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Financial lawyer: Asking leading questions

Although the law on what a lead manager can and cannot say about the success of a bond issue is reasonably settled, it still causes banks and, in particular, their compliance officers, difficulties in practice. By Christopher Stoakes

Most bond issues in the Euromarkets are subject to English law: the majority are written under English law or are underwritten and marketed in London; some may be listed on the London Stock Exchange; a smaller proportion are by UK issuers but listed elsewhere, such as Luxembourg. For these reasons and because of the sophistication of the Euromarkets, English law has so far led other European jurisdictions on this subject. By and large, any lead manager that complies with English law should be safe as far as any other European jurisdiction is concerned.

Section 47 of the Financial Services Act 1986 (FSA) is the starting point. It contains two prohibitions: (1) against making a statement, promise or forecast which is false, misleading or deceptive in order to induce someone to buy or sell a security or not to do so; and (2) against doing anything which creates a false or misleading impression about the state of the market in respect of a security in order to induce someone to buy or sell it or not to do so.

The first prohibition contains more of a subjective test: what was your intent in making the statement? (By the way, it also covers concealing material information.)

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