What is verification
Verification involves checking the accuracy of all price-sensitive statements in prospectus and other marketing documentation in order to reduce the risks of liability for false, misleading or inaccurate statements or omissions.
Verification notes must… (general)
- Check factual accuracy of statements, particular emphasis on business activities and financial performance
- Ensure no relevant information is omitted
- Ensures inferences drawn from statement documents are correct
Verification notes must (specific)
• “Foreseeable future,” “growth,” “demand” “industrial coating systems” and “industrial shipping sector” = uncertain and/or broad terms, will need to be verified – independent evidence from suitable sources should be used (e.g. accountants or investment bank). Justification required from directors for belief about future growth. Verification could include growth percentages or projections.
• Include as much detail as possible (e.g. growth percentages or projections), and if about growth, for example, from reporting accountsants and/or company’s investment bank, not from the company’s PR advisers
• Break down the information in prospectus as much as possible to ensure that nothing is missed
• Limit comments to next 1-2 financial year to ensure that timescale is supported by verification materials, avoid making profit forecast unless prepared to provide all supporting reports etc.
• If talking about growth in a sector, obtain independent reports to substantiate.
• Do not be too definitive where inappropriate
e.g. stating that a litigation claim against the company ‘will not be successful’ is too definitive – this should be reworded to be verifiable and qualified.
N.B. practical action to take would be to review the available information from solicitors/counsel and revise the prospectus to reflect the information available about the claim and its current status
