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HKCMA Spring Cocktail 2004. Andrew Malcolm. The EU Prospectus and Transparency Directives - what they mean for Asian issuers and Hong Kong’s Securities Law Reform - the three-phase process. EU Financial Action Plan. 42 new Directives

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Eu financial action plan
EU Financial Action Plan mean for Asian issuers

  • 42 new Directives

  • A pan-European securities market to rival the United States?

Eu pd and td
EU PD and TD mean for Asian issuers

  • Two major directives for our purposes

    • Prospectus Directive: new offers

    • Transparency Directive: continuing obligations

Eu pd and td1
EU PD and TD mean for Asian issuers

  • The Directives will apply to

    • securities offered to the public

    • securities listed in EU (whether or not offered to the public)

Eu pd and td2
EU PD and TD mean for Asian issuers

  • The Directives are complex and still incomplete. But the headline requirement is for

    • financial information under IFRS (IAS)

    • “true and fair view” audit under international auditing standards

Eu pd and td3
EU PD and TD mean for Asian issuers

  • Surprisingly: no (useful) grandfathering

Eu pd and td4
EU PD and TD mean for Asian issuers

  • Even more surprisingly: very limited exemptions for euromarket issues

    • for straight debt (and many exchangeables), exemption if in minimum denominations of €50,000 or equivalent

    • no exemptions for equity, convertible bonds or (effectively) GDRs

Eu pd and td5
EU PD and TD mean for Asian issuers

  • Only “home-state lock-in” currently in force - for an issuer’s first EU listing after 31 December 2003

  • Main provisions effective from sometime in 2005

Eu pd and td6
EU PD and TD mean for Asian issuers

  • What to do?

    • For straight debt: use € 50k denominations?

    • A delist-and-relist right

    • List on Hong Kong or Singapore

Stop press
STOP PRESS mean for Asian issuers

  • At end February, EU Parliamentary Committee on Economic and Monetary Affairs recommended:

    • US, Canadian, Australian GAAP “equivalent” to IAS

    • No quarterly reporting

    • Grandfathering for straight debt listed before 1 January 2006

      EU Parliament/Council of Ministers reaction awaited


Guidelines mean for Asian issuers

Phase One

Class Exemptions

We are here!

“Quick Fix” Legislation

Phase Two

Phase Three

Radical Overhaul


Guidelines and class exemptions
Guidelines and Class Exemptions mean for Asian issuers

  • Dual prospectuses

  • Offer awareness publicity

  • Prospectus contents for bonds

Quick fix legislation
Quick Fix Legislation mean for Asian issuers

  • Embed the Guidelines and Exemptions

  • New offering safe harbours

    • Professional investors (like SFO)

    • Denominations of HK$500k

    • Private placements up to 50 offerees

Quick fix legislation1
Quick Fix Legislation mean for Asian issuers

  • Committee stage amendments

    • deletion of resale restrictions

    • transparency in waivers/exemptions

    • others

  • Expected timing for implementation

Radical overhaul
Radical Overhaul mean for Asian issuers

  • New Ordinance

  • “Debenture”

  • Transaction-based rather than document- based regime

  • Promotional advertising

  • Incorporation by reference, shelfs, passports