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

1
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

2
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

3
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

4
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)

5
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. MDA requirements
• Role of convergence by way of private conduct

6
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?
• CESRs advice to Commission GAAP equivalence,
  subject to a number of specified qualifications
  requiring remedies
• CESR recommends that remedies are audited

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Equivalence (contd) CESRs 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

8
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?

9
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?

10
Regulators

• The big question Does Europe need a single
  regulator?
• Contrasting the European approach

11
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