European capital markets law / edited by Rüdiger Veil ; with translations by Rebecca Schweiger.
2017
KJE2245 .E9213 2017 (Map It)
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Details
Title
European capital markets law / edited by Rüdiger Veil ; with translations by Rebecca Schweiger.
Uniform Title
Europäisches Kapitalmarktrecht. English.
Published
Oxford ; Portland, Oregon : Hart Publishing, 2017.
Call Number
KJE2245 .E9213 2017
Edition
Second edition.
ISBN
9781782256526 (pbk. ; alk. paper)
1782256520 (pbk. ; alk. paper)
9781782256540 (ePDF)
9781782256533 (ePub)
1782256520 (pbk. ; alk. paper)
9781782256540 (ePDF)
9781782256533 (ePub)
Description
lv, 788 pages : illustrations ; 25 cm
System Control No.
(OCoLC)964661126
Bibliography, etc. Note
Includes bibliographical references (pages 755-758) and index.
Translation of
Europäisches Kapitalmarktrecht. 2., neu bearbeitete Auflage. Tübingen : Mohr Siebeck, 2014 9783161529337 (DLC) 2014443344
Available in Other Form
Online version: Second edition. Oxford ; Portland : Hart Publishing, an imprint of Bloomsbury Publishing Plc, 2017 9781782256533 (DLC) 2016055154
Record Appears in
Added Author
Table of Contents
Preface
v
List of Contributors
xxxv
List of Abbreviations
xxxvii
1.
Foundations of Capital Markets Legislature in Europe
1.
History
3
I.
Introduction
3
II.
Segre Report (1966)
4
III.
Phase 1: Coordination of Stock Exchange and Prospectus Laws (1979-1982)
5
IV.
White Paper on Completing the Internal Market (1985)
6
V.
Phase 2: Harmonisation of the Laws on Securities Markets (1988-1993)
6
VI.
Financial Services Action Plan (1999)
8
VII.
Lamfalussy Report (2000)
8
VIII.
Phase 3: Reorganisation of the Laws on Prospectuses and Securities (2003-2007)
10
IX.
Continuation of Phase 3: Harmonisation of Takeover Law (2004)
13
X.
White Paper on Financial Services Policy (2005)
14
XI.
de Larosiere Report (2009)
15
XII.
Phase 4: Towards a European Supervision and a Single Rulebook on Capital Markets Law (since 2009)
15
XIII.
First Step of Phase 4: Regulation of Credit Rating Agencies (2009)
16
XIV.
Continuation of Phase 4: Revision of the Framework Directives and Establishment of a Single Rulebook (2009-2014)
17
XV.
Continuation of Phase 4: Regulation on Short Sales (2012)
19
XVI.
Continuation of Phase 4: Regulation on OTC Derivatives (2012)
20
XVII.
End of Phase 4: Regulation of Benchmarks (2016)
20
XVIII.
Phase 5: Capital Markets Union (since 2015)
20
XIX.
Conclusion
21
2.
Concept and Aims of Capital Markets Regulation
23
I.
Concept
23
II.
Regulatory Aims
24
1.
Efficiency of Capital Markets and Investor Protection
24
2.
Financial Stability
26
III.
Regulatory Strategies and Instruments
28
1.
Disclosure and Prohibition
28
2.
Enforcement
29
3.
Legislative Powers for Regulating Capital Markets in Europe
31
I.
Legal Foundations of the European Union
31
II.
Rules on Competence
32
1.
Coordination of Provisions on the Protection of Shareholders and Creditors
32
2.
Coordination of Start-Up and Pursuit of Self-Employment
33
3.
Establishing an Internal Market
33
4.
Cross-border crimes
34
III.
Legislative Instruments
35
1.
Overview
35
2.
Regulation
35
3.
Directive
36
4.
Process and Strategies of Capital Markets Regulation in Europe
39
I.
Term Capital Markets Regulation
42
1.
Market Regulation versus Market Supervision
42
2.
Capital Markets Regulation versus Financial Markets Regulation
42
II.
Regulatory Process
43
1.
European Level
43
a.
Historical Development
44
b.
Lamfalussy II Process
45
aa.
Level 1: Framework Acts
45
bb.
Level 2: Delegated Acts and Implementing Measures
46
cc.
Level 3: Guidelines and Recommendations
49
dd.
Level 4: Supervision of the Enforcement by Member States
50
ee.
Involvement of Stakeholders
51
ff.
Graph: Lamfalussy II Process
51
2.
Evaluation
52
III.
Strategies of Capital Markets Regulation
53
1.
Regulations and Directives
53
2.
Minimum and Maximum Harmonisation
54
a.
Definitions
54
b.
Advantages and Disadvantages
56
c.
