Newsletter
THE LIABILITY OF TRUSTEES FOR MISREPRESENTATION IN FINANCIAL ASSET SECURITIZA-TION TRANSACTIONS
In an order issued on 24 March 2005, the Fi-nancial Supervisory Commission (FSC) indi-cated that if the content of a prospectus required under Paragraph 1, Article 17, of the Financial Asset Securitization Act includes false state-ments or omissions of material facts, the trustee is liable under Article 32 of the Securities and Exchange Act (SEA) to compensate bona fide counterparties for losses that they suffer as a result. However, because the trustee is merely the formal issuer, and thus differs from the sub-stantive issuer as envisaged by Article 32 of the SEA, the trustee is liable for damages under Ar-ticle 32 only for false statements or nondisclo-sures in information actually supplied by it or in information regarding its own activities.
The FSC also indicated that in addition to liability under Article 32 of the SEA a trustee may also be liable for civil damages to a bona fide counterparty under the relevant provisions of the Civil Code, the Trust Act and the Trust Enterprise Act.