Statutory civil liabilities of corporate gatekeepers for defective prospectuses in Australia, the United States, the United Kingdom and Canada: a comparison

Securities regulation is largely the regulation of information asymmetry in relation to the selling of financial assets described as securities. This selling requires information concerning issuers and their securities to be disclosed to the investing public. Securities regulation seeks to regulate this disclosure in order to ensure a level playing field between issuers and their potential investors. The House of Lords in Peek v Gurney held in 1873 that the objective of a prospectus was to enable investors to make an informed investment decision.' Most of the recent corporate failures in the United States between 2001 and 2002 such as Enron, WorldCom, Tyco, HealthSouth and Adelphia resulted from financial scandals in which issuers attempted to maximise the price of their securities by creating misimpressions about their financial health. Very recently, the Australian Securities and Investment Commission (ASIC) has expressed disappointment at "the significantly worse performance of auditors" found in an 18-month audit of auditors conducted by the regulator.' This malpractice is sometimes a deliberate fabrication of material facts, while other times it is a product of recklessness or negligence on the part of persons involved in the preparation and issuance of disclosure documents. Such a practice has a perilous impact upon the integrity of, and investor confidence in, the market.