Tendency towards Maximum Harmonisation
56
3.
National Level
57
a.
Methods for a Transformation of European Directives
57
b.
Accompanying National Law
58
c.
Excurse: The Principles-based Approach to Regulation in the United Kingdom
59
aa.
Foundations of Principles-based Regulation
59
bb.
Effects of Principles-based Regulation on Enforcement
60
cc.
Evaluation
61
dd.
Outlook
62
d.
Self-regulation
62
5.
Sources of Law and Principles of Interpretation
65
I.
Sources of Law
65
1.
European Law
66
a.
Market Abuse Regulation and Directive on Criminal Sanctions for Market Abuse
66
b.
Prospectus Directive
68
c.
Markets in Financial Instruments Directive (MiFID)
69
d.
Transparency Directive
70
e.
Takeover Directive
70
f.
Regulation on Credit Rating Agencies
70
g.
Regulation on Short Selling
71
h.
Benchmark Regulation
72
i.
Regulations on the European Supervisory Authorities
72
j.
Shareholder Rights Directive
73
k.
Further Directives
73
2.
National Laws of the Member States
74
a.
Austria
74
b.
France
75
c.
Germany
75
d.
Italy
77
e.
Spain
77
f.
Sweden
78
g.
United Kingdom
79
II.
Interpretation
80
1.
Importance of Interpretation
80
2.
Principles of Statutory Interpretation
81
a.
Textual Interpretation
82
b.
Contextual Interpretation
82
c.
Historical Interpretation
84
d.
Teleological Interpretation
84
6.
Dogmatics and Interdisciplinarity
87
I.
Overview
88
II.
Legal Nature
89
1.
Foundations
89
2.
Interpretation
90
III.
Relations with other Fields of Law
92
1.
Accounting Law
92
2.
Company Law
93
IV.
Interdisciplinarity
94
1.
Homo oeconomicus or irrational investor?
94
a.
Basic Assumption: Rationality
94
b.
Behavioural Finance
95
aa.
Bounded Rationality
95
bb.
Overconfidence
95
cc.
Fairness
96
dd.
Prospect Theory/Framing/Risk Aversity
96
ee.
Hindsight Bias
96
ff.
Representativeness/Availability/Salience
97
2.
Relevance of the Results of Behavioural Finance for Capital Markets Law
97
a.
Interpretation of the Law
97
b.
Legislation
98
aa.
Challenges
98
bb.
Recent Developments in the Financial Services Legislation
99
2.
Basics of Capital Markets Law
7.
Capital Markets
103
I.
Overview
103
1.
Trading Venue
103
2.
Facts
105
3.
Primary and Secondary Markets
106
4.
Stock Exchanges
107
II.
Regulated Capital Markets
109
1.
Scope of Application of European Capital Markets Law
109
2.
Definition
110
3.
Market Segments
111
III.
SME Growth Markets
112
8.
Financial Instruments
115
I.
Introduction
115
II.
Securities
116
1.
Definitions in MiFID II
116
2.
Shares
117
3.
Bonds
118
4.
Derivatives
119
9.
Market Participants
121
I.
Introduction
121
II.
Issuers
123
III.
Investors
124
IV.
Other Market Participants
126
10.
Access to the Markets and Market Exit
129
I.
Issuance of Shares
129
II.
Admission to Trading of Shares
130
III.
Market Exit
131
11.
Capital Markets Supervision in Europe
133
I.
Introduction
135
II.
European Requirements
136
1.
Institutional Organisation
136
2.
Powers
137
a.
Administrative and Investigation Powers
137
b.
Administrative Fines
138
c.
Other Administrative Sanctions
138
d.
Choice of Sanctions/Administrative Measures
139
III.
Capital Markets Supervision by the Member States
139
1.
Institutional Concepts
140
a.
Model of Integrated Supervision
140
b.
Model of Sectoral Supervision
141
c.
Hybrid Models
142
d.
Twin Peaks Model
142
e.
Direct Banking Supervision by the European Central Bank (ECB)
143
f.
Generally Preferable Supervisory Model?
143
2.
Internal Organisation
144
3.
Administrative and Criminal Powers
144
4.
Liability of Supervisory Authorities
145
5.
Use of Resources and Sanctioning Activity
145
IV.
Cooperation between the NCAs
146
1.
Cooperation within the European Union
146
2.
Cooperation with Third Countries' Authorities
148
V.
Competition between the National Supervisory Institutions
149
VI.
European Financial Supervisory Scheme
149
1.
European Financial Markets Supervisory System (ESFS)
150
a.
Macro-prudential Level
150
b.
Micro-prudential Level
151
c.
Single Supervisory Mechanism (SSM) and Single Resolution Mechanism (SRM)
151
2.
