Harmonization of U.S.-EU securities regulation: The case for a single European securities regulator

Law and Policy in International Business, Winter 2003 by Pan, Eric J

In order to evaluate both paths, this Article identifies the basic characteristics of the European securities market in recent years. Most striking is the degree to which issuers opt out of European securities regulation and local market practice in favor of U.S. securities regulation and U.S. market practice. In addition, this paper evaluates the SEC's success as a single regulator and explores whether these factors behind the SEC's success are transferable to the EU.

The current debate within the EU as to whether to establish a single European securities regulator is the most visible evidence that harmonization of securities regulation exists between the United States and EU.13 Therefore, this Article has both descriptive and prescriptive purposes: first, to analyze the results of a past study of cross-border securities offerings ("Jackson-Pan Study") in order to determine to what degree harmonization of securities regulation is occurring between the EU and United States; and second, to determine what the current phenomenon of market-driven harmonization means for the prospect of a single European securities regulator. In analyzing the state of European securities regulation, this Article focuses primarily on disclosure standards for equity offerings.14

The goal of a single European securities regulator should not be to create a European twin of the SEC. Europe already has a dominant securities regulator in the form of the SEC. Instead, the EU should seek to establish a regulator that will represent Europe's interests in multilateral organizations like the International Organization of Securities Commissions (IOSCO), work with the SEC in regulating the international markets, and tear down the barriers that prevent a true pan-European securities market and eventually a true international securities market. Ultimately, this is the most compelling reason why the EU should establish a single European securities regulator.

B. Two Paths of Harmonization: Mandatory Regulation and Regulatory Competition

The harmonization of U.S.-EU securities regulation, and its implications for the development of a single European securities market, can be best explained by the interaction of mandatory regulation and regulatory competition. In the United States, the SEC oversees a mandatory disclosure system that applies to any company seeking to sell securities to U.S. investors.15 This mandatory disclosure regime impacts the European markets because U.S. public companies desiring access to EU investors and EU companies desiring access to U.S. investors must follow the U.S. regime.16 At the same time, EU companies, which are not regulated in the United States, have a choice of regulatory regimes. Thus, the absence of a mandatory disclosure regime in the EU and the existence of choice provide for the possibility of regulatory competition. The current academic debate in the United States about the effectiveness of the SEC focuses on the pros and cons of the differences between mandatory regulation and regulatory competition.