European Securities Law: 5 Areas to Watch

Culled from commentary and updates by lawyers and law firms on JD Supra, five securities practices and products that are coming under increased scrutiny by European authorities: 

1. UCITS Exchange-Traded Funds and Structured UCITS

“On July 22, the European Securities and Markets Authority published a discussion paper Policy Orientations on Guidelines for UCITS Exchange-Traded Funds and Structured UCITS on aspects of the regulatory regime governing Undertakings for Investments in Transferable Securities (UCITS).” (From ESMA Issues Discussion Paper on UCITS ETFs and Structured UCITS by Katten Muchin Rosenman LLP)

2. Public Offering Prospectus Requirements

“The Prospectus Regulations 2011/1668 (the Regulations) came into force in the United Kingdom (the UK) on 31 July 2011, allowing companies—particularly smaller ones—to raise equity finance more cost-efficiently. The Regulations will achieve this by increasing two key thresholds, below which it is no longer necessary to create expensive prospectuses.” (From Deregulation of Public Offering Prospectus Requirements by McDermott Will & Emery)

“The European securities market looks set to undergo the most radical changes that have been proposed since the adoption of the Prospectus Directive (2003/71/EC) in 2003. The passing of the Amendment Directive (2010/73/EU) in December 2010 heralded significant material, though not earth-shattering, changes to the Prospectus Directive. However, if the additional changes currently proposed by ESMA in its recent Consultation Paper are implemented, they will have a wide-ranging impact on European debt programmes and offers of securities to retail investors.” (From The Changing Face of European Securities Issuance by Morrison & Foerster LLP)

3. High Frequency and Algorithmic Trading Obligations

“On July 20, 2011, the European Securities and Markets Authority (ESMA) issued a consultation paper on systems and controls relating to high frequency trading (HFT) and other forms of automated trading. … ESMA states that the guidelines are intended to clarify the obligations of trading platforms and investment firms under the existing EU legislative framework (i.e., where no legislative changes are required). It believes that the proposed guidelines ‘contribute to the efficiency, orderly functioning and resilience of trading in a highly automated environment.’” (from Guidelines from European Regulator Focus on High Frequency and Algorithmic Trading Obligations by Katten Muchin Rosenman LLP)

4. Short Selling

“ESMA emphasized that European financial regulators will take a firm stance against any behavior that breaches these requirements and ESMA will give the national authorities its full support. ESMA pointed out that while short-selling can be a valid trading strategy, when used in combination with spreading false market rumors is clearly abusive.” (From ESMA Issues Statement on Short Selling and Market Abuse by Katten Muchin Rosenman LLP)

5. Alternative Investment Funds

“The draft advice contained in the consultation paper covers three broad areas with respect to detailed rules on supervision and third country entities underlying the EU Alternative Investment Fund Managers Directive (AIFMD).” (From ESMA Issues Draft Advice on Possible AIFMD Implementing Measures in Relation to Supervision and Third Countries by Katten Muchin Rosenman LLP)


Additional European Securities Law Updates:

An Employer’s Guide to Implementing EU-Compliant Whistleblowing Hotlines (McDermott Will & Emery):

“Under the Sarbanes-Oxley Act, companies listed on U.S. stock exchanges are required to establish a system, often called a “whistleblowing hotline,” for employees to internally report concerns over questionable auditing or accounting matters. However, some European Union jurisdictions previously concluded that the EU privacy regime prohibited such hotlines.” Read more»

Former Chairman of Wm Morrison Supermarkets Plc Fined for Breach of Share Disclosure Rules (Katten Muchin Rosenman LLP):

“On August 16, the UK Financial Services Authority (FSA) announced that it had published a final notice imposing a penalty of £210,000 (approximately $350,000) on Sir Ken Morrison (KM), the former chairman of Wm Morrison Supermarkets Plc, for breach of its shareholding disclosure rule DTR 5.8.3R.” Read more»

Financial Services Europe and International Update: Regulatory Developments – August 2011 (Dechert LLP):

“This update summarises current regulatory developments in the European Union and the UK in the investment funds and asset management sectors in the past four weeks.” Read more»

European Financial Stability Measures: Recent Developments and U.S. Exposure (Venable LLP):

“As recently as July 2011, a number of financial measures have been implemented by institutions and member states of the European Union (the “EU”) to address the current sovereign debt crisis and ensure financial stability in the EU. These measures include the extension of loans to the countries known collectively as the “European periphery” —Portugal, Ireland, Italy, Greece, and Spain —and the establishment of inter-governmental facilities to repurchase government bonds in the debt markets.” Read more»

Fund Manager CEO and CFO Fined and Banned for Misleading Investors and Market Abuse (Katten Muchin Rosenman LLP):

“The fines were imposed for breach of Principle 1 of the FSA’s statements of principle for approved persons (APER), which requires an approved person to act with integrity, and for market abuse. Both men were also banned from performing any regulated activity in the future.” Read more»

Using the Octagon: Lozier’s Eight Steps to Further Your Compliance Program (Thomas Fox):

“… Chris Lozier, Principal at UHY Advisors in Houston and Manager of the FCPA – Foreign Corrupt Practices Act – Anti-Corruption Compliance Group on LinkedIn, wrote about the gaps that companies are finding in their compliance programs. To help remedy these gaps Lozier discussed eight key steps he believes that companies can take immediately to establish a more effective anti-corruption compliance program.” Read more»


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