Money makes the world go round. If not a truism, at least it holds for financial markets. The amount of capital traded thereupon outreaches human imagination by far. At the same time, financial markets create specific dangers for their participants. These dangers are essentially predicated upon information asymmetries between companies as capital seekers and investors as capital providers. The traditional approach to eliminate these information asymmetries is by regulation rather than leaving the solution to the market mechanism . Thus, financial markets are regulated markets.
The means of such regulation are usually twofold. First, capital seekers are imposed upon a duty to disclose material information. Secondly, if they do not sufficiently comply with this duty, sanctions are imposed. This, of course, poses the question of who can enforce these legal rules. The answer is twofold. Some rules create private causes of action enabling the impaired party to seek relief with the courts. Others provide for enforcement by an administrative agency.
This, however, raises the question which agency is called to perform this task. Traditionally, the answer has been easy as financial markets used to be national markets. Consequently, pursuant to traditional concepts of sovereignty in international law, each country could and would determine the competent agency. Regulation was and still mainly is national. Meanwhile, globalization and the revolution in telecommunication technology have blurred the borderlines between originally separated financial markets. Financial markets are now becoming international markets.
This reveals an incongruity. Although financial markets are international markets, they are nationally regulated. One might suggest implementing an international regulation to avoid this discrepancy and, indeed, such aspirations can be found to a certain extent. However, on a global stage a uniform regulatory system seems highly unrealistic. Thus, it still falls to national regulators to meet the challenges by the internationalization of financial markets. This paper intends to explore how the United States and Germany grapple with this issue by analyzing the ambit of international enforcement jurisdiction in securities law.
Table of Contents
A. Basics
I. Occasion for Subject Matter
II. Delimitation of Subject Matter
III. Impact of International Law on Subject Matter
IV. Applicable Law and Subject Matter
V. The Presumption against Extraterritoriality v. Rule-by-rule Approach
B. Antifraud Liability
I. Extraterritorial Application of Rule 10b-5
1. Text of Rule 10b-5 and its Interpretation in Morrison v. National Australia Bank Ltd.
2. The Effect of Dodd-Frank
3. Conduct and Effect Test
II. Extraterritorial Application of §§ 14 and 20a WpHG
1. Insider trading
2. Market manipulation
III. Conclusion
C. Registration Requirement for Public Offerings
I. Extraterritorial Application of § 5 Securities Act
1. Text of § 5 and its Interpretation by the SEC
2. Regulation S
II. Extraterritorial Application of § 3 WpPG
III. Conclusion
D. Obligations of Periodic Disclosure
I. Extraterritorial Application of § 13 (a) Exchange Act
II. Extraterritorial Application of §§ 37v, 37w and 15 WpHG
III. Conclusion
E. Conclusion and Critique
F. Bibliography
Research Objectives and Core Topics
The study examines the ambit of international enforcement jurisdiction in securities law by comparing the legal frameworks and regulatory practices of the United States and Germany. It aims to determine how both jurisdictions handle the internationalization of financial markets and addresses the challenges posed by cross-border securities activities.
- Analysis of the extraterritorial application of U.S. Rule 10b-5 and Dodd-Frank provisions.
- Examination of German enforcement mechanisms regarding insider trading and market manipulation (§§ 14 and 20a WpHG).
- Comparative review of registration requirements for public offerings under U.S. and German law.
- Investigation into the obligations of periodic disclosure for issuers in international contexts.
Excerpt from the Book
The Presumption against Extraterritoriality v. Rule-by-rule Approach
The dependence of jurisdiction in securities law on its applicability shifts the matter of analysis to the substantive law area. If substantive securities law is applicable, only then the respective administrative agencies are endowed with jurisdiction.
In the United States, the question of extraterritorial applicability of securities law has often been addressed as if there was a general answer that could be phrased as either “yes, there is extraterritorial applicability” or “no, there is no extraterritorial applicability.” In particular, courts have long since been arguing about the existence of a presumption against extraterritoriality in securities law. On the assumption of Congress’ silence on the issue, courts have rejected such a presumption, but rather undertaken the attempt at divining its hypothetical intent, and concluded that Congress would have wanted to apply the securities law in case there is some relevant conduct or effect on markets and investors within the United States. Despite the longstanding pedigree of this judicature, the U.S. Supreme Court has recently reaffirmed the extension of the presumption against extraterritoriality to securities law.
Summary of Chapters
A. Basics: Introduces the necessity of regulation in global financial markets and defines the scope of enforcement jurisdiction, establishing the foundation for the comparative study.
B. Antifraud Liability: Analyzes how U.S. and German authorities enforce rules against fraud, focusing on the extraterritorial reach of Rule 10b-5, Dodd-Frank, and specific German WpHG sections.
C. Registration Requirement for Public Offerings: Compares the U.S. § 5 Securities Act registration process with the German prospectus requirements, specifically addressing Regulation S and domestic accessibility.
D. Obligations of Periodic Disclosure: Explores how regulatory reporting requirements are applied to international issuers under the Exchange Act and the corresponding German WpHG regulations.
E. Conclusion and Critique: Synthesizes the comparative findings, arguing that while both systems rely on territorial-market approaches, the U.S. model is generally more expansive than the German, and emphasizes the need for international coordination.
Keywords
Securities Law, Enforcement Jurisdiction, Extraterritoriality, U.S. Law, German Law, Rule 10b-5, Dodd-Frank, WpHG, Market Manipulation, Insider Trading, Public Offerings, Periodic Disclosure, International Finance, Regulatory Sovereignty, Financial Market Regulation.
Frequently Asked Questions
What is the core focus of this research?
The work investigates the international enforcement jurisdiction in securities law, specifically comparing how U.S. and German regulatory agencies exercise their power in cross-border cases.
What are the primary themes covered in the text?
The central themes include antifraud liability, registration requirements for public offerings, and periodic disclosure obligations for issuers.
What is the main objective of this comparative study?
The goal is to explore how the SEC and BaFin handle the jurisdictional challenges created by the globalization of financial markets and to evaluate the effectiveness of their respective territorial-market approaches.
Which scientific methodology is employed?
The author uses a comparative legal analysis, evaluating statutes, court decisions, and academic literature from both the U.S. and German legal systems to assess jurisdictional reach.
What topics are discussed in the main part of the book?
The main part covers the "conduct and effect" tests, the impact of the U.S. Supreme Court's Morrison decision, the influence of the Dodd-Frank Act, and the practical application of German WpHG provisions.
Which keywords best characterize this work?
The work is best defined by terms such as extraterritoriality, securities regulation, comparative law, international enforcement, and financial market integrity.
How does the Dodd-Frank Act influence U.S. enforcement jurisdiction?
The text explains that Dodd-Frank added explicit language to the Exchange Act, codifying a "conduct and effect" test to define the jurisdictional boundaries for SEC enforcement actions.
What is the author’s conclusion regarding the optimal regulatory approach?
The author concludes that neither a strictly restrained nor an overly expansive approach is inherently superior; instead, efficient enforcement requires international coordination to avoid regulatory loopholes or double regulation.
- Arbeit zitieren
- Michael Müller (Autor:in), 2011, International Enforcement Jurisdiction in Securities Law, München, GRIN Verlag, https://www.grin.com/document/179721
