Term and Definition: Tombstone
The term Tombstone is used predominantly in the legal context in connection with the capital market, especially the securities issuance business, and is primarily employed there. Originally deriving from the US financial sector, Tombstone (literally: gravestone) refers to a standardized form of publication of information regarding the issuance of securities. In German law, the term is used in connection with so-called Tombstone Ads and particularly describes adverts and notices that inform about a planned or executed offer of financial instruments, without containing detailed promotional content.
Legal Basis and Areas of Application
Securities Prospectus Law and Disclosure Requirements
Within the framework of securities prospectus law public offers of securities are subject to strict disclosure requirements. According to the Regulation (EU) 2017/1129 (Prospectus Regulation) and the German Securities Prospectus Act (WpPG), it is required that a prospectus, approved by the competent authority, is published in the case of public offers.Tombstone ads occupy a special position: they are one of the few means by which communicative actions on the market may take place even before the publication of an approved prospectus. Therefore, their permissible content is clearly limited by law.
Permissible Content of Tombstone Ads
According to Art. 22 of the Prospectus Regulation and § 3 WpPG, no public offers or promotions may take place before the approval and publication of the prospectus. However, restricted content information, a so-called tombstone ad, is permitted. This may contain the following information:
- Name and address of the issuer
- Type and class of securities
- Details regarding the offer (e.g. timing, subscription period)
- Reference to the subsequent publication of the prospectus and its source
It is prohibited to add any promotional or emotional elements to such ads beyond these factual details, to prevent investors from making hasty investment decisions without sufficient information.
Purpose and Function
Informational Function
The primary function of a tombstone ad is neutral information: market participants are to be notified of an upcoming offering, while detailed information is only made available upon approval and publication of the prospectus.
Legal Protection Function
The clear separation between neutral information (tombstone) and promotional notice ensures that misleading statements or unverified information do not reach investors. Thus, the tombstone serves a legal protection function to protect potential investors.
Tombstone in Different Jurisdictions
United States
In the USA, the tombstone ad serves as a standard means of informing about an offer in the course of a securities issuance, without violating the requirements of the Securities Act of 1933 . The US Securities and Exchange Commission (SEC) strictly regulates which content may be included. Violation of these requirements can result in severe penalties.
Germany and the European Union
In Germany and the EU, the term is not explicitly defined by law, but the principles are found in the Prospectus Regulation and the Securities Prospectus Act. BaFin (Federal Financial Supervisory Authority) monitors compliance with these disclosure obligations and intervenes in cases of proven violations of permissible informational content.
Liability Issues Relating to Tombstone Ads
Responsibility
From a liability perspective, responsibility lies with whoever acts as the publisher of a tombstone ad—usually the syndicate banks (underwriters), the issuer, or designated representatives. According to § 12 WpPG, these are liable for false statements, misleading information, or violations of content restrictions.
Legal Consequences of Violations
Improper tombstone ads featuring excessive promotional content or factual errors may result in the following sanctions:
- Administrative offense proceedings by the supervisory authority
- Civil claims for damages by aggrieved investors
- Preliminary injunctions for cease-and-desist orders
Distinction From Other Means of Information
Advertising and Roadshows
In contrast to advertisements and so-called roadshows—which typically occur after the ‘go live’ of the prospectus and are intended to establish an emotional connection to the offer—tombstone ads must be strictly factual, neutral, and ‘advertising-cold.’
Compulsory Publications Under Other Provisions
Tombstone ads must not be confused with other mandatory notices, e.g. according to § 10 WpPG, ad hoc announcements pursuant to Art. 17 MAR (Market Abuse Regulation), or disclosure of insider information.
Other Applications of the Term Tombstone
Mergers & Acquisitions
In practice, in M&A transactions, “tombstones” are also referred to as printed or digital memorabilia (e.g. plexiglas steles) commemorating completed transactions. However, this has no legal significance but serves merely as a symbol of successful business deals.
