Skip to main content
SpringerLink
Log in

Transatlantic Financial Services Regulatory Dialogue

  • Articles
  • Published:
European Business Organization Law Review Aims and scope Submit manuscript

Abstract

The EU Financial Markets Dialogue led by the SEC and the European Commission has achieved some notable successes, particularly with respect to the consolidated supervision of financial conglomerates and the development of a plan to achieve convergence in corporate financial reporting. On both sides of the Atlantic, there is a clear ongoing commitment to the dialogue as a key mechanism for the development of efficient and credible regulatory solutions that guarantee effective investor protection and a high level of business efficiency. This paper reports on a two-day roundtable discussion that took place at Cambridge University in September 2005 to explore ways in which the academic community can contribute to this transatlantic debate. Lively discussion between the policy-makers, regulators, market participants and academics who attended the roundtable yielded a number of thematic concerns, which, the paper suggests, could form the basis of a programme for further work. Finally, the paper announces the establishment of a seminar series, to be based in the United Kingdom, on the Transatlantic Financial Services Regulatory Dialogue and invites contributions.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Figures quoted in the Testimony of Alexander Schaub, Director-General, DG Internal Market of the European Commission, before the Committee on Financial Services, US House of Representatives, 13 May 2004, available at: http://europa.eu.int/comm/internal_market/finances/docs/general/2004-05-13-testimony_en.pdf (last accessed April 2006).

  2. HM Treasury, Financial Services Authority and Bank of England, After the EU Financial Services Action Plan: A New Strategic Approach (2004) p. 35, available at: http://www.hm-treasury.gov.uk.

  3. European Commission, A stronger EU-US Partnership and a more open market for the 21st century, COM (2005) 196, p. 9.

  4. European Commission, Implementing the Framework for Financial Markets: Action Plan, COM (1999) 232 (the FSAP).

  5. See, for example, L. Stout, ‘The Investor Confidence Game’, 68 Brooklyn Law Review (2002) p. 407; A. Jackson, The Aggregate Behaviour of Individual Investors (2003), available at SSRN: http://www.ssrn.com/abstract=536942 (last accessed May 2006).

    Google Scholar 

  6. See, for example, European Commission, Financial Integration Monitor 2004, SEC (2004) 559.

  7. In its White Paper — Financial Services Policy 2005–2010, COM (2005) 629 (December 2005), p. 7, the Commission noted that ‘[a]s the public sector gradually withdraws from financing some aspects of social systems, there is a need for increased awareness and direct involvement of citizens in financial issues.’

  8. See the European Financial Conglomerates Committee and Banking Advisory Committee’s July 2004 Guidance on the equivalence of the US supervision regime, available at: http://europa.eu.int/comm/internal_market/financial-conglomerates/docs/guidance-usa-final-060704_en.pdf (last accessed April 2006).

  9. Political agreement was reached in April 2005 on a ‘roadmap’ for convergence on IAS/IFRS and US GAAP. See European Commission Press Release, ‘Accounting Standards: EU Commissioner McCreevy sees agreement with SEC as progress toward equivalence’, available at: http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/469&format=HTML&aged=0&language=EN6 (last accessed April 2006).

  10. European Commission, loc. cit. n. 3.

  11. See, for example, the comments of Anthony Belchamber, chief executive of the UK Futures and Option Association: ‘No one should underestimate the importance of this dialogue. Regulatory complexity and duplication is beginning to impose a cost burden that is … forcing up trading and investment costs for customers and leading to needless commercial inefficiencies.’ Reported in I. Simensen, ‘US and EU financial regulators discuss transatlantic framework’, Financial Times, 14 September 2005.

  12. ‘The Group would emphasise the enormous value of a continuous and formalised dialogue between the EU and the US, and other major financial centres worldwide, in promoting upstream convergence and ensuring that there are no adverse spill-over implications for outside jurisdictions resulting from new regulation.’ Securities Expert Group, Financial Services Action Plan: Progress and Prospects (May 2004) p. 14, available at: http://europa.eu.int/comm/internal_market/finances/docs/actionplan/stocktaking/report-securities_en.pdf (last accessed April 2006).

