Misrepresentation
The offense, contrary to s 20 of the Theft Act 1968 and punishable by up to seven years imprisonment, of dishonestly concealing, destroying, or defacing any valuable security, will, or any document issuing from a court or government department for gain for oneself or causing loss to another. Valuable securities include documents concerning rights over property, authorizing payment of money or the delivery of property, or evidencing such rights or the satisfying [Gooch, Williams, p. 73]. Financial statements do not give a true and fair view of the company’s performance. Typically, this involves hiding expenses, inflating revenue, moving debts off the balance sheet, or manipulating reserves. Although executives have sometimes used such means for private gain, the objective is more often to create a false impression of corporate success and meet financial market expectations [Law, p. 23-24]. Misrepresentation may be fraudulent (made by a party with knowledge of its falsity or without belief in the truth of the representation), negligent (made without knowledge of its falsity but in breach of a duty of care), or innocent (made without knowledge of its falsity and breach of a duty of care) [Mann, p. 225].
If guilty of fraudulent misrepresentation (i.e., if the truth of a statement is not honestly believed, which is not the same as saying that it is known to be false), the representee may, subject to certain limitations, set the contract aside and may also sue for damages [Law, p. 223]. To avoid such problems, financial intermediaries will undertake due diligence inquiries before undertaking a transaction and will have proper rules of fair practice and ethical guidelines to ensure that their agents do not misrepresent a given situation [Moles, Terry, p. 221].
Gooch, G., Williams, M. (2015). A Dictionary of Law Enforcement (2 ed.) Oxford: Oxford University Press.
Law, J. (2018). A Dictionary of Finance and Banking (6 ed.) Oxford: Oxford University Press.
Law, J. (2016). A Dictionary of Business and Management (6 ed.) Oxford: Oxford University Press.
Moles, P., Terry, N. (1997). The Handbook of International Financial Terms. Oxford: Oxford University Press.
Mann, T. (Ed.) (2017). Australian Law Dictionary. Oxford: Oxford University Press.