The EU Issuer- Disclosure Regime: Objectives and Proposals for Reform

The issuance of equity via government-regulated capital markets is an important source of corporate finance. This is an opinion endorsed by many influential policymakers and authors, many of whom add, however, that over-regulation can undermine competitive advantage and thus a nation’s economic growth. The author of this provocative book sets out to show that the tendency towards ‘more disclosure’ that is usually the immediate regulatory response to financial market crises may be misconceived; what is required, she contends, is a thoughtful search for the true objectives of disclosure – the most advantageous (for all) cost-benefit analysis of any proposed regulatory path. In this book she provides just such a search and analysis, using as a springboard the ‘disclosure and transparency agenda’ started with the EU Financial Services Action Plan of 1999.

In an examination that is at once critical, comparative and interdisciplinary, the book discusses the stated objectives of the EU issuer-disclosure regime – principally about retail investor protection – and then goes on to identify objectives that can actually be met in practice, i.e. market efficiency and corporate governance. The author concludes by drawing concrete policy and regulatory implications, along the way covering such aspects and ramifications of the regime as the following:

• the need for retail investor protection; • the relevance of education programmes for retail investors and of their involvement in the law-making process; • the importance of behavioural researches; • market efficiency and its impact on the performance of the economy; • the concepts of ‘relative’ as opposed to ‘perfect’ market efficiency; • shareholders’ engagement in corporate affairs; • the importance of more sophisticated market actors; • the addressees of the issuer-disclosure regime; • reducing, where possible, the costs for issuers to enter European regulated markets; • the importance of the investor-investment firm (or other financial intermediary) relationship; • content, level and format of issuer-disclosure; • quality of issuer-disclosure; • the importance of enforcement of disclosure requirements, including a proper civil liability regime in case of violation of the EU issuer-disclosure regime; and • the importance of complementary substantive rules.

In its defence of the power of market forces as regulatory means, and its clear argument that market finance should be seen at a minimum as a useful complement to bank credit and other financing sources, this important book can claim a privileged space in the debate over the role of disclosure requirements in securities regulation.