Control of securities markets in the European Economic Community

Directorate-General For Translation European Commission

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Report on a comparative law study
Approximation of legislation
Competition policy
Company law
Financial integration - free movement of capital

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• Publié par: EUROPEAN-COMMISSION
• Nombre de lectures: 8
• Langue: English
• Poids de l'ouvrage: 2 Mo

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COMMISSION OF THE EUROPEAN COMMUNITIES
studies
Control of
securities markets in the
European Economic Community
COMPETITION -
APPROXIMATION OF LEGISLATION SERIES - 1978 31 COMMISSION OF THE EUROPEAN COMMUNITIES
Control of
securities markets in the
European Economic Community
Report on a comparative law study
submitted by
Prof. Dr. E. Wymeersch,
Universitaire instelling Antwerpen
(Antwerp University Institution)
COLLECTION STUDIES
Competition — Approximation of Legislation Series no. 31
Brussels, December 1977 This publication is also available in
DE ISBN 92-825-0344-5
FR ISBN 92-825-0346-1
NL ISBN 92-825-0343-7
A bibliographical slip can be found at the end of this volume
©Copyright ECSC - EEC - EAEC, Brussels-Luxembourg, 1978
Printed in Belgium
Reproduction authorized, in whole or in part, provided the source is acknowledged.
ISBN 92-825-0345-3
Catalogue number: CB-NP-78-031-EN-C Preface
In the preparation of this report I have been able to rely on the support
and co-operation of a number of persons, particularly the representatives
of the control authorities. They not only provided the basic information
or referred me to the available documentation, but also elucidated the
significance and relative importance of their national regulations.
Furthermore, they gave me valuable data about the actual operation of
their control systems and about local usages and current bottlenecks
in the implementation of the control systems. I wish to place on record
here my thanks for the support, assistance and encouragement which I
received from them all.
My thanks go also to Mr. H. Braeckmans and Mr. J. Van Dyck, assistants at
the Antwerp University Institution (Universitaire Instelling Antwerpen),
who carefully and critically reread the manuscript, and to Hiss M.R. Verhegghe,
who so meticulously typed out - and only too often retyped - the whole work.
E.W. CHAPTER I
THE FIELD OF INVESTIGATION:
"CONTROL OF SECURITIES MARKETS"
1. This report describes and analyses the different forms in which - and
the instruments whereby - control of securities markets is exercised.
2. Among the many meanings which can be attached to the term "control" we
are thinking primarily of the methods and techniques which are employed
to enforce compliance with a norm or standard, whatever its nature, to
exercise supervision with regard to compliance and, finally, to impose
sanctions in the event of infringement. No distinction is made in this
connection with regard to the legal nature of the rule: both those imposed
by the State and those formulated by professional bodies are included in
the investigation. Nor is any distinction made according to the objective
of the norm in question; this is usually many-sided, complex and lacking
in transparency. Both norms for market organization and rules to protect
investors, together with instruments of socio-economic policy, and even
of monetary policy, are touched upon, although attention is directed
primarily towards the two first-mentioned subjects, which directly affect
securities business.
3. Control can also mean the whole body of methods, instruments and techniques
which are employed in order to intervene in a certain field, organize it
according to one's views or dominate it. Rather than being taken to mean
the checking of compliance with the norm, and associated sanctions,
this connotation of the term "control" calls attention to the phase pre­
ceding the checking or testing, i.e. that of the preparation and enactment
of these rules. From this point of view the various authorities involved,
their powers and influence on the securities markets are studied
in the light of statutory or corporative regulations, and
in the context of the overall institutional framework. Where they can be scientifically determined, existing conditions which deviate
from the legal regulations are recorded. It is clear that the facts
often depart - and in a manner which cannot easily be determined -
from the law.
Both forms of control can be subsumed under the wide and neutral term
of "intervention", so that the study embraces both the basic organizational
intervention by the legislator or public authorities, together with the
additional enactment of corporative or professional norms, and the checking
