Securitisation Law 2nd Edition. Forthcoming. How to make the reason for your book disappear. Academics might say that the above book is a textbook but Id say that my arguments in that book are counter-cyclical and extremely critical to the point of ridiculing the fundamental logic of regulations. So, the book would be better classed as an anti-textbook or meta-textbook for securities lawyers. Its definitely anti-cheerleading. [From Chapter 5, para 5.2] THE DISAPPEARING PROSPECTUS ARGUMENT Disclosures of potential legal liability (ie legal risks) are redundant because we assume individuals and legal entities are bound by the laws of the jurisdiction where they reside or are incorporated or do business, and therefore, to paraphrase or repeat in a prospectus that a certain law or regulation that already exists outside of the prospectus and which the parties to the transaction must adhere to, may apply to various parties is superfluous. In other words, the parties should already know better since knowledge of such laws and regulations is already imputed to them. This is a fundamental operational fact of jurisprudence. Next consider the potential legal liabilities from a failure of performance under contract. Disclosures of such potential breaches are unnecessary because the contract in question provides the information required under law for adjudication. Thus, the disclosures of legal risks and contractual risks posed by the transaction agreements underlying the prospectus are unnecessary. The question then is what’s left? That is, what types of disclosures are necessary to inform the investor of the risks of the transaction that are not already stated or implied by the identity and whereabouts (or jurisdiction) of the parties, and the terms and conditions of the contracts making up the securitisation transaction? We argue the ‘residual risk’ is very little but in most likelihood, very significant. This residual risk is significant because if it is not part of the relevant and applicable regulatory and legal regimes and not anticipated by the provisions of the transaction agreements that make up the prospectus, then this is a risk which should have been anticipated by the issuer and made part of one or more of the relevant transaction agreements. In other words, either the issuer (issuing entity) should have considered this risk in some aspect of the contractual provisions or be made to disclose that this risk is a matter which cannot and/or will not be anticipated or controlled by any provision in the transaction agreements. If the matter should have been made as one of the contractual provisions but was not, then this may lead to a theory of negligence on the part of the issuer’s advisors. That is, the failure of the issuer’s advisors to incorporate such risk in the relevant transaction agreement constituted a breach of their professional standard of care and duty to the client-issuer. If the matter is something which cannot be anticipated but is wilfully anticipated but disclaimed, then we move into the area of ‘legends’ and ‘disclaimers’, of which the latter the Final Rule substantially rejects as inappropriate disclosures1. Thus, in the US general waivers of liability and disclaimers are rejected as against the basic purpose of all securities law which is disclosure.
Posted on: Sun, 24 Aug 2014 12:53:10 +0000
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