In Spain the offer or sale of securities does not require administrative authorisation, however the Securities Act of 1988 submits every offer or sale of securities for the fulfilment of some requirements. The Act provides that no security may be offered or sold to the public unless it is registered with the National Securities Exchange Commission (hereinafter the "Commission"). An issuer can register securities by filing with the Commission a prospectus containing certain information specified in the Act and in the Commission´s rules and forms.

The information relating to the issuer, the securities offered and the distribution proceeding shall be included in the prospectus. The objective of the full disclosure of all material facts relating to the proposed issuance is to produce a document which tells a prospective purchaser the things he really ought to know before buying a security.

According to the Securities Act, the prospectus shall be filed with the Commission before the issuer is free to sell the securities to the public. According to the Securities Act and the legislation applicable, Royal Decree 291/1992 and 2590/1998 of Sales and Offers of Securities, the Commission shall register the prospectus if it includes all the information required by the Securities Act and it does not contain any misstatement or omission of a material fact.

The basic purpose of the Securities Act is to guarantee the protection of investors by assuring the availability of adequate and reliable information concerning securities that are offered to the public. The prospectus is the only document that provides full disclosure of relevant information about an offer or issuance of securities and it is considered as a measure to protect investors against really bad deals by making sure that negative factors are emphasised, or to enable them to make rational choices among alternative respectable deals. According to these facts, the Commission is under the obligation of controlling that all the information required is contained in the prospectus, and that is complete and accurate.

The regime of the prospectus and public offers of securities and the civil liabilities to purchasers with respect to any material misstatements or omissions contained in the prospectus is becoming relevant as a consequence of the fact that in Spain we are now at a stage that a lot of companies are being privatised.

Notwithstanding the liabilities of the issuer, we must analyse the civil liabilities of the Commission for the registration of a prospectus which does not contain complete and accurate information.

Verification by the Commission of the content of the prospectus and liabilities arising from misstatements or omissions

The Commission shall verify the figures contained in the prospectus in order to assure that the information about the securities which is offered to the public is adequate and reliable. However, we shall determine the nature of this obligation imposed on the Commission.

The verification by the Commission of the content of the prospectus is considered as a regulated act because the Commission lacks authority to decide whether a particular security may be offered to the public; it can only insist that the issuer make full disclosure of all material facts.

However, the Commission shall control that all the information required is contained in the prospectus and that is complete and accurate. It is required to give due regard to the adequacy of the information available to the public, to the facility with which the nature of the securities and the rights of holders thereof can be understood, and to the public interest and protection of investors.

The Securities Act establishes that the Commission shall not be liable for the misstatements or omissions contained in the prospectus, despite it has registered the prospectus. Nevertheless, we consider that the Commission shall be liable for the non fulfilment of its obligation to verify the information of the prospectus. Consequently, the Commission shall indemnify any person against liabilities it may incur in the conduct of its functions.

This is the conclusion reached by the judgement of the Court of Valencia of April 2nd, 1997 which considers that "despite the provision of the Securities Act which does not determine the Commission´s liability arising from the misstatements or omissions contained in the prospectus, we shall determine that the fact that the Commission has registered the prospectus implies that the information is complete and accurate".

Clauses which determine the non liability of the Commission

The Securities Act establishes some clauses which determine the non liability of the Commission which include:

  1. The prospectus shall mention expressly that the registration of the same does not imply any recommendation of the purchase or any formal statement of the solvency of the issuer or the profitability of the securities.

  1. In the event that the securities offered have any special characteristics, the prospectus shall include a formal statement of the lawfulness of the regime and guarantees of the same.

  1. The prospectus shall include a declaration from all the companies who have signed the prospectus mentioning the fact that they have verified the information contained in the prospectus and that they have not found any misstatements or omissions.

Nevertheless, we think that these clauses do not exclude the liability of the Commission for the non fulfilment of its obligation to verify that the information contained in the prospectus is complete and accurate. This liability arises from the lack of diligence of the Commission with respect to the duty of verification imposed on it.

The fact that the prospectus includes a formal statement of the circumstances mentioned in the clauses concerning the liability of the Commission, does not eliminate the fulfilment of the Commission of its obligations relating to the verification of the information contained in the prospectus.

Consequently, we consider that the liability of the Commission would arise from the damages caused by illegal clauses opposed to legal provisions included in the prospectus that should have been verified by the Commission.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.