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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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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
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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

2430108

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