  13. European Commission, White Paper, loc. cit. n. 7, at p. 15.

  14. J. Braithwaite and P. Drahos, Global Business Regulation (Cambridge, Cambridge University Press 2000) pp. 562–563.

    Google Scholar 

  15. Ibid., at p. 556.

  16. A.M. Slaughter, ‘Agencies on the Loose? Holding Government Networks Accountable’, in G.A. Bermann, M. Herdegen and P.L. Lindseth, Transatlantic Regulatory Cooperation: Legal Problems and Political Prospects (Oxford, Oxford University Press 2000) pp. 521–546.

    Google Scholar 

  17. S. Picciotto, ‘Introduction: Reconceptualizing Regulation in the Era of Globalization’, 29 Journal of Law and Society (2002) p. 1. Competition or anti-trust regulation is one area where heavy reliance has been placed on transatlantic dialogue: I. Maher, ‘Competition Law in the International Domain: Networks as a New Form of Governance’, 29 Journal of Law and Society (2002) p. 111. So too is international trade: D. Coen and W. Grant, ‘Corporate Political Strategy and Global Public Policy: a Case Study of the Transatlantic Business Dialogue’, 13 European Business Journal (2001) p. 37 (reviewing the Transatlantic Business Dialogue (TABD), set up in 1995 as a joint initiative of the European Commission and US State Department). Other sectors where there have been initiatives to establish structures for transatlantic dialogue are telecommunications, cyberspace, biotechnology and industrial and intellectual property: Bermann, Herdegen and Lindseth, op. cit. n. 16, at p. 7.

    Article  Google Scholar 

  18. The collection of papers in Bermann, Herdegen and Lindseth, op. cit. n. 16, emerged from a conference at Columbia Law School which had as its central purpose the aim of achieving a better understanding of the processes of transatlantic regulatory cooperation.

  19. Epitomised perhaps by the ‘law matters’ scholarship. See generally S.J. Choi, ‘Law, Finance, and Path Dependence: Developing Strong Securities Markets’, 80 Texas Law Review (2002) p. 1657.

    Google Scholar 

  20. Herbert Smith LLP in association with Gleiss Lutz and Stibbe.

  21. However, some of the papers considered at the seminar have since been further developed and have appeared as working papers (see, e. g., H.E. Jackson, Variation in the Intensity of Financial Regulation: Preliminary Evidence and Potential Implications, Harvard Law and Economics Discussion Paper No. 521 (2005), available at SSRN: http://ssrn.com/abstract=839250) or have been accepted for publication as journal articles (see, e. g., N. Moloney, ‘The EC and the Hedge Fund Challenge: A test case for EC securities policy after the Financial Services Action Plan’, Journal of Corporate Law Studies (2006) p. 1; H. Jackson, et al., ‘Foreign Trading Screens in the United States’, Capital Markets Law Journal (forthcoming 2006)).

  22. O.R. Young, International Governance: Protecting the Environment in Stateless Society (Ithaca, NY, Cornell University Press 1990) pp. 31–33.

    Google Scholar 

  23. A. Schaub, ‘EU Regulatory Relations with Third Countries’, speech at St John’s College, Cambridge, 30 September 2005.

  24. Ibid.

  25. E. Tafara and R.D. Strahota, ‘Fostering an International Regulatory Consensus’, 10(1) eJournal USA: Economic Perspectives (2005), available at: http://usinfo.state.gov/journals/ites/0205/ijee/tafara.htm (last accessed April 2006).

  26. Ibid.

  27. Rule 12g3-2(a) under the Securities Exchange Act, codified in 17 C.F.R. 240.12g3-2(a).

  28. Schaub, speech, loc. cit. n. 23.

  29. Securities and Exchange Commission, Termination of a Foreign Private Issuer’s Registration of a Class of Securities under Section 12(g) and Duty to File Reports under section 15(d) of the Securities Exchange Act of 1934, Proposed Rule, [Release No. 34-53020; International Series Release No. 1295; File No. S7-12-05], available at: http://www.sec.gov/rules/proposed/34-53020.pdf (last accessed April 2006).

  30. European Commission letter (G3/PP/D (20060 2945) of 1 March 2006, available at: http://europe.eu.int/comm/internal_market/securities/docs/us/ec010306_en.pdf (last accessed April 2006).

  31. H.E. Jackson, M. Gurevich and A.M. Fleckner, ‘The Controversy over the Placement of Remote Trading Screens from Foreign Exchanges in the United States’, in University of Cambridge/University of Nottingham/Harvard Law School, eds., Transatlantic Financial Services Regulatory Dialogue (Cambridge, 30 September’ 1 October 2005).

