Recent Developments in European Union Securities Law
Wolff, Samuel, Denver Journal of International Law and Policy
The European Union (EU) is engaged in a major effort to develop the single financial market. The oddly named "Committee of Wise Men" ("Committee") published an influential report in February 2000 calling for reform of the lawmaking procedures in the EU. (1) One of the Committee's main objectives is to speed up legislative action needed to bring new life to the single financial market. (2) Despite the considerable and impressive work that the EU has already done in the area of listings and public offerings, true integration of European capital markets is not yet achieved, particularly in the area of corporate finance and capital formation. (3) In May 2001, the European Commission ("Commission") submitted a proposal to the European Parliament and the Council of Ministers for a new directive that would represent a combined version of the Prospectus (4) and Listing Particulars Directives, (5) which would later be repealed. (6) In March 2002, the European Parliament approved its own version of a new Prospectus Directive (7) and the measure was before the Council when the Commission, "to speed up the legislative process" published an amended proposal in August 2002. (8) Significantly, the new system would substantially rely upon the International Disclosure Standards promulgated by the International Organization of Securities Commissions ("IOSCO") in 1998. (9) The Commission also proposes to enact a registration system similar to shelf registration in the United States. (10) In addition, under the Prospectus/Listing Particulars Directive, as proposed, the host state would have less power to interfere with a prospectus that has been approved by the home state, which should facilitate cross-border securities offerings within the EU. (11) No longer would the prospectus necessarily have to be translated into the language of the host country, although it would be required to be drawn up in a language accepted by the competent authority in the home Member State. (12) In certain cases, it may be necessary to translate the prospectus into a language "customary in the sphere of international finance."
The Commission also proposes to revise the mutual recognition provisions of the Prospectus and Listing Particulars Directives. (13) Although the current Prospectus and Listing Particulars Directives already contemplate the possibility of reciprocity for issuers located outside of the EU, both in the context of listings and public offerings, recognition throughout the EU on the basis of a prospectus of a non-EU issuer has failed to materialize. The proposed directive lays the foundation for an issuer from outside the EU to make an offering or effect a listing throughout the EU on the basis of a prospectus prepared in accordance with IOSCO standards and approved by one EU Member State. (14) Presumably, the exercise of this privilege will also depend upon the issuer's use of accounting standards acceptable to the member country supervising the offering. (15) In February 2001, the EU Commission presented a proposal, which will require a mandatory application of International Accounting Standards for listed companies in the EU by 2005. (16) Under the legislation, all companies listed on a regulated market in the EU, or offering securities publicly in tandem with a listing, must prepare their accounts in accordance with International Accounting Standards. (17) The proposal for mandatory applications of International Accounting Standards for listed companies in the EU was endorsed by the European Parliament, with amendments, in March 2002, and adopted in July 2002. (18) Conceivably, someday, an issuer from outside the EU preparing its prospectus in accordance with IOSCO standards will be able to make an offering throughout the EU on the basis of a single prospectus.
A legislative dialogue is also being conducted in the EU with respect to amending the Investment Services Directive. (19) The most important area of reform in this regard is the diminution of power on the part of host member countries to impose conduct of business rules on investment firms authorized by their home states. …