Summary
The term Tombstone is an established instrument under securities law and in financial market communications for legally mandated information regarding an upcoming securities offering. Within a strict framework, the tombstone ad allows for an initial, neutral market approach, while investors are protected by the limitation of its content. The legal provisions in both Europe and the USA require that tombstone ads be factual, non-promotional, and limited to essential information. Violations of these requirements may result in both civil and regulatory consequences. A precise understanding of the requirements for tombstone ads is of considerable importance to all parties involved in the capital market.
Frequently Asked Questions
Who is legally responsible for erecting a gravestone (tombstone)?
The legal responsibility for erecting a gravestone in Germany typically lies with the persons obliged to arrange the burial. These are generally the closest relatives of the deceased, usually spouse or children, if present. This obligation arises from the respective burial laws of the federal states. The cemetery administration may also require that certain permissions be obtained before a gravestone is erected. The persons obliged to arrange the burial enter into a contractual relationship with the stonemason when commissioning the stone and are legally responsible for its proper implementation, both to the service provider and to the cemetery administration.
What permits are required for the installation of a gravestone?
In Germany, erecting a gravestone regularly requires express permission from the cemetery administration. These obligations to verify arise from the respective cemetery and burial regulations, which are legally binding and stipulate the procedure as well as the necessary documents, such as design drawings, material specifications, and measurements. The persons entitled to arrange the burial or their representatives must submit an appropriate application prior to installation. The administration checks whether design guidelines, structural requirements, and safety regulations are observed. Without such administrative approval, the installation of a gravestone is generally not permitted and may be reversed.
What legal obligations exist regarding the maintenance of gravestones?
The obligation to maintain a gravestone generally rests with the relatives or those entitled to use the grave, as regulated in the cemetery statutes. In particular, they must ensure road safety, which includes the stability and proper condition of the gravestone. If the relatives neglect this obligation and there are damages or accidents caused by falling gravestones, civil liability claims and chargeable orders by the cemetery administration may result. Many cemeteries conduct regular stability checks and require rectification in case of identified deficiencies.
What legal requirements exist for the design, materials, and inscription of gravestones?
Cemetery regulations provide detailed provisions regarding the design, dimensions, materials, and inscriptions of gravestones. These requirements serve to ensure dignified and uniform cemetery design and to maintain the local appearance. For example, specific types of stone, surface treatments, and religious or ideological symbols may be permitted or prohibited. Inscriptions and images must be respectful and may not contain criminally relevant or unlawful content. In case of violations, the cemetery administration may order corrections or removal.
Who is liable for damage to a gravestone caused by third parties or force majeure?
Damage to a gravestone caused by third parties (e.g. vandalism, theft) falls under civil liability of the damaging party, if they can be identified. Otherwise, the risk generally lies with the grave user. Some cemeteries offer group insurance or recommend private insurance for grave sites. Damage as a result of force majeure (e.g. natural disasters, storms) generally constitutes a general life risk; without specific insurance, no claim exists against the cemetery administration or third parties.
What are the legal consequences of violations of gravestone design regulations?
Anyone who violates legal requirements regarding gravestone design may face administrative measures depending on the nature and severity of the breach. These range from requirements to rectify, fines, up to removal of the unauthorized gravestone at the responsible person’s expense. In serious cases, the cemetery administration may temporarily prohibit use of the gravesite. At public cemeteries, these measures are directly enforceable and may be subject to court review. Repeated violations can lead to permanent revocation of grave use rights.
What legal considerations must be taken into account regarding the gravestone in the event of later reburial or removal of the grave?
In the event of reburial or dissolution of the grave, the grave use right—and thus the authorization to erect a gravestone—ends. Legally, the relatives are obliged to remove the gravestone at their own expense within a set period and dispose of it professionally or keep it if they wish. Failure to remove it can result in the cemetery administration arranging removal at the relatives’ cost. The retention of the gravestone as a keepsake is only possible after agreement and approval of the cemetery administration, provided there are no conflicting public interests.
