This chapter begins by considering the especially severe information-asymmetry problem that plagues primary offerings of truly new securities. It then examines market-based solutions for these problems, the shortcomings of exclusive reliance on such solutions, and the rationale for having a government-designed affirmative-disclosure regime, whereby an issuer making an offering is required to answer certain questions. It also addresses the question of whether this regime should be imposed on all issuers making such offerings or only those that volunteer to be subjected to it. The remainder of the chapter considers the rationale for mandating the imposition of liability on issuers, issuer directors and officers, underwriters, dealers, and experts such as accountants or rating agencies when there have been material misstatements or material omissions of what was required to be disclosed. The final section briefly applies the preceding discussion to the efforts, as part of the Capital Markets Union, to increase the opportunities for European SMEs raise funds through public offerings.
Business Organizations Law | European Law | Law
Program in the Law and Economics of Capital Markets
Merritt B. Fox,
Initial Public Offerings in the CMU: A U.S. Perspective,
Capital Markets Union in Europe, Danny Busch, Emilios Avgouleas & Guido Ferrarini (Eds.), Oxford University Press
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/3923