Two articles (among several) in a comprehensive proposal to revise EU corporate governance would have a significant beneficial impact if they were to be adopted in the United States. In large measure they mirror recommendations by Chief Justice Leo E. Strine, Jr., in two essays: Can We do Better by Ordinary Investors? A Pragmatic Reaction to the Dueling Ideological Mythologists of Corporate Law, 114 Columbia Law Review 449 (Mar. 2014) and One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term? 66 Business Lawyer 1 (Nov. 2010).
Posts Tagged ‘European Commission’
EU proposal for a regulation on structural measures improving the resilience of EU credit institutions
1. On 29 January 2014 the European Commission published a proposal for a regulation of the European Parliament and of the Council “on structural measures improving the resilience of EU credit institutions”. This proposed legislation is the EU’s equivalent of Volcker and Vickers. It was initiated by the Liikanen report published on 2 October 2012 but the legislative proposal departs in a number of ways from the report’s conclusions. There are two significant departures: the legislative proposal contains a Volcker-style prohibition, which also departs from the individual EU Member States’ approach, and, although the proposal contains provisions which mirror the Vickers “ring-fencing” approach they are not, in direct contradiction to Liikanen’s recommendation, mandatory.
On December 4, the European Commission announced the imposition of €1.7 billion in fines on eight international banks for participation in cartels in euro- and yen-denominated interest-rate derivatives. The banks had conspired on submissions for euro and yen Libor rates, and the fines were imposed under European antitrust law. As EU Commissioner Joaquín Almunia said, “What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other.”
Commissioner Almunia’s comment might have been addressed specifically to U.S. antitrust enforcers. Although the Antitrust Division of the Department of Justice has been involved in some of the settlements that the department has reached with banks, to date none of those settlements has included antitrust liability. Instead, the banks have pled guilty or admitted liability only for fraud, even though the statements issued by the Justice Department when announcing the settlements describe just the sort of collusion to which Commissioner Almunia referred.
Last week, the European Commission announced proposed amendments to the notification forms that companies must complete to report mergers subject to antitrust review in the EU, with the stated intention of reducing burdens on filing parties. If adopted, the proposed changes would reduce the amount of information parties must provide in transactions that are unlikely to raise competitive concerns.
The EC proposes to expand the categories of mergers that are eligible for review under a simplified procedure that allows companies to file “short form” notifications with more limited information requirements. Under the proposed changes, the simplified procedure would apply to all mergers that result in the combined firm holding a market share of less than 20% in any market in which both parties are active, up from the current threshold of 15%. In addition, at the EC’s discretion, filing parties would be permitted to use the “short form” when a merger results in a small market share increase, even if the combined firm’s market share exceeds 20%. For vertical mergers, the market share threshold for the simplified procedure would increase from 25% to 30%. The EC estimates that, as a result of these changes, an additional 10% of all reportable mergers could be reviewed under the simplified procedure, with significant benefits—in terms of both time and costs—for companies no longer required to complete the full notification.
On December 12, 2012, the European Commission published an Action Plan with initiatives it intends to undertake in 2013 in the fields of EU company law and corporate governance. These initiatives are primarily inspired by the responses to the Commission’s 2011 Green Paper on the EU corporate governance framework and an on-line consultation on the future of European company law. They are aimed at enhancing transparency, engaging shareholders and simplifying cross-border operations of EU companies. The Commission further plans to codify a number of major EU company law directives.
I. Introduction and Overview
As previously described in our memorandum on the pan-European short selling regulation , the European Commission (the Commission) adopted a proposal on September 15, 2010 to harmonize the regulation of short sales and credit default swaps across the European Union.  On March 14, 2012, the European Parliament and the Council of the European Union (the Council) each voted to adopt the proposed regulation, after including a number of significant amendments (the Regulation). 
The Regulation has been in force since March 25, 2012 (a day after it was published in the Official Journal) and is due to become ‘directly’ effective in the EU Member States (each a Member State) on November 1, 2012.  As such, the Regulation will become law in each Member State in its own right without the need for domestic implementing measures. On September 13, 2012 the European Securities and Markets Authority (ESMA) published its first edition of Q&A on the ‘Implementation of the Regulation on short selling and certain aspects of credit default swaps,’ in response to frequently asked questions posed by market participants, market regulators and the general public.  On September 17, 2012, ESMA published its consultation paper on the Regulation’s exemption for market making activities and primary market operations.
