The following Banking & Finance guidance note Produced in partnership with Adam Farlow, Partner and Charles Farnsworth, Of Counsel of Baker McKenzie LLP provides comprehensive and up to date legal information covering:
A 10b-5 letter (also referred to as a 'disclosure letter') is a letter delivered to the underwriters by issuer's and underwriters' counsel in connection with an offering of securities in the United States pursuant to an Securities and Exchange Commission (SEC)-registered offering or a private placement pursuant to Rule 144A under the United States Securities Act of 1933 (the 'Securities Act'). The underwriters will rely on this letter as supporting evidence of their "'due diligence' investigations of the issuer in building a defence to potential liability under US federal securities laws.
The focal point of the 10b-5 letter is the prospectus used to market the securities to investors. The letter states that based on counsel's activities in connection with the securities offering, nothing came to their attention to cause them to believe that the prospectus either: (i) contains an untrue statement of a material fact or (ii) omits to state a material fact necessary in order to make the statements in the prospectus, in light of the circumstances under which the statements were made, not misleading.
In an offering of securities in the United States, various liability and anti-fraud laws and regulations apply. Section 11 and Section 12(a)(2) of the Securities Act, which apply only to SEC-registered offerings, impose liability on certain parties, including the issuer and underwriters, for material misstatements or omissions in connection with offers and sales of securities.
Rule 10b-5 under the United States Securities Exchange Act of 1934, which applies to all securities offerings with a US nexus, including offerings exempt from SEC registration requirements (and which is the rule from which a 10b-5 letter takes its name), also broadly prohibits manipulative and deceptive practices and untrue statements or omissions of material facts in connection with the purchase or sale of securities.
In the event of a material misstatement or omission in a registration statement and/or prospectus,
**excludes LexisPSL Practice Compliance, Practice Management and Risk and Compliance. To discuss trialling these LexisPSL services please email customer service via our online form. Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.
To view the latest version of this document and thousands of others like it, sign-in to LexisPSL or register for a free trial.
Existing user? Sign-in
Take a free trial
Take a free trial
0330 161 1234