An economic analysis of liability for continuing corporate disclosures in English law

Thesis

I analyse and evaluate the effectiveness of the English law regime governing public companies’ continuing disclosures with a focus on the incentives it creates. In this area, EU regulation stipulates most of the disclosure content as well as the process for how and when to disclose, while the design of disclosure liability is left almost entirely to member states. Nonetheless, perceptions of an increasingly strained relationship between EU regulation and the common law caused the UK to introduce in 2006 its first statutory regime for issuer liability for continuing disclosures. The design of this regime provided the original motivation for this inquiry.

I make four principal claims that I believe to be new to the literature. First, the statutory liability regime fails to address the main problem it was introduced to solve – preventing an expansionary development of the common law tort of negligent misstatement into the corporate disclosure context – and both heads of liability could now be available in many cases.

Second, the substantive rules of the EU’s continuous disclosure regime are well-designed to support the work of information traders and this is also a suitable policy goal for disclosure regulation.

Third, issuer liability regimes (such as the new UK regime) will be ineffective in deterring disclosure misstatements, but could potentially have some compensatory justification by protecting information traders. However, information traders do not need issuer liability and should perform a more useful role in the markets when not offered such protection. The new regime is therefore unnecessary and unhelpful.

Fourth, the FCA’s recent initiative of requiring that a misstating issuer establish an investor restitution scheme is a significant development. Investors may find such schemes attractive compared to private litigation since the FCA appears to consider itself unrestrained by the doctrine preventing shareholder compensation for corporate losses.

Authors: Bengtzen, M

• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford