Causes of action
Which causes of action can be asserted by claimants in relation to the offer and trade of securities and which are most commonly asserted?
The most common causes of action relating to the offer and trade of securities asserted by claimants are misrepresentations or omissions regarding information that was provided to them by the issuer. Depending on whether the claimant is a professional party or a consumer, it may invoke the statutory rules on misleading advertising or the statutory rules on unfair commercial practices, respectively. These rules shift the burden of proof with respect to the correctness of the information from the claimant to the defendant.
Directors’ and officers’ liability
In what circumstances and to what extent can directors and officers be held liable for misrepresentations, omissions or other fraudulent conduct in relation to the offer and trade of securities?
Usually, the company (ie, the legal entity) will be qualified as the publisher of misleading advertisements or as the trader of unfair commercial practices. In these cases, directors and officers can then be held liable only if a serious personal blame can be attributed to them for not preventing such misrepresentation or omission. However, if directors or officers qualify as publishers of misleading advertisements or traders of unfair commercial practices, they can be held liable under the respective rules and no serious personal blame is required to establish liability.
In administrative proceedings, directors and officers can be held liable if they directed the offence. No serious personal blame is required.
Can liability be limited in any way?
Directors and officers cannot exclude their liability. However, often their company will indemnify them and take out directors and officers insurance.
In what circumstances and to what extent can secondary actors (eg, attorneys, auditors and underwriters) be held liable for misrepresentations, omissions or other fraudulent conduct in relation to the offer and trade of securities?
Secondary actors can be held liable on the same grounds as issuers if they can be classified as a publisher of the misleading advertisement or as a trader with respect to the unfair commercial practice. Lead managers that are involved in the drafting and distribution of a prospectus might be classified as such. In addition, case law demonstrates that lead managers can be liable for not correcting misleading statements from the issuer during a press conference in an initial public offering book building process. Auditors may also classify as publishers or traders. Attorneys are less likely to be classified as such; however, attorneys and auditors can be held liable if they have not acted as a reasonably competent attorney or auditor.
Can liability be limited in any way?
Liability cannot be limited.
Who may file securities claims? Are there any restrictions on foreign claimants? Who are the most common claimants (eg, pension funds, institutional investors)?
Any security holder at the time of the misrepresentation or omission can file securities claims. Both claims by buyers and holders of shares in the relevant period are accepted. There are no restrictions on foreign claimants. Claimants are usually represented by professional claiming entities or the Dutch Investors' Association (VEB) and the Consumentenbond.
Pleading and evidentiary standards
What pleading and evidentiary standards apply to securities claims, including with regard to:
(a) Proof of reliance on the relevant misrepresentation, omission or other fraudulent conduct?
Investors must assert that they relied on the misrepresentation or omission. Reliance is assumed relatively easily, especially in case of retail investors. This reliance can be indirect (ie, not requiring the investors to have actually read the misleading information themselves).
(b) Proof of loss causation?
Claimants must prove that the misleading information caused damages (eg, a drop in securities prices). They must therefore filter out unrelated price movements.
(c) Materiality requirements?
Not every omission or misrepresentation classifies as an unfair or misleading commercial practice or as misleading advertising. An omission or misrepresentation classifies as ‘unfair’ or ‘misleading’ if it can be reasonably assumed that the omission or misrepresentation, considering the whole context, has a material impact on the investment decision of an average investor.
(d) Scienter requirements?
Misrepresentations create civil liability if the party responsible for the misrepresentation knew or ought to have known about the misrepresentation.
(e) Any other requirements, standards or considerations?
What pre-trial disclosure/discovery mechanisms are available to support claims, if any?
Dutch law provides for the possibility to obtain documents. This possibility is much more restricted than (for example) US discovery. No fishing expeditions are allowed; the parties must be very specific in their request for documents.
Dutch law also provides for the possibility to depose witnesses, both before initiating proceedings –so-called ‘preliminary witness hearings’ – and during the proceedings. Witness hearings are more restricted than (for example) US depositions. Contrary to US depositions, witness hearings under Dutch law take place before a court and the topics for the witness hearing must be specified beforehand and should be relevant for the claim.
Shareholders and some other stakeholders may also file a petition requesting the Enterprise Court to order an investigation into the management and affairs of the company if there are “sufficient grounds to doubt as to whether the company is pursuing a proper policy or a proper course of affairs”. The investigators will write a report on their findings, which will be made available to the parties involved in the proceedings before the Enterprise Court and these findings are usually sufficiently thorough to be used as a factual basis for a liability claim.
What rules and standards govern non-disclosure of documents on the grounds of professional privilege or other confidentiality considerations?
A request for disclosure of documents can be denied if there are compelling reasons to deny such request – for example:
- a statutory duty to keep information confidential;
- a contractual duty; and
- professional privilege.
Witnesses must answer all questions and generally cannot refuse to answer even if the answer would reveal confidential information. There is an exception for attorneys and other persons that hold professional privileges.
What interim measures are available to claimants in securities cases?
Preliminary injunctions and preliminary attachments are available. These are not specific to securities cases.
Statute of limitations
What is the statute of limitations for filing claims?
Damages claims generally have a statute of limitations of five years. Claims for the nullification of a transaction based on the rules on unfair commercial practices have a statute of limitations of three years.
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