Title: Business Associations II
1Business Associations II
2Class 2
- Key participants in the regulation of Australias
securities markets - Demutualised exchanges
3Key participants
- ASIC
- Takeovers Panel
- CAMAC
- ASX
- ASXSR
4ASIC
- ?Established under the Australian Securities and
Investments Commission Act 2001 - ?National regulator of Australian companies
- ?Also regulates
- Auditors
- Insurance agents and brokers
- Investment advisers
- Fund managers
- Liquidators
- Financial markets eg ASX, BSX, NSX and SFE
5ASIC (cont)
- ?Principal aims (section 1(2), ASIC Act)
- maintain and improve the performance of the
Australian financial system in the interests of
commercial certainty, reducing business costs and
the efficiency and development of the Australian
economy - promote the confident and informed participation
of investors and consumers in the Australian
financial system
6ASIC (cont)
- ?Principal functions
- registration of companies
- maintaining a public register of corporate
information - licensing of participants in the Australian
financial markets - enforcing the Corporations Act
- exercising discretions (ie granting relief from
or modifying the application of certain
provisions of the Corporations Act)
7Takeovers Panel
- ?Corporations and Securities Panel
- established under ASIC Act
- given certain powers under Part 6.10, Corps Act
- principal forum for resolving disputes about
live takeover bids - peer review
- can make binding orders regulating the conduct of
a bid - modelled on the UK, HK and Singapore takeovers
panels - www.takeovers.gov.au
8CAMAC
- ?Corporations and Markets Advisory Committee
(CAMAC) - established under the ASIC Act
- advises the Federal Treasurer on corporate law
reform - www.camac.gov.au
9ASX
- Australian Stock Exchange (ASX)
- principal stock exchange in Australia
- ASX Ltd is a company registered under the Corps
Act and licensed to operate the ASX under Ch 7 of
that Act - ASX Ltd regulates membership of the ASX (only
members can access the ASXs trading facilities) - ASX Ltd regulates the listing of companies on the
ASX - www.asx.com.au
10ASXSR
- ?ASX Supervisory Review Pty Ltd (ASXSR)
- wholly-owned subsidiary of ASX Ltd
- independent of ASX Ltd (majority of independent
directors) - monitors ASX Ltds compliance with its licence
- reviews ASX Ltds supervision of the ASX
- www.asxsr.com.au
11ASX
- Converted from a company limited by guarantee to
a company limited by shares in 1998 - - Corporations Law Amendment (ASX) Act 1997 (Cth)
- Shares in ASX Ltd are listed on the ASX, the
market that ASX Ltd supervises - ASX is a for-profit entity
- Other demutualised listed exchanges include
- Bursa Malaysia (Kuala Lumpur Stock Exchange)
- Deutsche Borse (Frankfurt Stock Exchange and
Xetra) - Euronext (Amsterdam, Brussels, Lisbon and Paris
Stock Exchanges) (2000) (listed on Amsterdam,
Brussels and Paris Stock Exchanges) - Hong Kong Stock Exchange
- London Stock Exchange
- Nasdaq
- NZ Stock Exchange
- OMX (Copenhagen, Helsinki and Stockholm Stock
Exchanges and also the Baltic exchanges) (listed
on Helsinki and Stockholm Stock Exchanges) - Singapore Stock Exchange
- Toronto Stock Exchange
-
12Demutualised exchanges
- Are the norm
- One major exception NYSE
- Question Would Richard Grasso be facing law
suits over his remuneration if the NYSE was a
listed company? - Historically, most exchanges were non-profit
organisations. Demutualisation has converted them
into for-profit companies (that are listed on the
very exchanges that they operate)
13Dual roles of the exchange
- The demutualised exchange is a for-profit entity
- Main sources of revenue
- initial and annual listing fees
- fees charged for individual buy and sell sides of
trades in securities and other listed instruments - sale of market data
- The exchange is also entrusted with ensuring a
fair and transparent market
14Question
- What problems might be posed by
- the conversion of a non-profit exchange into a
for-profit company? - the self-listing of the exchange?
15Conflict of interest?
- Potential areas of conflict
- Is motivation to maximise profit through
attracting new listings and facilitating the
increase in turnover consistent with the
exchanges role in maintaining market integrity? - Can the exchange act effectively as its own
regulator, when it is self-listed and is now a
for-profit company that may be in competition
with other companies listed on the exchange?
16Difficulties for exchanges
- Dec. 1998 Demutualised ASX makes a takeover bid
for SFE - May 1999 Computershare, a company listed on the
ASX, makes a competing bid - Problem
- Conflict between ASXs interest in purchasing SFE
and its obligations to administer the listing
rules in relation to Computershare - Solution
- ASX, Computershare and ASIC entered into an
agreement - ASX not to make any substantive decisions about
the listing of Computershare without first
consulting ASIC - ASX to act in accordance with advice received
from ASIC in relation to Computershare - Agreement to remain in force until competing bids
for SFE resolved (ACCC rejected ASXs takeover
bid, and Computershare also withdrew its bid)
17Constraints
- Competition amongst exchanges
- Reputational risk
- BUT does the fact that demutualised exchanges are
now the norm promote a race to the bottom?
18Pre-conditions for fair and efficient securities
markets
- Good information about the value of the companies
whose securities are traded in the market - How much information should be disclosed? And how
timely should the disclosure be? - Constraints on tunnelling by corporate
controllers - State-enforced vs market-enforced remedies
- See further B S Black, The Legal and
Institutional Preconditions for Strong Securities
Markets (2001) 48 UCLA L Rev 781
19Current model of securities regulation
- Australia Jurisdictional nexus
- 1 Offers
- Primary offers offers of securities for issue
and inviting applications for the issue of
securities - Secondary offers offers of securities for sale
and inviting offers to purchase securities - Corporations Act applies to all such offers
received in Australia, regardless of where the
issue or sale occurs - 2 Markets
- Corporations Act applies to facilities through
which offers or invitations (received in
Australia) to acquire or dispose of securities
are regularly made or accepted - Corporations Act applies to markets operated by
bodies corporate registered under the
Corporations Act
20New models of regulation
- 1 Letting issuers of securities choose the most
favourable law - Issuers to choose governing jurisdiction
- R Romano, Empowering Investors A Market
Approach to Securities Regulation (1998) 107
Yale LJ 2359 - S J Choi and A T Guzman, Portable Reciprocity
Rethinking the International Reach of Securities
Regulation (1998) 71 So Calif L Rev 903 - Nationality of issuers determines jurisdiction
- M B Fox, The Political Economy of Statutory
Reach US Disclosure Rules in a Globalizing
Market for Securities (1998) 97 Mich L Rev 696 - M B Fox, Retaining Mandatory Securities
Disclosure Why Issuer Choice is Not Investor
Empowerment (1999) 85 Va L Rev 1335
21New models (cont)
- 2 Transferring power from the regulator to the
market - Investors regulated based on their level of
knowledge of securities (issuers can deal
directly with sophisticated investors and opt out
of securities regime, but less sophisticated
investors must deal via market intermediaries and
unsophisticated investors are limited in what
they can invest in unless they fulfil certain
knowledge-related criteria) - S J Choi, Regulating Investors Not Issuers A
Market-Based Proposal (2000) 88 Calif L Rev 279 - Transfer regulatory authority to the exchanges
- P Mahoney, The Exchange as Regulator (1997) 83
Va L Rev 1453