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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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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
EU Financial Action Plan
  • 42 new Directives
  • A pan-European securities market to rival the United States?
eu pd and td
EU PD and TD
  • Two major directives for our purposes
    • Prospectus Directive: new offers
    • Transparency Directive: continuing obligations
eu pd and td1
EU PD and TD
  • 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
  • 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
  • Surprisingly: no (useful) grandfathering
eu pd and td4
EU PD and TD
  • 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
  • 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
  • What to do?
    • For straight debt: use € 50k denominations?
    • A delist-and-relist right
    • List on Hong Kong or Singapore
stop press
  • 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



Phase One

Class Exemptions

We are here!

“Quick Fix” Legislation

Phase Two

Phase Three

Radical Overhaul

guidelines and class exemptions
Guidelines and Class Exemptions
  • Dual prospectuses
  • Offer awareness publicity
  • Prospectus contents for bonds
quick fix legislation
Quick Fix Legislation
  • 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
  • Committee stage amendments
      • deletion of resale restrictions
      • transparency in waivers/exemptions
      • others
    • Expected timing for implementation
radical overhaul
Radical Overhaul
  • New Ordinance
  • “Debenture”
  • Transaction-based rather than document- based regime
  • Promotional advertising
  • Incorporation by reference, shelfs, passports