Section 90A FSMA claims: what is misleading published information?

The trigger for a section 90A claim

The section 90A/schedule 10A FSMA regime gives investors the right to sue public companies that publish misleading information to the market. It is designed to provide a remedy to investors-at-large. It therefore targets misinformation published to the market as a whole, such as in a company's financial reports and RNS-announced press releases (published information), rather than misrepresentations made to specific investors, which are covered by other common law regimes.

Meaning of misleading information

In order to establish a section 90A claim, claimants will need to show one of three things:

• that the company's published information contained a misstatement that a director knew was untrue or misleading; or

• that there was an omission that a director knew would result in the concealment of a material fact; or

• that there was a deliberate delay in providing information.

Proving any of these will not be straightforward, because in each case there has to have been an element of knowing wrongdoing. Absent a parallel criminal or regulatory proceeding, claimants are unlikely to be privy to information which would enable them to show that there had been.  

Further uncertainty is introduced by the fact that there has not yet been a reported case to clarify issues arising from the wording of the statute.  For example, materiality does not appear to be a necessary ingredient of misstatement claims, whereas it is for omission-based claims. Does this mean that claimants can bring a section 90A claim in respect of any inaccurate statement in a company's annual report?  In practice, the courts are likely to apply a de facto materiality test given that the regime also requires proof that the investor relied on the statement (to be explored later in this series). The more peripheral the statement, the less likely the court will conclude that it had any impact on the investor's decision to deal in the company's securities.   

Equally, it is unclear how Courts will grapple with areas of commercial or accounting judgement when determining whether published information was misleading. In circumstances where there was a range of permissible views on whether and if so when and in what form particular information should be published, that would need to be the subject of expert evidence.  This is an active issue for the Court to consider in the HP v Autonomy case, in which judgment is currently awaited.

Scope of published information

There is also a lack of certainty as to the scope of published information arising from that term's definition in Schedule 10A of FSMA (which made changes to section 90A with effect from October 2010). Schedule 10A expanded the scope of published information to cover information published by recognised means (such as press releases announced via the RNS service) and also "by other means where the availability of the information has been announced by recognised means".

The potential scope of this second expansion is large. In theory, it could cover any earnings calls, investor presentations or webinars that have been announced directly or indirectly via RNS. For example, financial results released on RNS will often cross-refer to investor presentations stored on a company's website. If the section 90A regime includes inaccurate disclosure in such secondary publications, the risk to companies of incurring FSMA liability is increased: statements made by directors on earnings calls and in investor presentations may be less precise than those recorded in financial reports, which will have passed through  accounting, legal and PR teams before publication.

Unfortunately, it may be some time before the Court has the opportunity to clarify whether the scope of published information under Schedule 10A includes secondary publications: the issue was raised but then dropped in HP v Autonomy, as the distinction had limited practical impact on the facts of that case.

Dishonest delay

A final point to note is that Schedule 10A of FSMA introduced the dishonest delay head of claim. This is intended to capture situations like that which arose in Wirecard, where the company's delay in publishing its 2019 financial results arguably allowed a false market for its shares to arise. We will explore dishonest delay claims in greater detail later in the series including how, in contrast to misstatement/omission claims, claimants do not need to prove their reliance on the delay to make out FSMA liability. 

In the next article, to be published in two weeks' time, we will look at who is able to bring a section 90A of FSMA claim.

Read more on Parallel Proceedings, and the difficult strategic decisions companies must face when an incident leads to multiple legal proceedings and/or enforcement actions, by visiting our dedicated website.

Click here for a webinar by our firm on the ramifications of the Wirecard fallout on businesses from both a German and international perspective.

This article is part of a series exploring practical issues arising out of the components of a Section 90A of FSMA claim. Find the other articles in the series under ‘Related links’ on the right-hand side.