Table Of Content

EUROPEAN CAPITAL MARKETS LAW This user-friendly, fully updated new edition continues to systematise the European law governing capital markets and examines the underlying concepts from a broadly interdisciplinary perspective. The third edition deals with three central developments: the project of the capital markets union; sustainable fnance; and the further digitalisation of fnancial instruments and securities markets. The frst chapter deals with the foundations of capital markets law in Europe, the second explains the basics, and the third examines the regime on market abuse. Chapter four explores the disclosure system and chapter fve the roles of intermediaries, such as fnancial analysts, rating agencies and proxy advisers. Short selling and high frequency trading is described in chapter six. Chapter seven deals with fnancial services and compliance requirements for investment frms. Chapter eight illustrates the regulation of benchmarks. Finally, chapter nine deals with public takeovers. Throughout the book emphasis is placed on legal practice, and frequent reference is made to the key decisions of supervisory authorities and courts. This book is essential reading for students involved in the study of capital markets law and fnancial law. . ii . European Capital Markets Law Third Edition Edited by Rüdiger Veil . PREFACE The frst two editions of the textbook aimed to make the fragmentation of European capital markets law visible. At that time, capital markets in the EU were largely governed by minimum harmonising directives. This has since changed. Today, the European legal acts are regulations and fully harmonising directives. As a result, supervisory law is largely unifed at the European level. In addition, the body of law has grown enormously. The EU has learned lessons from the fnancial market crisis. There is no longer any unregulated trading of fnancial instruments. Furthermore, benchmarks and securitisations are covered by European law for the frst time. Another meta-theme is the transformation of fnance in the direction of environmentally sustainable investments. Sustainable fnance now permeates much of fnancial markets regulation. The digitalisation of investment services and the use of blockchain for the distribution and trading of fnancial products have also led to far-reaching reforms that are intended to provide market participants with a reliable legal framework, but also to enable innovation. The third edition of this book aims to address these developments. It looks at the principles of European capital markets law, which is currently scattered across eight single rule- books, each consisting of numerous legal acts, thereby aiming to reduce the complexity of the regimes and present the larger picture of capital markets regulation in Europe. The focus is on the market abuse regime, the disclosure obligations for both issuers and inves- tors and the regulation of fnancial intermediaries, such as investment frms. Furthermore, important trading activities are dealt with, such as short selling and high frequency trading. The third edition includes new sections on objectives of capital markets law (§ 2), DLT-based fnancial instruments and their trading on the blockchain (§ 10), on investment objectives (§ 23), proxy advisors (§ 28) and the prudential regulation of investment frms (§§ 29–31). The EU’s goal of promoting sustainable investments is addressed in several sections of the book (§ 1 on the history of European capital markets law, § 2 on regulatory objectives and strategies, § 8 on fnancial instruments, §§ 16 and 18 on corporate disclosure, § 22 on disclosure of corporate governance issues, § 24 on investment objectives and § 35 on benchmarks). This book is valuable for a wide audience. It offers students the possibility to examine European capital markets law from a dogmatic and interdisciplinary point of view. At the same time, it offers insights equally relevant to research and practice. National particu- larities, such as the different understanding of the role of private enforcement, are depicted through examples chosen from various European countries, including Austria, France, Germany, Italy, Spain, Sweden and the United Kingdom. The book places a strong emphasis on legal practice, presenting more than 30 decisions by Belgian, Danish, English, French, German and Swedish supervisory authorities and courts and the European Court of Justice, in order to improve understanding of how interpretational questions are being dealt with in legal practice. . vi Preface I would like to thank the co-authors Hendrik Brinckmann, Marcus P. Lerch, Fabian Walla and Malte Wundenberg for their contributions to this book. Their chapters are inspired by their academic work and proft from the experiences they have gathered in listed companies, law frms and the Ministry of Finance. I am grateful to Koray Cavusoglu, Tristan Denis, Jasmin Gärth, Gabriele Groß, Julian Heyermann, Lorena Meyer, Pia Richter, Evgenia Sardeli, Nadja Weber and Marc Wiesner for their great assistance in editing the manuscript. The book is based on European legislation as of October 2021. Suggestions regarding the book are welcome and can be submitted to me at ruediger. [email protected]. Rüdiger Veil Munich, October 2021 . SUMMARY CONTENTS Preface ........................................................................................................................................v List of Contributors ...............................................................................................................xxxi List of Abbreviations............................................................................................................xxxiii 1 Foundations of Capital Markets Legislature in Europe § 1. History (Rüdiger Veil) ...................................................................................................3 § 2. Concept and Aims of Capital Markets Regulation (Rüdiger Veil) ............................27 § 3. Legislative Powers for Regulating and Harmonising Capital Markets in Europe (Rüdiger Veil) ..............................................................................................43 § 4. Rule-Making Process (Fabian Walla) .........................................................................53 § 5. Sources of Law and Principles of Interpretation (Rüdiger Veil) ...............................65 § 6. Intra- and Interdisciplinarity (Rüdiger Veil) ..............................................................85 2 Basics of Capital Markets Law § 7. Capital Markets (Rüdiger Veil) ...................................................................................99 § 8. Financial Instruments (Rüdiger Veil) .......................................................................113 § 9. Market Participants (Rüdiger Veil) ...........................................................................123 § 10. Cryptoassets and DLT Market Infrastructures (Rüdiger Veil) ................................133 § 11. Capital Markets Supervision (Fabian Walla) ...........................................................143 § 12. Sanctions (Rüdiger Veil) ............................................................................................171 3 Market Abuse § 13. Foundations (Rüdiger Veil) .......................................................................................183 § 14. Insider Dealing (Rüdiger Veil) ..................................................................................189 § 15. Market Manipulation (Rüdiger Veil) ........................................................................227 4 Disclosure System § 16. Foundations (Hendrik Brinckmann) ........................................................................259 § 17. Prospectus Disclosure (Rüdiger Veil) .......................................................................281 § 18. Periodic Disclosure (Hendrik Brinckmann) .............................................................309 § 19. Disclosure of Inside Information (Rüdiger Veil) .....................................................341 § 20. Disclosure of Major Holdings (Rüdiger Veil) ...........................................................373 § 21. Directors’ Dealings (Rüdiger Veil) ............................................................................409 § 22. Corporate Governance and Shareholder Rights (Rüdiger Veil) ..............................419 . viii Summary Contents 5 Trading Activities § 23 Investment Objectives (Rüdiger Veil) .......................................................................431 § 24 Short Sales and Credit Default Swaps (Fabian Walla) ............................................439 § 25 Algorithmic Trading and High-Frequency Trading (Marcus Lerch) ......................457 6 Intermediaries § 26 Financial Analysts (Rüdiger Veil) ..............................................................................499 § 27 Rating Agencies (Rüdiger Veil) .................................................................................521 § 28 Proxy Advisors (Rüdiger Veil) ...................................................................................547 7 Investment Firms § 29 Foundations (Rüdiger Veil) .......................................................................................555 § 30 Investment Services (Rüdiger Veil) ...........................................................................559 § 31 Product Intervention (Rüdiger Veil) .........................................................................579 § 32 Foundations of Compliance (Malte Wundenberg) ..................................................585 § 33 Compliance Requirements (Malte Wundenberg) ....................................................591 § 34 Governance (Malte Wundenberg) .............................................................................623 8 Regulation of Benchmarks § 35 Foundations (Malte Wundenberg) ............................................................................645 § 36 Market Supervision and Organisational Requirements (Malte Wundenberg) .......651 9 Takeover Law § 37 Foundations (Rüdiger Veil) .......................................................................................673 § 38 Public Takeovers (Rüdiger Veil) ................................................................................683 § 39 Mandatory Bid (Rüdiger Veil) ...................................................................................687 § 40 Defence against Takeover Bids (Rüdiger Veil) ..........................................................697 Bibliography ...........................................................................................................................701 Subject Index ..........................................................................................................................705 Index of National Laws ..........................................................................................................719 Index of National Laws by Country .......................................................................................727 Index of European Laws .........................................................................................................733 Index of Supervisory and Court Rulings ................................................................................735 . DETAILED CONTENTS Preface ��v List of Contributors ...............................................................................................................xxxi List of Abbreviations............................................................................................................xxxiii 1 Foundations of Capital Markets Legislature in Europe § 1. History .............................................................................................................................3 I. Introduction .....................................................................................................4 II. Segré 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) .............................................................7 VII. Lamfalussy Report (2000) ................................................................................8 VIII. Phase 3: Reorganisation of the Laws on Prospectuses and Securities (2003–2007) ......................................................................................................9 