Charting your way through an IPO
Public Offering of Securities Insurance covers claims arising from offerings. The policy can cover equity or debt issues, both initial and secondary.
By raising capital from the public, a company is creating new relationships, and opening up potential liabilities which are closely scrutinised by regulators. Investors may claim the full value of their loss if the information in the prospectus is proved to be wrong, possibly years later. A POSI policy has limits tailored to the specific transaction, and for the duration of the exposures in the relevant jurisdiction.
Companies that want to offer their securities to the public, or trade their securities on a regulated market like the stock exchange, have to issue a prospectus. There are detailed rules about what has to be in a prospectus, what may or may not be left out and processes to follow in the case that anything material changes once issued or in the case an error is discovered.
A prospectus must explicitly confirm that the peopleresponsible for it have taken reasonable care to make sure the information is true. So they, as well as the company and its directors, may face civil and criminal liabilities if the prospectus is inaccurate, incomplete or misleading particularly if they can’t prove that proper care was taken preparing it. In the case of false representation, imprisonment is a possibility in some jurisdictions.
An AIG POSI policy offers protection against some of the risks of ‘going public’, for every party involved in the transaction and for the length of time those exposures can last. AIG also has worldwide capabilities and can underwrite from any country where we are licensed to operate (and we have the largest owned global network of any insurance company).
This product could be of benefit to companies of any size who are thinking of, or are in the process of, listing on a stock market.
• Liabilities relating to a prospectus/listing particulars
• Liabilities arising from statements or information provided in connection with the offering including statements made in any road shows
• Advancement of defence costs
• Non-rescindable policy unless there has been any fraudulent misrepresentaion or fraudulent non-disclosure by any insured
• Automatic cover for follow-on offerings made and raising an amount of up to 25% of the value of the initial offering