Disclaimers: investors must stand on their own two feet

If a bond or loan defaults, how much redress do the investors have against the bank that sold them the instrument? Not much, one might think. But what if the investment bank had doubts about the reliability of the financial data in the offering memorandum before the deal was closed ¡ª yet didn¡¯t tell the investor? That is what Goldman Sachs did in a mezzanine deal in 2000, leading to a court case that concluded in London in December. Goldman won the case, because the court upheld disclaimers in the deal documents that protected the arranger. Andrew Howell and Ivan Wilkinson of UK-based law firm Barlow Lyde & Gilbert explain the court¡¯s reasoning and the implications for financial markets.