Risk Management Solutions in Business Law: Prospectus Disclosure Requirements

Marijn Van Daelen
Tilburg University - Faculty of Law


October 21, 2008


Abstract:
Risk management provisions can be divided into provisions that require companies to have risk management systems in place, provisions that require the disclosure of information on such systems, and provisions that require the disclosure of information on actual risks. Disclosure requirements have necessitated including information on corporate risks in such documents as the annual report, quarterly reports, and the prospectus. The prospectus plays a pivotal role in attracting capital from public investors. This paper focuses on information disclosure requirements on risk management in the prospectus. In more detail, this paper discusses which information companies should disclose to comply with these requirements. A generally neglected issue is that prospectus liability could be triggered by giving either too little information or too much information. Information overload and boilerplate text can obscure the main risks. Both might be qualified as misleading information. Analysing prospectuses, this paper shows that it could be debated whether the actual reporting complies with Directive 2003/71/EC and Commission Regulation 809/2004 regarding information on risks disclosed in prospectuses. A safe harbour could, however, be reached by adequately balancing the information disclosure on risks. To determine the minimum information on risks that should be disclosed in prospectuses, the four-step method presented in this paper could be used. These steps are: (1) identifying risks with a material adverse effect on a company and its securities; (2) classifying risks based on their probability and impact; (3) allocating risk responses; (4) and selecting the minimum information that should be disclosed. By using this method, companies can provide sufficient and objective investor information. Finally, this paper concludes with the improvements to be gained applying the four-step method instead of the actual ad hoc method.

http://papers.ssrn.com/sol3/Delivery.cfm....1287624&mirid=3

or

http://sapphirecapital.proboards101.com/index.cgi?action=display&board=investment&thread=2460

Richard,

              In your professional opinion? Do you think pinkie swearing is now a thing of the past? Or will we be able to go back to pinkie swearing after the markets are un-leveraged?

I am personally a fan of pinkie swearing and would like to see it make a comeback..

All the best to you and yours Richard, JW

I like and do hand shake deals but only with serious people, frankly the further I'm away from the US the better people honor their name and obligation even if it is only a hand shake

its not trashing, its experience my friend, I run often into people outside the US who bemoan the habit of US firms to make a tough and tight profit sale of a contract and then use lawyers and legal arguments to get more money and want to renegotiate the money when they do not return the favour when the shoe is on the other side, or should I say that the general perception is not to believe that a US contract partner will stick to his word. (which is actually also a political assessment on the reliability of US government support promises) Don't misunderstand, I have been dealing with people in the US who keep their word in a hand shake deal, but since the percentage is so low (forgive me for the side kick, especially in California) I rather not advise it. This is personal experience, just as every body has experiences in the field, it can not be generalised but one is using it as a measurement how and with whom to engage. I may say that especially in countries of Eastern Europe and Islamic Countries I have a good experience, however it may be that this is because I'm carefully choosing my contacts there whereas I'm a bit more approachable in G7 countries.

Frankly I like to live here, its a beautiful country but even if I'm not a citizen I have the view that a lot is not well in the US, I try not to trash but discuss it, I may be wrong

whats your experience on hand shake deals?

Our public business is public which is governed by law and contractual obligations..

 

As for the business I personally transact a phone call or an email is fine.. let the vultures run up the billable hours afterward seems to be the status quo..  but those billable hours don not reflect the personal guarantees made in the end all you have is your reputation some would say.. I look at any transaction as a test of my own personal valor it is easy to look in the mirror that way.. but I am dealing with people I have a comfort level with.. so it is not so hard to maintain a good core set of beliefs in treating others like I care.. simply I do care about those people, their families and the ancillary they support because it is important to support good people doing good things

 

This was probably to personal but if a hand shake is involved..... for anyones protection there should be strong personal ties involved or you will inherit a large amount of risk through the action..

 

That is my 1 ½ cents..

 

JW

I agree, however in some societies the hand shake deal is seen more like a good base and they follow "thy word is your bond" and their society enforces it, so they very seldom try to get away with the argument "it has to be written" or "my lawyer tells me that this means ...... and not...."

I understand that having things written down is easier when the arguments start and contracts are only a good as the performance can be enforced, but in the US it is overdone and abused in my opinion.

but thats me,