EU advocate general opens door to investor compensation in flawed IPO prospectus case

On the 02/12/21 at 7:26AM


Adrien Paredes-Vanheule

For the advocate general of the CJEU, qualified investors can bring a liability action against a company and possibly obtain compensation even if an inaccurate prospectus for the public offering of shares is only issued for retail investors.

The European court’s advocate general Richard De la Tour on Thursday published his conclusions in a lawsuit opposing Spanish institutional investor Unión Mutua Asistencial de Seguros (Umas) to the Spanish financial group Bankia. The case was brought to the court’s examination in December 2019 through a request for preliminary ruling from the Spanish supreme court. It raises the following pair of questions : Can an inaccurate prospectus serve as the basis for an action for damages brought by a qualified investor against the issuer of the shares? And may evidence that a qualified investor is aware of the true situation of the issuer be adduced from the existence of commercial or legal relations between them?

In his conclusions, the advocate general says that the EU law does not preclude that qualified investors may bring an action for damages arising from an inaccurate prospectus when a public share offering is directed at both retail and qualified investors. That, even though the prospectus was dedicated to retail investors solely as there was no requirement to release one for qualified investors. Giving his view on the second question, the magistrate interprets the EU law as qualified investors being aware of the true situation of the concerned issuer, in addition to the flawed prospectus, “does not in practice have the effect of making it impossible or excessively difficult to bring that action (for damages), which is a matter for the referring court to determine.”

Sign in