  32. SEC Rule on Registration under the Investment Advisers Act of Certain Hedge Fund Advisers (2005).

  33. Directive 2002/87/EC, OJ 2003 L 35/1.

  34. Schaub, speech, loc. cit. n. 23.

  35. General guidance from the European Financial Conglomerates Committee to EU supervisors: the extent to which the supervisory regime in the United States of America is likely to meet the objectives of supplementary supervision in Directive 2002/87/EC (Financial Conglomerates Committee, 6 July 2004).

  36. European Commission, Green Paper — Financial Services Policy 2005–2010, COM (2005) 177 (March 2005); European Commission, White Paper, loc. cit. n. 7.

  37. CESR, Preliminary Progress Report, Which Supervisory Tools for the EU Securities Market? (October 2004) CESR 04-333f.

  38. Directive on statutory audit of annual accounts and consolidated accounts and amending Council Directives 78/660/EEC and 83/349/EEC (adopted October 2005, not yet published in the Official Journal).

  39. PCAOB Release No. 2003-020 at p. 1 (28 October 2003).

  40. European Commission Press Release, ‘Internal Market: “European Group of Auditors’ Oversight Bodies” Created’, 14 December 2005, available at: http://europa.eu.int/rapid/pressReleasesAction.do?reference=IP/05/1596&format=HTML&aged=0&language=EN&guiLanguag?e=en&language=EN&guiLanguage=en (last accessed April 2006).

  41. On the standing sub-committee on enforcement within CESR-Fin, see http://www.cesr-eu.org/index.php?page=groups&mac=0&id=15 (last accessed April 2006).

  42. IOSCO, Code of Conduct for Rating Agencies (2004).

  43. See definition in R. Keohane and J. Nye, Power and Interdependence (Boston, Harper-Collins 2001) p. 12.

    Google Scholar 

  44. A. Drazen, ‘Conditionality and Ownership in IMF Lending: A Political Economy Approach’, 49 IMF Staff Papers (2002, special issue) pp. 36–38.

    Google Scholar 

  45. The national counterpart of the IASB in the United States is the Financial Accounting Standards Board (FASB), a private sector body composed of representatives from the accounting and auditing industries. The FASB was delegated substantial autonomy by the SEC in the 1960s to devise and recommend standards for the accounting industry that would be relied on by US investors to assess the financial health of listed companies and firms. The adoption of the Sarbanes-Oxley Act put an end to the FASB’s relative autonomy by requiring direct oversight and approval of FASB standard-setting by the newly created Public Company Accounting Oversight Board (PCAOB). It can now be said that the FASB is directly accountable to the public through the PCAOB and the SEC. There is no similar direct accountability for the IASB.

  46. In 2004, the European Commission stated that the IASB was not an accountable body because its board and staff were not sufficiently representative of European civil law countries. It was argued that the IASB’s accounting methods were too Anglo-centric in their approach and did not fairly represent civil law practices. The Commission called for the IASC and IASB to expand its membership to include more representatives from civil law jurisdictions and emerging economies. See P. Walton. ‘The European Union and the IASB’, IFRS Direct (February 2005), available at: http://www.acccaglobal.com/ifrs/directarticles (last accessed May 2006).

  47. At the IASC Trustees meeting in Brussels on 4 November 2003, the IASC announced the appointment of a committee to review the IASB’s constitution. The constitution establishes the operating procedures of both the IASC Foundation and the IASB and requires a review every five years. The constitution provides that the IASC has responsibility for the IASB’s operating procedures. See Deloitte Touche, IAS Plus, IASC Foundation and Constitution Review — 2003–2005, available at: http://www.iasplus.com/restruct/constreview.htm.

  48. Concerns were also raised regarding the composition of the IASC Board of Trustees. See Strengthening the IASB’s deliberative processes, IASB Discussion Paper (24 March 2004).

  49. IASC, Changes in the IASCF Constitution, Report of the IASC Foundation Trustees (July 2005).

  50. See A. Fleckner, ‘FASB and IASB: Organization and Influence’ (15 August 2005). Several seminar participants continued work on this subject at a March 2006 conference on the Future of IASB-Funding, hosted by the European Commission, Deutsche Bundesbank and Deutsches Aktieninstitut in Frankfurt.

  51. IOSCO, The Regulatory Environment for Hedge Funds: A Survey and Comparison (March 2006); IOSCO, Code of Conduct for Rating Agencies (2004).

