2430108

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

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

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 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 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 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

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 “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

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

The big question: Does Europe need a single regulator?

Contrasting the European approach

2430108

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