European Securities and Markets Authority (ESMA)
153
a.
Internal Organisation
153
b.
Independence and Budget Autonomy
155
c.
Powers of Intervention vis-a-vis NCAs
155
aa.
Breaches of EU Law by the National Supervisory Authorities
156
bb.
Decisions on Emergency Situations and Disagreements between NCAs
156
1.
Emergency Situations
157
2.
Disagreements between Competent Authorities in Cross-Border Situations
157
3.
National Fiscal Responsibilities Limit ESMA Powers
157
d.
Direct Supervision of Market Participants
158
aa.
Warnings and Prohibition of Financial Activities
158
bb.
Supervision of Credit Rating Agencies (CRA) and Trade Repositories (TR)
159
e.
Single Rulebook and Supervisory Convergence
160
aa.
Supervisory Convergence
160
bb.
Guidelines and Recommendations
161
cc.
Regulatory and Implementing Technical Standards
162
1.
Regulatory Technical Standards (RTS)
162
2.
Implementing Technical Standards (ITS)
163
3.
Assessment
164
f.
Compliance of ESMA's powers with the TFEU
164
g.
Judicial Review
165
h.
Liability of ESMA
166
i.
Access to Information
166
3.
Conclusion
166
12.
Sanctions
169
I.
Introduction
170
II.
Sanctioning Systems in the Pre-Crisis Era
171
1.
Criminal and Administrative Sanctions
171
2.
Civil Law Sanctions
172
III.
Reforms after the Financial Crisis
173
1.
Need for Reforms
173
2.
Public Enforcement
174
a.
Provisions on the Detection and Exposure of Legal Infringements
175
b.
Supervisory Measures
175
c.
Sanctions
175
3.
Development of a Private Enforcement
178
IV.
Outlook
178
3.
Market Integrity
13.
Foundations
183
I.
Introduction
183
II.
Legal Foundations
184
1.
MAR
184
2.
CRIM-MAD
185
3.
Further Measures by ESMA
185
4.
Overview on the Single Rulebook on Market Abuse
185
III.
Level of Harmonisation
186
1.
Minimum versus Maximum Harmonisation
186
2.
Evaluation
187
IV.
Presentation of Market Abuse Law in this Book
187
14.
Insider Dealing
189
I.
Introduction
190
II.
Regulatory Concepts
194
1.
Market Abuse Regime
194
2.
Accompanying Rules
194
III.
Concept of Inside Information
195
1.
Relevance of the Term
195
2.
Definition and Interpretation of Inside Information under the MAD 2003 Regime
196
3.
Implementation in the MAR 2016
200
a.
Information of a Precise Nature
200
aa.
Existing Circumstances
200
bb.
Future Circumstances and Intermediate Steps in a Protracted Process
201
cc.
Reference to an Issuer or to Financial Instruments
201
dd.
Rumours
202
b.
Information which has not been made public
203
c.
Price Relevance
203
aa.
Foundations
204
bb.
Assessment by NCAs
205
d.
Special Rules for Derivatives on Commodities and Front Running
206
4.
Stricter Rules in the Member States?
207
IV.
Prohibitions
209
1.
Overview
209
2.
Prohibition of the Acquisition or Disposal of Financial Instruments
209
a.
Foundations
209
b.
Use of Inside Information and Legitimate Behaviours
210
3.
Unlawful Disclosure of Inside Information
212
a.
Foundations
212
b.
Market Sounding
214
4.
Recommending or Inducing
215
5.
Exemptions
215
V.
Supervision
216
1.
European Requirements
216
a.
Powers of National Authorities
216
b.
Insider Lists
217
c.
Notification Obligations and Whistleblowing
218
2.
National Practices and Supervisory Convergence
219
VI.
Sanctions
220
1.
Overview
220
2.
Administrative Pecuniary Sanctions
220
3.
Criminal Sanctions
221
4.
Investor Protection through Civil Liability
221
VII.
Conclusion
222
15.
Market Manipulation
225
I.
Introduction
226
II.
Regulatory Concepts
227
1.
Requirements under European Law
227
2.
Direct effect in the Member States
228
III.
Scope of Application of the MAR
229
1.
Personal Scope
229
2.
Material Scope
229
IV.
Prohibitions
230
1.
Regulatory System
230
2.
Core Definitions of Market Manipulation
232
a.
Information Based Manipulation
232
aa.
Core Definition
232
bb.
Digression: Behavioural Finance
234
b.
Transaction-Based Manipulation
235
aa.
Core Definition and Indicators
235
bb.
Exceptions
238
1.
Legitimate Reasons
238
2.
Accepted Market Practices (AMPS)
239
c.
Other Forms of Market Manipulation
240
d.
Benchmark Manipulation
241
3.