IX. Continuation of Phase 3: Harmonisation of Takeover Law (2004) .............12 X. White Paper on Financial Services Policy (2005) .........................................13 XI. Phase 4: Overcoming the Financial Market Crisis through Unifcation of European Law and a European Supervisory Architecture (2009–2016) ....................................................................................................14 XII. Phase 4: European System of Financial Supervision (2009) ........................14 XIII. Regulation of Credit Rating Agencies (2009–2013) .....................................15 XIV. Revision of the Framework Directives—from Minimum to Full Harmonisation and Unifcation of Union Law (2009–2014) ......................16 XV. Regulation on Short Sales (2012) ..................................................................18 XVI. Continuation of Phase 4: Regulation on OTC Derivatives (2012) ..............19 XVII. End of Phase 4: Regulation of Benchmarks (2016) ......................................19 XVIII. Phase 5: Capital Markets Union (since 2015) ...............................................20 XIX. Prospectus Regulation ....................................................................................20 XX. Securitisation ..................................................................................................21 XXI. ESA Review .....................................................................................................22 XXII. Improving Start-up and SME Financing ......................................................22 XXIII. Sustainable Finance ........................................................................................23 . x Detailed Contents XXIV. Action Plan 2020 ............................................................................................24 XXV. Conclusion ......................................................................................................25 § 2. Concept and Aims of Capital Markets Regulation ......................................................27 I. Concept ...........................................................................................................28 II. Regulatory Aims .............................................................................................29 1. Effciency of Capital Markets and Investor Protection ..........................29 2. Financial Stability ....................................................................................32 3. Sustainability ............................................................................................33 III. Regulatory Strategies and Instruments .........................................................35 1. Disclosure .................................................................................................35 (a) Information Function .....................................................................35 (b) Regulatory Function .......................................................................39 (c) Monitoring Function ......................................................................40 2. Prohibition ...............................................................................................40 3. Enforcement .............................................................................................41 § 3. Legislative Powers for Regulating and Harmonising Capital Markets in Europe .......................................................................................................................43 I. Legal Foundations of the European Union ...................................................43 II. Rules on Competence .....................................................................................44 1. Coordination of Provisions on the Protection of Shareholders and Creditors ...................................................................................................44 2. Coordination of Start-Up and Pursuit of Self-Employment ................45 3. Establishing an Internal Market ..............................................................45 4. Cross-border Crimes ...............................................................................46 III. Legislative Instruments ..................................................................................46 1. Overview ..................................................................................................46 2. Regulation ................................................................................................47 3. Directive ...................................................................................................48 IV. Harmonisation ...............................................................................................49 1. Concepts ...................................................................................................49 2. Tendency towards Full Harmonisation ..................................................49 § 4. Rule-Making Process ....................................................................................................53 I. Historical Development .................................................................................54 II. The Lamfalussy II Process ..............................................................................55 1. Framework Acts .......................................................................................55 (a) Concept ............................................................................................55 (b) Trialogue Procedure ��56 2. Delegated Acts and Implementing Measures .........................................57 3. Guidelines and Recommendations .........................................................60 4. Supervisory Convergence ........................................................................61 5. Stakeholder Involvement .........................................................................62 6. Graph: Lamfalussy II Process ..................................................................63 III. Evaluation of the Lamfalussy II Process ........................................................63 .