activity with a view to the prevention and suppression of abuses.
4. The second guiding point of this report is to be found in the subject
matter to which these interventions are directed, namely the securities
markets themselves. Any precise definition of this term has been de­
liberately avoided. This makes it possible to embrace the rather divergent
approaches in the various ;ountries with regard to the protection of in­
vestors, while it has also allowed phenomena occurring on the fringe of
the security sector to be included in the investigation.
5. The ultimate object of the intervention is indicated with the
legally neutral term "security". The term is defined pragmatically in
order not to impede an accurate understanding of the scope and purpose
of the regulations.
Depending on the purport of the regulations, a narrower and a wider
concept of the term can be distinguished. In the narrower sense it is
understood to mean: the bonds or loan instruments issued by the State,
its subordinate authorities or territorial subdivisions; the bonds or
loan instruments issued by private undertakings, usually operating in the
form of joint-stock companies, together with shares or stockholdings in
these companies; and also, usually, certificates representing investment
funds. A striking point is that national regulations generally do not
take into account the legal form of the security (whether a document
of title or not), and that the distinction between securities governed
by public or private law is not decisive for all matters. Securities in the narrower sense of the term are usually issued in large numbers of
financially (if not also Legally) mutually interchangeable ("fungible") units:
as they are thus suited to being dealt in on a stock exchange, they are some­
times also referred to as "marketable securities" or "stock exchange securities".
In those countries where securities regulation is not only aimed at the
organization of stock exchanges, and at the accompanying rules for companies
with securities listed on an exchange, but also seeks to achieve wider pur­
poses of investor protection, the regulatory scope is widened by a technical
extension of the term "security". The protection of the law is extended to
cover also investment vehicles which in legal terms cannot, or can only with
much difficulty of interpretation, be compared with the securities in the
ordinary, narrower sense, but which, financially speaking, belong to the field
of financial investments. This extension of the scope has existed for a long
time in the United States and in Ontario; in the United Kingdom there is a
comparable definition, and in Belgium these other investment vehicles were
put on an equal footing with securities in 1969. In the Federal Republic of
Germany legislation is now under discussion, and the recently published Dutch
Investment Institution Bill (Ontwerp van Wet Beleggingsinstel lingen) might be
applicable to some of these investment media (1).
Only securities markets are studied rather than the whole of the securities
sector. No attention is paid to the rules on documents of title or concerning
involuntary loss of possession of bearer instruments, while the legal status
of the rights, including the rules of company law which have a direct bearing
on the field of publicly traded securities, is only mentioned incidentally.
Attention is concentrated on the place where demand for and supply of
securities meet: rules concerning the placing of securities in safe deposit or
concerning transfer arrangements or clearing have only a complementary bearing
on the conduct of the markets. Readers are referred to specialized studies for
an examination of these fields, the importance of which can not be overestimated.
(1) For the United States and Canada, see the term "Investment Contract" in s. 2
(1) Securities Act 1933; cf. a similar provision in the Ontario Securities Act,
s. (1) (58) of the draft of the Securities Act 1977 (Bill No. 20).
For the United Kingdom s. 14 (3) Prevention of Fraud (Investments) Act 1958;
for Belgium Arts. 1 and 2, law of 10 July 1969; for the Federal Republic of
Germany see the Entwurf eines Gesetzes uber den Vertrieb von Anteilen an Vei—
mogensanlagen, published 19 April 1977; and for the Netherlands see the Be-
palingen betreffende beleggingsinstellingen (Wet beleggingsinstellingen)
(Provisions concerning investment institutions - Investment Institutions Law),
Second Chamber 1977, No. 14664; the Japanese Securities Exchange Law 1948 does
not contain any comparable provision. 8- Following the model of the classification adopted in the literature on
financial legislation, the investigation in each country is divided according
to whether the subject under discussion is the