Convergence of Securities Laws?
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Convergence of Securities Laws? The European Prospectus and Transparency Directives in Comparative Perspective. Dorothee Fischer-Appelt American Bar Association Section of International Law Fall meeting in Brussels 27 October 2005. Scope of Prospective Directive. Public offer definition

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Dorothee Fischer-Appelt American Bar Association Section of International Law

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Dorothee fischer appelt american bar association section of international law

Convergence of Securities Laws?The European Prospectus and Transparency Directives in Comparative Perspective

Dorothee Fischer-Appelt

American Bar Association

Section of International Law

Fall meeting in Brussels

27 October 2005

2430108


Scope of prospective directive

Scope of Prospective Directive

  • Public offer definition

  • How to avoid an “offer to the public”

    • Offer to institutions

    • Offer to less than 100 persons per Member State

    • Offer in units of Euro 50K

  • Resales


Periodic and current disclosure

Periodic and Current Disclosure

  • Prospectus Directive: Annual information update

  • Transparency Directive: Periodic financial reporting

  • Market Abuse Directive: Ad hoc disclosure of inside information

  • Compare to U.S. system


Shelf registration and incorporation by reference

Shelf Registration and Incorporation by Reference

  • New EU system of shelf registration and incorporation by reference

  • Similar to U.S. shelf?

  • Two pitfalls:

    • Separate regulatory approval

    • No true EU system of integrated disclosure yet

  • Compare to new flexibility of U.S. shelf for WKSIs…

  • For debt: base prospectus and final terms (versus supplement)


Disclosure obligations under prospectus regulation

Disclosure Obligations under Prospectus Regulation

  • EU schedules and building-block approach versus U.S. framework regulation

  • Convergence of rules based on IOSCO standards with remaining divergence in the detail

    • CESR level 3 guidance

    • See EU vs. U.S. MD&A requirements

  • Role of convergence by way of private conduct


Equivalence

Equivalence

  • Equivalence of prospectuses

    • Case-by-case review in Member States

    • But the future may bring level 2 measures…

  • Similar approach under Transparency Directive

  • Compare to U.S. requirements for foreign issuers

  • GAAP equivalence versus reconciliation?

    • CESR’s advice to Commission: GAAP equivalence, subject to a number of specified qualifications requiring “remedies”…

    • CESR recommends that remedies are audited


Equivalence cont d cesr s advice on u s canadian and japanese gaap remedies

Equivalence (cont’d) – CESR’s Advice on U.S., Canadian and Japanese GAAP: Remedies

  • Additional disclosures

    • Disclosure A (narrative and/or quantitative)

      • Explanation of transactions and method for accounting

      • Assumptions, valuation methods or hypothesis used

      • Disclosure of fair value of assets if not already included

    • Disclosure B

      • Quantitative impact of transaction had it been accounted for under IFRS

      • Include gross effect of difference on profit and loss or shareholders’ equity, and effect next of tax

  • Supplementary statements

    • Significant differences, or specific statement missing

    • Pro formas based on third country GAAP, including limited restatement

  • Other remedies in “exceptional" situations

    • Industry-specific or unusual accounting outcome


Disclosure system and corporate governance

Disclosure System and Corporate Governance

  • “The disclosure requirements of the present Directive do not prevent a Member State… to impose other particular requirements in the context of admission to trading of securities on a regulated market (notably regarding corporate governance).”

  • Binding and non-binding EU measures on corporate governance

  • Does securities law harmonisation entail some degree of harmonisation of corporate governance rules?


Liability

Liability

  • Is true convergence of EU standards possible without uniform liability rules?

  • Prospectus and Transparency Directives make a first step in harmonising certain aspects:

    • Responsibility statements

    • Limited liability for summary

  • Race to the bottom?


Regulators

Regulators

  • The big question: Does Europe need a single regulator?

  • Contrasting the European approach


Dorothee fischer appelt american bar association section of international law

Convergence of Securities Laws?The European Prospectus and Transparency Directives in Comparative Perspective

Dorothee Fischer-Appelt

American Bar Association

Section of International Law

Fall meeting in Brussels

27 October 2005

2430108


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