Comparing US and Canadian Prospectus Liability

While the capital markets of the United States and Canada are deeply integrated, the legal standards governing prospectus liability differ significantly. This post dissects the 'reasonable investigation' defense available under Section 11 of the Securities Act of 1933 against the 'due diligence' defense found in Canadian securities legislation. John Babikian examines the judicial interpretations of these standards in both jurisdictions, noting that Canadian courts may impose a higher threshold for scientific or technical experts. He also explores the differences in statutory caps on liability and the availability of contribution claims among underwriters. For legal practitioners managing cross-border offerings, John Babikian asserts that understanding these divergences is critical for structuring an effective defense strategy.