as the credit crunch continues to unfold.
Due to the transitional arrangements, it will apply to company...