Instances of Market Manipulation
241
a.
Dominant Market Position
242
b.
Transactions at the Close of the Market
243
c.
Certain Means of Algorithmic and High-Frequency Trading (HFT)
243
d.
Abusing Access to the Media
243
e.
Emission Allowances
245
V.
Safe-Harbour Rules
245
1.
Introduction
245
2.
Buy-Back Programmes
245
a.
Aim of the Programme
246
b.
Disclosure Obligations
247
c.
Trading Conditions
247
d.
Restrictions
248
3.
Price Stabilisation
248
a.
Scope of Application
249
b.
Period of Stabilisation
250
c.
Disclosure and Organisational Obligations
250
d.
Ancillary Stabilisation
251
VI.
Supervision
252
1.
Supervisory Mechanisms
252
2.
Investigatory Powers
252
VII.
Sanctions
253
1.
Requirements under European Law
253
a.
Administrative Sanctions
253
b.
Criminal Sanctions
254
c.
Investor Protection through Civil Liability
256
2.
Transposition in the Member States
256
a.
Administrative Sanctions
256
b.
Criminal Sanctions-practical relevance in the Member States under the MAD 2003-regime
257
c.
Investor Protection through Civil Liability
258
VIII.
Conclusion
259
4.
Disclosure System
16.
Foundations
263
I.
Introduction
264
II.
Transparency and Capital Market Efficiency
265
1.
Allocational Efficiency
266
2.
Institutional Efficiency
268
3.
Operational Efficiency
269
III.
Disclosure Provisions as Part of the Regulation of Capital Markets
270
1.
Importance of Legal Disclosure Provisions from an Economic Point of View
270
a.
Reduction of Information Asymmetries to Prevent Market Failure
270
aa.
Social Value of Public Information
270
bb.
Reduction of Agency Costs and Signal Theory
271
b.
Information and the Public Good Problem
272
c.
Mandatory Disclosure and the Theory of Transaction Costs
273
d.
Conclusion
274
2.
Disclosure Provisions as Part of Investor Protection
274
a.
Principle of Investor Protection through Information Disclosure
274
b.
Discussion on the Scope of Investor Protection
275
c.
Criticism of the Information Paradigm and Complementing Measures for Investor Protection
276
IV.
Development of a Disclosure System in European Capital Markets Law
277
17.
Prospectus Disclosure
281
I.
Introduction
282
II.
Legal Sources
283
1.
European Law
283
2.
Implementation in the Member States
285
3.
Reform
285
III.
Foundations of the Prospectus Regime
286
1.
Approval by NCA
286
2.
Approval Procedure
287
3.
European Passport
288
IV.
Obligation to Draw up a Prospectus
289
1.
Scope of Application
289
2.
Exemptions from the Obligation to Publish a Prospectus
290
a.
Exceptions for Certain Addressees, Offers or Securities
290
b.
Exemptions for Certain Issuances in Cases of Public Offers
291
c.
Exemptions for Certain Issuances for the Admission to the Regulated Market
292
d.
Supplements
292
3.
Content, Format and Structure of a Prospectus
293
a.
General Rules
293
b.
Format of the Prospectus
293
aa.
Single or Separate Documents and Base Prospectus
293
bb.
Summary
295
cc.
Incorporation by Reference
296
c.
Specific Information Depending on the Type of Security and the Issuer
297
d.
Language of the Prospectus
298
e.
Update
298
V.
Supervision and Sanctions
299
1.
Requirements under European Law
299
2.
Supervisory Measures
300
a.
Suspension or Prohibition of an Offer
300
b.
Administrative Sanctions
300
3.
Sanctions under Criminal Law
301
4.
Private Enforcement
301
a.
Deficiencies of the Prospectus
302
b.
Claimant and Opposing Party
304
c.
Causation
305
d.
Responsibility
306
e.
Legal Consequences
307
VI.
Conclusion
309
18.
Periodic Disclosure
311
I.
Introduction
312
1.
Development of a System of Periodic Disclosure
312
2.
Financial Accounting Information as the Basis of Financial Reporting
315
II.
Regulatory Concepts
317
1.
Requirements under European Law
317
a.
Financial Report as a Unified Reporting Standard for Periodic Disclosure
317
b.
Correlation with European Accounting Law as a Reflection of the Dualistic Regulatory Concept
318
c.
Addressee of the Disclosure Obligation
319
2.
Implementation in the Member States
320
III.
Annual Financial Report
320
1.
Overview
320
2.
Financial Accounting Information
322
a.
Consolidated and Individual Accounts
322
b.
Management Report
324
c.
Auditing of the Annual Financial Report
324
d.
Single Electronic Reporting Format (ESEF)
325
IV.
