In 2005, The Freeman Group purchased preferred shares offered by The Royal Bank of Scotland (RBS) in an offering registered under the Securities Act of the 1933. In the prospectus by which the securities were offered, RBS disclosed that it had accumulated a significant concentration of subprime assets, i.e., financial assets secured by subprime mortgages. The prospectus also disclosed that RBS was exposed to tens of billions of British pounds worth of securitized assets, including certain securitizations of residential mortgages, and identified whether the risks and rewards associated with these assets were completely held, partially held, or had been transferred by RBS. The offering documents further described those assets, explained how RBS had calculated their value, disclosed the dangers it foresaw, and provided an account of how those dangers could affect the assets' value. These statements did not disclose the percentage of the relevant securitizations that included subprime mortgages. The prospectus stated that RBS had a strong credit quality, had few problem loans, and its risks remained stable. When the subprime crisis hit banks, including RBS, in 2008 and 2009, the preferred shares lost 80% of their value. Freeman sued RBS under sections 12(a)(2) and 11 of the 1933 Act, claiming that RBS failed to disclose a material fact, that is, the full extent of RBS's exposure to subprime mortgage risks. 1. The Royal Bank of Scotland Group, PLC (Royal Bank) is permitted to sell the preferred shares described in the registration statement and prospectus during the 30 day period before the registration statement is filed under the Private Securities Litigation Reform Act of 1995. 2. Under the 1933 Securities Act, Royal Bank is prohibited from communicating any information about its securities which might encourage an investor to purchase the security before all information is filed and available. 3. During the 30 days prior to filing the registration statement, Royal Bank is permitted to issue a free-writing prospectus, which describes the issuer or its securities and which contains forward looking statements. 4. The disclosures made by Royal Bank about its accumulation of a significant concentration of financial assets secured by subprime assets and the risks posed by those assets violate Section 11 of the 1933 Securities Act. 5. Royal Banks assurance that it possessed effective risk management procedures in the offering documents violates Section 11, because such assurances qualify as misleading statements of fact, which support liability under those sections.

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