stability of EU financial markets and eliminating tax obstacles to financial market in-
tegration. The plan consists of a series of legislative and non-legislative initiatives.
There are still wrinkles to be ironed out. For example, some have argued that pro-
posed amendments to the Prospective Directive could be burdensome to issuers by
requiring them to follow the regulations of their home country rather than their list-
ing country. In addition to being burdensome, these provisions could increase issuer
liability by requiring issuers to maintain a shelf prospectus at all times, and to be up-
dated annually.
The efficiencies in time and cost offered by this procedure are obvious, though: an
integrated market comparable in size in population and capitalization to that of the
United States is being created. A European or U.S. issuer can reach investors in sev-
eral European countries without any additional regulatory burdens or costs. This
should make the European capital markets more attractive to issuers and thus more
competitive with the United States.
(b) Cross-Border and Multijurisdictional Offerings. Over the last two decades, there
has been substantial growth in cross-border securities transactions. These include both
the purchase of foreign securities by U.S. investors (whether in the primary or sec-
ondary markets) and the offering of securities outside the United States by U.S. is-
suers. Part of the growth in these transnational securities transactions has resulted from
an increase in the number of offerings made simultaneously in two or more countries.
Such “multijurisdictional” offerings may be made for several reasons. Issuers may find
that their home market is not large enough to absorb a large offering of securities. Ex-
amples of this would be offerings by large issuers from the comparatively small Latin
American or Scandinavian markets or the huge offerings made in recent years pur-
suant to the privatization of nationalized industries by European, Latin American, and
Asian issuers. Issuers may wish to expand the geographic base of their security hold-
ers or to increase the market for their securities internationally. Issuers may also wish
to acquire foreign shareholders for strategic purposes, such as to protect against
takeover attempts. (Many issuers have found that the existence of U.S. shareholders is
an effective delaying mechanism, or deterrent, to tender offers for their securities.)
In 1989, the Technical Committee of the International Organization of Securities
Commissions (IOSCO) produced a report on “International Equity Offerings.” The
Working Party that produced the report analyzed current practices and issues that had
arisen in the making of multijurisdictional equity offerings. Several major areas of
problems encountered in both equity and debt offerings were identified.
Problems are caused in multijurisdictional offerings by differing underwriting
practices; different disclosure requirements (including continuous disclosure); differ-
ent registration and regulatory requirements; and processing delays, stabilization, and
other regulatory controls over dealings; and widely differing clearance and settle-
ment procedures.
Differing underwriting practices cause timing problems. The price of issues is set
at different times under the U.S. and U.K. models, for example. Additional timing
problems are caused when it is necessary to obtain regulatory clearances or ap-
provals. Settlement procedures for the securities offered may differ from country to
country, with no clearly established principle of immediate delivery on payment to
avoid credit risks, financing costs, and the costs of settling failed transactions. Addi-
tionally, settlement dates for primary and secondary trades also vary from country to
country, although settlement dates are fast becoming conformed.
14 • 8 GLOBALIZATION OF WORLD FINANCIAL MARKETS