Half-yearly Financial Reports
325
1.
Overview
325
2.
Financial Accounting Information
326
a.
Consolidated and Individual Accounts
326
b.
Interim Management Report
327
c.
Auditing of the Half-yearly Financial Report
327
V.
Quarterly Periodic Financial Reports
328
1.
Question of a Sufficient Supply of Capital Markets with Information on Issuers
328
a.
Concept of a Quarterly Reporting Obligation in the TD 2004
328
aa.
Content of Interim Management Statements
329
bb.
Quarterly Financial Reports under the TD of 2004
330
b.
Concept of Additional Periodic Disclosure after the Reform of 2013
330
VI.
Disclosure Procedures
332
1.
Requirements under European law
332
2.
Transposition in the Member States
333
3.
European Electronic Access Point (EEAP)
334
VII.
Enforcement of Financial Information
334
1.
Dual-enforcement in Germany and Austria
336
2.
Enforcement in the United Kingdom by the Conduct Committee
337
VIII.
Sanctions
338
1.
Liability for Incorrect Financial Reporting
338
a.
Specific Liability for Incorrect Financial Reporting
338
b.
Liability under the General Civil Law Rules
339
2.
Sanctions under Criminal and Administrative Law
341
a.
Requirements of the TD
341
b.
Legal Situation in den Member States
341
IX.
Conclusion
342
19.
Disclosure of Inside Information
345
I.
Introduction
348
1.
Dual Function of the Disclosure Obligation
348
2.
Practical Relevance
350
II.
Regulatory Concepts
351
1.
Requirements under European Law
351
2.
National Regulation
353
III.
Obligation to Disclose Inside Information
354
1.
Addressees
354
a.
Issuers of Financial Instruments
354
b.
Persons Acting on Behalf or on Account of the Issuer
354
c.
Companies Controlled by the Issuer
355
d.
Emission Allowance Market Participant
355
2.
Relevant Information
355
a.
Foundations
355
b.
Information Directly Concerning the Issuer
356
c.
Future Circumstances
358
d.
Corporate Group Constellations
359
e.
Relationship to Other Disclosure Rules
360
3.
No Offsetting of Information
362
4.
No Combination of Disclosure with Marketing Activities
362
5.
Publication Procedure
363
IV.
Delay in Disclosure
363
1.
Foundations
363
2.
Legitimate Interests
367
a.
Requirements under European Law
367
b.
Divergent Legal Traditions in the Member States
368
aa.
Attempts at a Dogmatic Approach
369
bb.
Further Constellations
371
c.
In particular: Multi-Stage Decision-Making Processes
372
3.
No Misleading the Public
374
4.
Ensuring Confidentiality
375
5.
Conscious Decision by the Issuer
377
V.
Supervision
379
VI.
Sanctions
379
1.
Importance of National Legal Traditions
379
2.
Civil Liability
380
a.
Germany
380
b.
Austria
385
c.
United Kingdom
386
d.
Other Member States
386
3.
Administrative Sanctions
387
a.
Fines
387
aa.
Germany
388
bb.
France
389
b.
Further Administrative Sanctions
390
c.
Naming and Shaming
390
4.
Criminal Law
392
VII.
Conclusion
392
20.
Disclosure of Major Holdings
393
I.
Introduction
395
1.
Regulatory Aims
395
2.
Degree of Harmonisation
397
3.
Practical Relevance
398
II.
European Concepts of Regulation
399
1.
Legal Sources
399
2.
Scope of Application
400
3.
Disclosure Obligations under the TD
401
4.
Further Disclosure Obligations
401
III.
Notification Obligations on Changes in Voting Rights
402
1.
Prerequisites
402
a.
Procedures Subject to Notification
403
b.
Thresholds
403
c.
Exemptions from the Notification Obligation
405
2.
Legal Consequences
406
a.
Notification
406
b.
Publication
407
3.
Attribution of Voting Rights
407
a.
Regulatory Concepts
407
b.
Cases of an Attribution of Voting Rights
408
aa.
Acting in Concert
409
1.
Legal Practice in France
410
2.
Legal Practice in Germany
411
3.
Legal Practice in Italy
413
4.
Legal Practice in Spain
414
bb.
Temporary Transfer of Voting Rights
414
cc.
Notification Obligations of the Secured Party
415
dd.
Life Interest
415
ee.
Voting Rights Held or Exercised by a Controlled Undertaking
415
ff.
Deposited Shares
417
gg.
Shares Held on Behalf of Another Person
418
hh.
Voting Rights Exercised by Proxy
419
IV.
Notification Requirements when Holding Financial Instruments
420
1.
Foundations
420
a.
Requirements under the TD 2004
420
b.
Deficits
420
2.