  52. G.R.D. Underhill and X. Zhang, ‘Global Structures and Political Imperatives: In Search of Normative Underpinnings for International Financial Order’, in G.R.D. Underhill and X. Zhang, eds., International Financial Governance Under Stress: Global Structures Versus National Imperatives (Cambridge, Cambridge University Press 2003) p. 77.

    Chapter  Google Scholar 

  53. European Commission, White Paper loc. cit. n. 7; European Commission, FSAP Evaluation, Part I: Process and Implementation (November 2005), available at: http://europa.eu.int/comm/internal_market/finances/docs/actionplan/index/051028_fsap_evaluation_part_i_en.pdf (last accessed April 2006).

  54. Bermann, Herdegen and Lindseth, op. cit. n. 16, at p. 4.

  55. Ibid., at p. 264.

  56. Ibid., at p. 270.

  57. European Commission, White Paper, loc. cit. n. 7, at p. 15.

  58. European Commission, Modernising Company Law and Enhancing Corporate Governance in the European Union — A Plan to Move Forward, COM (2003) 284.

  59. See Joint Forum, Supervision of Financial Conglomerates, Report of BIS/IAIS/IOSCO, papers prepared by the Joint Forum on Financial Conglomerates (February 1999) p. 7.

  60. The Group of Ten has defined consolidation to be the result of ‘combinations of existing firms, growth among leading firms or industry exit by weaker firms’. Group of Ten, Report on Consolidation in the Financial Sector (Basle, Bank for International Settlements, Monetary and Economic Department 2001) p. 31.

    Google Scholar 

  61. Ibid., at pp. 47–48.

  62. See O. Ruding, The Transformation of the Financial Services Industry, Financial Stability Institute, Occasional Paper No. 2 (Basle, Bank for International Settlements 2002).

    Google Scholar 

  63. Ibid.

  64. Among the legal instruments which restrict banking practices in the United States are the Bank Holding Company Act of 1956, the Glass-Steagall Act of 1933 and the Gramm-Leach-Bliley Act of 1999. Gramm-Leach-Bliley has substantially reduced the barriers for banks to engage in non-banking financial services. The legislation allows banks to establish Financial Holding Companies through which they are permitted to establish subsidiaries to engage in the securities and insurance business.

  65. J. Santos, ‘Banking and Commerce: How Does the United States Compare to Other Countries?’, 34 Economic Review (1998) p. 14.

    Google Scholar 

  66. OJ 2000 L 126/1.

  67. The Joint Forum on Financial Conglomerates established in 1996 by the Basel Committee, IOSCO and IAIS.

  68. In particular, three documents set important principles in the field: the ‘Capital Adequacy Principles Paper’, the ‘Fit and Proper Principles’ and the ‘Principles for Supervisory Information Sharing’.

  69. S. Gkantinis, ‘A Recent SEC Initiative: Registration of Hedge Fund Advisers’.

  70. On the ‘home bias’ of regulators (specifically the SEC), which means ‘scarce regulatory resources are expended in a discriminatory way, with disproportionately less being devoted to extraterritorial enforcement’, see D Langevoort, Structuring Securities Regulation in the European Union: Lessons from the US Experience, Georgetown Public Law Research Paper No. 624582 (2004), available at SSRN: http://www.ssrn.com/abstract=624582 (last accessed May 2006).

  71. Directive 2003/71/EC, OJ 2003 L 344/64.

  72. Testimony, loc. cit. n. 1.

Download references

Author information

Authors and Affiliations

  1. Centre for Financial Analysis and Policy, University of Cambridge and University of Warwick, UK

    Kern Alexander

  2. European Corporate Governance Institute (ECGI), University of Cambridge, UK

    Eilís Ferran (Professor of Company and Securities Law)

  3. Harvard Law School, UK

    Howell Jackson (Professor of Law)

  4. European Corporate Governance Institute (ECGI), University of Nottingham, UK

    Niamh Moloney (Professor of Capital Markets Law)

Authors
  1. Kern Alexander
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Eilís Ferran
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Howell Jackson
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Niamh Moloney
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Kern Alexander.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Alexander, K., Ferran, E., Jackson, H. et al. Transatlantic Financial Services Regulatory Dialogue. Eur Bus Org Law Rev 7, 647–673 (2006). https://doi.org/10.1017/S1566752906006471

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1017/S1566752906006471

Keywords

Search

Navigation