COBS 23.4 Post-information gathering due diligence

(1) Before facilitating a qualifying public offer, a firm must take reasonable steps to satisfy itself that the information received in accordance with COBS 23.3 can be relied upon to: 

     (a) determine whether it is appropriate to facilitate the qualifying public offer in accordance with COBS 23.5; and

     (b) present such information as a reasonable client would require to make an informed and effective decision on whether or not to participate in the qualifying public offer, in accordance with COBS 23.6.

(2) For the purposes of (1), the firm must:

     (a) take reasonable steps to at least ensure that the information is materially complete and does not include any material inconsistencies; and 

     (b) consider whether it needs to carry out additional steps to assess the reliability of the information, having regard to: 

           (i) the type of information the firm is assessing;

           (ii) the risks associated with the location of the issuer and the nature of the issuer's business; and 

           (iii) any adverse information identified in relation to the issuer.

(1) The reasonable steps that a firm must take to ensure reliability of information in COBS 23.4.1R(1) may be different in respect of information which cannot be objectively verified as it is reliant upon the occurrence of a future event, including growth forecasts and expected rates of return. 

(2) The steps that the firm takes in respect of information described in (1) may be similar to those required to ensure a communication or financial promotion is compliant with the fair, clear and not misleading rule depending on the particular context.

• If another firm (F2) is involved in approving financial promotions relating to the qualifying public offer to be facilitated by a firm (F1):
• (1) F1 may rely upon any information about the issuer or qualifying public offer which it may have received from F2 if it can show that it was reasonable for it to do so; and
• (2) F1 will remain responsible for complying with its obligations in this chapter.

If a firm receives information which consists of a statement prepared by an expert, it is entitled to regard the information as satisfying the requirements in COBS 23.4.1R without taking further steps to assess it unless it is aware of any reason to doubt the expert’s independence or credibility or the statement’s accuracy.

• (1) Before facilitating a qualifying public offer, a firm must carry out a reasonable assessment of the issuer’s expected financial position after the offer closes. 

• (2) If the firm determines in (1) that the issuer does not have sufficient financial resources to continue as a going concern for at least 6 months after the qualifying public offer has closed, the firm must not facilitate that offer.   

Before facilitating a qualifying public offer, a firm must ensure that the contractual terms of the offer include:

(1) the right for a client who has agreed to buy or subscribe for the relevant securities offered to withdraw their acceptance while the qualifying public offer is open, in at least the circumstances set out in COBS 23.7.1R(2); 

(2) the date by which the right of withdrawal must be exercised; and 

(3) the steps that the client must take to exercise the right of withdrawal in (1).