Reform of the Transparency Directive 2013
422
a.
Prerequisites
422
b.
Attribution of voting rights
423
3.
Legal Consequences
423
V.
Notification of Intent
424
1.
France
424
2.
Germany
425
3.
Reforms at European level
427
VI.
Supervision
427
1.
Requirements under European Law
427
2.
Supervisory Practices in the Member States
427
VII.
Sanctions
428
1.
Requirements under European Law
428
2.
Investor Protection by means of Civil Liability
429
VIII.
Conclusion
430
21.
Directors' Dealings
433
I.
Introduction
434
II.
Regulatory Concepts
435
1.
Legal Foundation
435
2.
Additional Disclosure Rules
436
3.
Practical Relevance
436
III.
Disclosure Obligations
437
1.
Notification Requirements
437
a.
Persons Subject to the Notification Obligation
437
b.
Transactions Subject to the Notification Requirements
438
2.
Publication
439
IV.
Closed Period
439
V.
Supervision and Sanctions
440
1.
Requirements under European Law
440
2.
Disgorgement of Profits
440
3.
Civil Liability
441
VI.
Conclusion
442
22.
Access to Information
443
I.
Requirements under European Law
443
II.
Implementation in the Member States
445
1.
Germany
445
2.
United Kingdom
446
III.
Conclusion
447
23.
Disclosure of Corporate Governance Issues
449
I.
Introduction
449
II.
Corporate Governance Statement
450
III.
Disclosure of Information Necessary for Shareholders to Exercise their Rights
452
1.
Introduction
452
2.
Regulatory Concepts
452
3.
Disclosure of Changes in the Rights Attached to Shares
453
4.
Disclosure of Information Necessary for Exercising Rights
454
a.
Information Necessary for Shareholders
454
b.
Information Necessary for the Holders of Debt Securities
454
IV.
Conclusion
455
5.
Trading Activities
24.
Short Sales and Credit Default Swaps
459
I.
Introduction
460
II.
Need for Regulation
462
1.
Short Sales as a Means for Market Manipulation
463
2.
Short Sales as a Means for Destabilising the Financial System
463
III.
EU Regulation on Short Selling and Credit Default Swaps (SSR)
463
1.
Scope of the SSR
465
2.
Rules on Short Sales
466
a.
Prohibited Transactions
466
b.
Transparency Obligations
467
c.
Rules for Central Counterparties (CCP)
470
3.
Rules on Sovereign Credit Default Swap Agreements (CDS)
470
4.
Powers of the NCAs and ESMA
471
5.
Sanctions
473
IV.
Conclusion
474
25.
Algorithmic Trading and High-Frequency Trading
477
I.
Introduction
478
II.
Defining AT and HFT/Technical Aspects and Trading Strategies
481
1.
Definitions and Important Terms
481
2.
Trading Strategies
484
a.
AT/HFT as Technical Means for Implementing Trading Strategies
484
b.
Overview of Concepts Behind Particular AT and HFT Strategies
485
III.
Potential Risks and Benefits of AT and HFT
490
1.
Potential Risks of AT and HFT
490
a.
Systemic Risk and Market Stability
490
b.
Market Quality and Market Integrity
492
2.
Potential Benefits of AT and HFT
495
a.
Increased Liquidity and Superior Intermediation
495
b.
Increased Market Efficiency and Market Quality
496
3.
Risk-Benefit-Assessment and Consequences
496
IV.
Regulatory Measures with regard to AT/HFT
499
1.
European Approach
499
a.
MiFID, MAD and ESMA-Guidelines
500
b.
Level 1 regime: MiFID II
501
aa.
Provisions Concerning AT/HFT Firms and Investment Firms that Provide DMA/SA
502
bb.
Provisions concerning Trade Venues with Particular Relevance for AT/HFT
504
c.
Level 2: ESMA's Technical Advice and Regulatory Technical Standards
506
aa.
Technical Advice
506
bb.
Draft Regulatory Technical Standards
508
d.
Action taken by selected Member States/Gold plating
512
e.
Assessment of the European Union regime
513
2.
Some Thoughts on HFT regulation in other Jurisdictions
519
V.
Conclusion
520
6.
Intermediaries
26.
Financial Analysts
523
I.
Introduction
524
II.
Types of Financial Analysts
526
III.
Regulatory Concepts
527
1.
Requirements under European Law
528
2.
Direct application in the Member States
528
IV.
Specific Regulation of Financial Analysts
529
1.
Scope
529
a.
Material Scope
529
b.
Personal Scope
530
2.
Production of Research
532
a.
Objective Presentation of Investment Recommendations
532
aa.
General Requirements
532
bb.
Special Requirements for Qualified Persons and Experts
533
b.
Disclosure Obligations
534
aa.
