LAW2457 Marking Guide Final Exam
法律exam代考 According to the facts the directors did not exercise due diligence in the dealings of the prospectus to provide the public
ISSUE:
Under the Corporations Act, the ASIC Act, and the common law.The legal issue in this case is whether the directors, advisors, or Fake News Limited are accountable for the flawed prospectus.
RULE: 法律exam代考
The Corporations Act of 2001 (Cth) is a piece of legislation that governs corporations (CA)
A financial advisor must have an Australian Financial Services Licence granted by ASIC under section 911A of the CA.
A licensee must have suitable systems in place for the management of conflict of interest under s912a(1)(aa).
A person is offering financial services if they give advise or trade in a financial product. According to § 766. Financial product advice is defined as a communication that might affect a person's choice on financial products under Section 766B. If the financial advice is personal, the financial advisor is required to give the following disclosure paperwork to the customer: 766B s (3).
Common Law
Due diligence is not a method outlined under the Corporations Act 2001 (Corporations Act); rather, it has evolved as a market practice to verify that the prospectus is correct and thorough. As well as to reduce the risk of future liability resulting from a defective prospectus.
Any misstatements are the responsibility of the person who signed the prospectus and gave their permission. Those who had control over the whole, or substantially all. Of the company's activities may be held liable for disinformation in the prospectus if they signed it and provided their assent. Managers, corporate secretaries, and directors fall within this group. If the person signing the prospectus statements is not a member of the firm's management or gets a payment from it. The person signing will not be held accountable for misleading representations.
In the context of Sahara India Commercial Corporation Ltd., the SEBI issued an order on October 31, 2018. The Company Secretary claimed that he signed the prospectus on behalf of the directors under their power of attorney, but SEBI determined that he was not liable for deception as a company director. 法律exam代考
In general, issuers that displayed weak due diligence methods generated prospectuses with deficient disclosure.
Such as assertions that were misleading or deceptive without a reasonable basis. These prospectuses also left out important information that would have been provided if the issuer had done all of its due diligence.
Defective disclosure is often the result of inadequate due diligence.
Inadequate supervision of foreign advisors' due diligence
Emerging market issuers have significant difficulties. We saw instances of Australian legal counsel failing to oversee due diligence investigations done by overseas advisors.
Corporations Act 法律exam代考
Sec. 26 of the Companies Act sets out the matters to be stated in the prospectus as well as the steps required to comply with its registration. Sec. 26(9) deals with the punishment for issuing prospectus in contravention of the said provisions. A company issuing such a prospectus shall be punishable with a fine of minimum fifty thousand rupees and a maximum of three lakh rupees.
Also, every person who has a knowledge of the issue of such prospectus shall be punishable with imprisonment that may extend to three years or with a minimum of fifty thousand rupees as fine. The fine may extend to three lakh rupees. And the person may be awarded both fine and imprisonment. (How do we determine the mental culpability of a person? As in, how do we determine that he had the knowledge that it is a prospectus in contravention? What is the standard and on whom does the burden of proof lie?) 法律exam代考
A person who loses money as a result of a faulty prospectus may be able to recover that money against individuals who worked on the prospectus.
Any specified underwriter is accountable for flaws in the whole prospectus, including the offeror (Fake News Ltd). The offeror's current directors, Jimmy Timmie, and Winnie. Ian Briggs, who put up the audit report that was relied on. Is accountable for each assertion in the prospectus ascribed to that advisor with the adviser's assent.
A person who is engaged in a breach of the prospectus regime is responsible for that breach. The statute of limitations for recovering losses caused by a faulty prospectus is six years. If the prospectus is deficient and the deficiency is significantly unfavorable to an investor. The offeror will also commit a criminal offense. Others participating in the prospectus preparation may be held criminally accountable if they help, abet, advise. Or obtain the offeror's commission of an offense. If a problem in the prospectus is discovered. tThose engaged in its preparation must tell the offeror. This is a criminal offense if you don't do it.
Due diligence is performed to ensure that the prospectus disclosure test is met and that you have the best chance of relying on the prospectus due diligence and reasonable reliance defenses.
In this instance, the directors relied on false information from their legal counsel without taking into account critical facts. Putting them at danger of losing their license.
Defence 法律exam代考
Ian Briggs ,Due diligence was conducted. The prospectus was defective in the sense that ill advice came from the lawyers that the license would be granted. But there was no misleading or nondisclosure on his part as a financial advisor. Which is a defense to civil and criminal liability for a defective prospectus. The directors, on the other hand, are excessively accountable for relying on that suggestion from their legal experts. And so failed to undertake legal due diligence to mitigate the risks. The LAW FIRM NO IDEA PARTENERS is also accountable for failing to adequately advise their client of the stringent regulations for foreigners obtaining these broadcasting licenses. Resulting in reasonable reliance on the information.
Common Law
According to the facts the directors did not exercise due diligence in the dealings of the prospectus to provide the public with reliable information.Since prospectus is relied on by the members of the public to subscribe or purchase the securities of a company. Any misstatements on it invite penal consequences. Misstatement may occur when a statement which is untrue or misleading in form or context is included in the prospectus.
Also, any inclusion or omission of any matter which is likely to mislead will also be considered as a misstatement (sec. 34). For e.g., a statement on the purpose of offering shares which is untrue, or statement on the locations of offices for a company which is misleading will amount to misstatement in the prospectus. Likewise, in Hafez Rustom Dalal vs Registrar of Companies, the Gujarat High Court observed that while issuing notices, the respondent authority has to point out the statements in the Prospectus which they consider false or deliberate or made to induce the public for subscribing the shares of the Company.
THE ASIC ACT 法律exam代考
The same circumstances might lead to a claim of general misleading and deceptive conduct under section 12DA of the ASIC Act, or particular false and misleading assertions under section 12DB of the ASIC Act. William may have also broken s 12ED of the ASIC Act by failing to exercise reasonable care and skill in advising Tina and Aristotle to invest in a firm that is experiencing financial difficulties.
William might also be held accountable under the ASIC Act if he engages in unconscionable or misleading and deceptive behavior. Unconscionable behavior, defined as unfair conduct that takes advantage of a person's weakness, is prohibited under sections 12CA, CB, and CC of the ASIC Act. According to the High Court decision Commercial Bank of Australia Ltd v Amadio, there are three aspects of unconscionability (1983).
1 The weaker party must have been handicapped in some way, resulting in a lack of true fairness between the parties.
2 The stronger side has to be aware of the specific handicap.
3 Obtaining consent under the conditions in which it was obtained must have been unfair or unconscionable on the part of the stronger.
CONCLUSION
Based on the foregoing analysis, the directors are most likely to be held liable under the ASIC Act and Corporations Act, as well as common law. Investors lost money as a result of the untruth, and the misstatement in the prospectus may result in criminal (section 34) and civil liability (sec. 35). Under Section 447, misstatements may result in a fraud penalty.
Based on the above analysis, William is most certainly in violation of the Corporations Act and ASIC Act's financial adviser requirements, as well as the common law in general. When a person suffers a loss or harm as a consequence of investing in a company's securities based on a misleading prospectus, civil liability for prospectus misstatements arises (sec. 35). In such circumstances, the parties listed below will be held liable under section 447 and would be forced to pay those who were harmed. Fake News Ltd has the right to sue their legal advisor for giving a guarantee of very crucial detail pertaining their IPO. The investors also have a right to initiate a class action suit to recover their losses. 法律exam代考
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