The Regulation brings to an end the current fragmented approach to shortsale restrictions across Member States and also establishes a ‘preventive regulatory framework’ to be used in ‘exceptional circumstances’ for ‘temporary’ periods.
Users of commodity derivatives markets are now facing major changes under proposed European and US legislation. Stronger supervision of the commodity derivatives market is one of the key areas of the G20 regulatory reform agenda. In Europe, the European Commission is proposing to regulate the activities of a wider range of commodity derivatives traders through amendments to MiFID. End-users will become subject to mandatory clearing requirements for OTC derivative transactions above certain thresholds once the recently agreed EMIR proposal comes into force. For the first time, the wholesale energy market and the commodity spot market will become subject to the market abuse regime. In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act brings in a comprehensive reform of the OTC derivatives market. This publication gives an overview of the impact of the various recent European and US regulatory changes from the perspective of non-financial businesses involved in commodity derivatives trading.
Various proposals have been introduced since the onset of the financial crisis to strengthen financial regulation across the full spectrum of financial services at international, EU and domestic levels. Previous client publications address many of these proposals. This publication draws together various threads of regulation in the context of their impact on commodity derivatives trading.
The EU Alternative Investment Fund Managers Directive (the “Directive”) came into force on 21 July 2011. The Directive promises to reshape the regulation of managers of alternative investment funds in the EU and beyond, and is required to be implemented across the EU by 22 July 2013. Yet the Directive requires significant rulemaking in the form of so-called Level 2 implementing measures in order to put flesh on its bones. The body tasked with bringing forth those implementing measures, the European Commission (the “Commission”), has now received final advice from the European Securities and Markets Authority (“ESMA”). That advice, upon which the Commission is expected to rely heavily in its own rulemaking, has been the subject of fierce debate during consultation. This note analyses ESMA’s Final Advice and the possible consequences for the fund management industry going forward.
After two years of development, argument and fine-tuning, the Directive was finally published in the Official Journal of the European Union on 1 July 2011 and entered into force for European law purposes on 21 July 2011. EU Member States are required to implement the Directive by 22 July 2013.
On November 15, 2011, the European Parliament adopted a regulation banning any person or legal entity in the European Union (“EU entities”) from entering into “naked,” or uncovered, credit default swaps (“CDS”) on sovereign debt and restricting uncovered short sales on shares and sovereign debt (the “Regulation”) after November 1, 2012.  The Regulation also bans such transactions from being effected on any trading venue in the European Union (the “EU”). CDS on sovereign debt that do not hedge exposure to the sovereign debt itself or to assets or liabilities whose value is correlated to the value of the sovereign debt will no longer be permitted. Short sales of shares and short sales of sovereign debt will be permitted only where the seller has “located” the share or debt instrument prior to entering into the agreement and has a “reasonable expectation” of being able to borrow the shares. The Regulation provides exemptions for market making activities and primary market operations and allows Member States of the EU (“Member States”) to temporarily suspend the ban on uncovered CDS on sovereign debt if the Member State determines that its sovereign debt market is not functioning properly as a result of the ban. The Regulation also introduces reporting requirements for significant net short positions.
On 20 October 2011, the European Commission published its long-awaited legislative proposal to revise the Markets in Financial Instruments Directive (better known by its acronym MiFID). The proposal is divided into two parts, a Directive and a Regulation, both of which are expected to enter into force in 2013. Financial institutions and users of financial services will now need to prepare to negotiate a wider regulatory perimeter, which captures previously unregulated and more weakly regulated business areas. Pre-trade and post-trade transparency will apply to a broader scope of instruments. Firms should also be aware of the wider interventionist powers for EU and national regulators under contemplation.
The original Markets in Financial Instruments Directive (“MiFID”) came into force almost four years ago, in November 2007. MiFID was intended to enhance investor protection, improve cross-border market access and promote competition in the financial markets across the EU. Although MiFID has arguably achieved some of these aims, it is widely considered that the regime requires updating to reflect the lessons of the financial crisis and developments in the markets. The terms of MiFID itself anticipate a review in any event. However, the financial crisis has undoubtedly led to a far more wide-ranging proposal than might otherwise have been expected.