Identity of the Producer of Investment Recommendations
534
bb.
Actual and Potential Conflicts of Interest
535
1.
General Provisions
535
2.
Additional Requirements for Qualified Persons and Experts
535
3.
Additional Requirements for Investment Firms, Credit Institutions or Persons Working For Them
537
3.
Dissemination of Investment Recommendations Produced by Third Parties
538
4.
Principle of Proportionality-Non-written Recommendations
539
5.
Sanctions
540
a.
Requirements under European Law
540
b.
Transposition in the Member States-Germany vs the UK
541
V.
Relevance of the General Rules of Conduct for Financial Analysts
542
1.
Market Manipulation
542
a.
Information-Based Manipulation
542
b.
Fictitious Devices or Any Other Form of Deception or Contrivance
543
c.
Scalping
544
d.
Effects of Commission Delegated Regulation (EU) No. 2016/958 on the Definition of Market Manipulation
545
2.
Prohibition of Insider Dealings
545
3.
Organisational Requirements
546
a.
General Organisational Requirements
546
b.
Special Organisational Requirements
548
4.
Outlook: Research as an Inducement under MiFID II
549
VI.
Conclusion
550
27.
Rating Agencies
551
I.
Foundations
552
1.
Role of Credit Rating Agencies
552
2.
Effects of a Rating
553
3.
Market Structure and Development of Regulation in Europe
554
4.
Development of regulation in Europe
555
5.
Legal Sources
555
II.
Scope of Application and Regulatory Aims
556
1.
Foundations
556
2.
Aims
557
3.
Scope of Application
558
4.
Concepts and Definitions
558
III.
Regulatory Strategies
559
1.
Overview
559
2.
Avoidance of Conflicts of Interest
560
a.
Independence of Credit Rating Agencies
560
b.
Persons Involved in the Rating Procedure
562
3.
Improvement of the Quality of Ratings
563
4.
Transparency
564
a.
Disclosure and Presentation of Credit Ratings
564
b.
Transparency Report
564
5.
Registration
565
6.
Problem of Over-Reliance
566
IV.
Supervision and Sanctions
568
1.
Foundations
568
2.
Procedure
569
3.
Administrative Measures and Sanctions
570
4.
Criminal Measures
571
5.
Civil Law Liability
571
a.
National Laws of the Member States
571
b.
Liability under European Law
571
V.
Conclusion
573
28.
Proxy Advisors
575
I.
Introduction
576
1.
Overview
576
2.
Risks
578
II.
Regulatory Concepts
582
1.
Possible Regulatory Approaches
582
2.
National Regulatory Concepts
583
a.
United Kingdom
583
b.
France
584
c.
Germany
585
3.
European Approaches
586
a.
Background
586
b.
Best Practice Principles
587
aa.
Establishment
587
bb.
Content
588
cc.
Review
590
c.
Shareholder Rights Directive
591
III.
Conclusion
592
7.
Financial Services
29.
Foundations
599
I.
Introduction
599
II.
Legal Sources
600
1.
Foundations
600
2.
MiFID II Regime
600
a.
Level 1
601
b.
Level 2
601
30.
Product Governance and Product Intervention
603
I.
Introduction
603
II.
Product Governance
604
1.
Principles
604
2.
Scope of Application
604
3.
Manufacturer
605
4.
Distributor
606
III.
Product Intervention
607
1.
Introduction
607
2.
Reform under the MiFID II-Regime
608
a.
Powers of ESMA and the NCAs
608
b.
Criteria and factors
609
IV.
Conclusion
610
31.
Investment Advisory Services
611
I.
Introduction
611
II.
Definition
612
III.
Obligations of Investment Firms
613
1.
Exploration and Assessment of the Suitability of an Investment
613
2.
Information Obligations
614
3.
Specific Obligations in Case of Independent Advice
615
IV.
Supervision
616
V.
Sanctions
616
VI.
Conclusion
617
8.
Organisational Requirements for Investment Firms
32.
Compliance (Foundations)
621
I.
Compliance
622
II.
Relationship between Compliance and Risk Management
623
III.
Developments and Legal Foundations
625
33.
Compliance (Organisational Requirements)
629
I.
Regulatory Concepts in European Law
631
1.
Overview
631
2.
Principles-based Approach to Regulation
633
3.
Regulatory Aim
637
II.
Implementation in the Member States
638
1.
Germany
639
2.
United Kingdom
640
III.
Regulatory Objectives and Scope of Compliance Obligations
641
1.
Mitigation of Compliance Risk
641
2.
Scope of the Compliance Obligation
644
IV.
Elements of a Compliance Organisation
644
1.
Compliance Function
645
a.
Requirements
645
aa.
Independence
645
1.
