*Formerly lecturer in Corporate and Business Law at Copper-belt University-Zambia
LLB (UNZA), MBL (USyd), Dip. Arbitration Law and Practice (CIArb), Fin & Corp Gov (Oxon), AHCZ. Currentlyreading for PhD/LLD in International Trade and Investment in Securities (UNILUS)
Regulatory rules are likely to be violated if they are perceived to be weak or if enforcement is lax. Investors, in investing in securities markets, bank on the integrity of the regulatory framework and the market which integrity, in turn, depends on effective civil and criminal enforcement of regulatory rules. The study employs the doctrinal approach to evaluating legal rules. The main findings of the study were that:(1)the legal framework for public distribution of securities does not provide for a uniform approach to causation and loss for misrepresentation or omissions or pure non-disclosure in prospectuses and other disclosure documents, (a) with regard to prospectuses, the common law approach which requires proof of reliance—the causal link between the misleading statement and the plaintiff's loss—has been adopted (i) An argument has been made that, such a procedural requirement poses problems for investors in securities markets in the event that the loss suffered is caused by partial disclosure or pure non-disclosure. In such cases, it is obvious that the plaintiff investor will find it practically impossible to prove reliance since they cannot rely on undisclosed facts. Such a procedural shortcoming is likely to discourage participation of investors in new issues of securities in primary markets where prospectuses are traditionally used. (b) with regard to other disclosure documents than prospectuses, the statutory regime adopts a stricter form of fraud on the market theory (i) An argument has been made in this respect that absent a rebuttable presumption of reliance, liability of the offenders would be unrestricted; this is also likely to lead to unrestricted litigation (2)there is no policy justification for the different approaches to causation and loss for misrepresentation, omissions or pure-non-disclosure in prospectuses or other disclosure documents. Necessary proposals for reform as a possible way of remedying the shortcomings in the legal framework have been made.