Operational and Financial Independence
646
2.
Organisational Independence
647
bb.
Permanence and Effectiveness
649
b.
Responsibilities
650
aa.
Monitoring and Assessment
650
bb.
Advice and Assistance
651
2.
Compliance Officer
652
a.
Appointment
652
aa.
Registration and Qualification Requirements
652
bb.
Appointment of Members of Senior Management as Compliance Officers
654
b.
Legal Status
654
aa.
Independence towards Senior Management
655
bb.
Disciplinarian Independence and Protection against Dismissal
656
c.
Responsibilities and Powers
657
aa.
Informational Rights and the Right to Issue Instructions
657
bb.
Compliance Reporting
658
1.
Internal Reporting
658
2.
External Reports
660
3.
Informational barriers ('Chinese Walls')
661
a.
Legal Foundations
662
b.
Elements
663
aa.
Segregation of Confidential Areas
663
bb.
Watch Lists and Restricted Lists
665
c.
Legal Effects
666
V.
Sanctions
668
1.
Sanctions against Investment Firms
668
2.
Sanctions against the Senior Management and the Compliance Officer
670
VI.
Conclusion
671
34.
Corporate Governance
673
I.
Introduction
674
II.
'Governance-based' regulation of investment firms
675
III.
Regulatory Framework
677
1.
Overview
677
2.
Board structure and composition
677
a.
One tier vs. two tier board structures
677
b.
Separation of functions; establishment of board committees for 'significant' firms
679
c.
Diversity requirements
680
3.
Personal Requirements of the Board Members
681
a.
Fit and properness
681
b.
Limitation of directorships
682
4.
Board Members' Duties
683
IV.
Sanctions
686
1.
Administrative sanctions
686
2.
Civil sanctions
686
V.
Conclusions
687
9.
Regulation of Benchmarks
35.
Foundations
691
I.
Introduction
691
II.
Legal Background and Regulatory Initiatives
693
III.
Functions of Benchmarks
695
36.
Market Supervision and Organisational Requirements
697
I.
Regulatory Concept of the Benchmark Regulation
697
1.
Regulatory Aim and Structure
697
2.
Scope and Definitions
698
3.
Regulatory Concept
700
4.
Legal Requirements
703
a.
Governance Requirements relating to the Benchmark Administrator
703
b.
Input Data and Calculation Methodology
704
c.
Governance and Control Requirements for Contributors
706
d.
Investor Protection (Assessment Obligations)
707
5.
Restrictions on use and third-country benchmarks
707
6.
Authorisation, Supervision and Sanctions
708
a.
Authorisation and Registration
708
b.
Supervisory Powers and Sanctions
709
aa.
Supervisory Powers of the National Supervisory Authorities
709
bb.
ESMA's Role
710
cc.
Civil Law Liability
711
II.
Conclusion
712
10.
Takeover Law
37.
Foundations
721
I.
Legal Sources
721
II.
Implications of Takeover Bids
723
III.
Administration and Supervision
724
38.
Public Takeovers
725
I.
Types of Bids
725
II.
Decision to Launch a Bid
726
III.
Offer Document
726
39.
Disclosure of Defensive Structures and Mechanisms
729
I.
Introduction
729
II.
Structure of the Capital
730
III.
Restrictions Regarding the Transfer of Shares
731
IV.
Significant Shareholdings
731
V.
Holders of Special Rights
732
VI.
System of Control for Employee Share Schemes
733
VII.
Restrictions on Voting Rights
733
VIII.
Agreements between Shareholders
733
IX.
Provisions on the Appointment and Replacement of Board Members
734
X.
Powers of Board Members to Issue and Buy Back Shares
735
XI.
Change of Control Clauses
735
XII.
Compensation Agreements
736
XIII.
Conclusion
736
40.
Mandatory Bid
737
I.
Introduction
737
II.
Prerequisites
738
III.
Exemptions from the Mandatory Bid
739
IV.
Creeping-in
741
V.
Gaining Control by Acting in Concert
741
1.
Legal Foundations
741
2.
Legal Practice in the Member States
742
a.
Sacyr/Eiffage (France)
743
b.
WMF (Germany)
744
3.
Attempts to further harmonise the concept
745
VI.
Conclusion
746
11.
Conclusion
41.
Review and Outlook
751
I.
Achievements
751
1.
Single Rulebook and Capital Markets Union
751
2.
Stricter and More Harmonised Sanctioning Regimes
752
II.
Challenges
752
1.
Supervisory Convergence
752
2.
Effective Sanctions
753
3.
Improving Access to Capital Markets
754
Bibliography
755
Subject Index
759
Index of National Laws
775
Index of National Laws by Country
783
Index of Supervisory and Court Rulings
789