Part 1： Introductory survey

1 Introduction

The topic

Financial assets

Three classes of asset

What are financial assets？

Key features of financial assets

Measurement and quantity of financial assets

What are financial assets for？

Banks and the role of credit

Role of banks

Advantages of credit

Dangers of credit

Risks affecting commercial banks

Banks and financial institutions as intermediaries

Importance of insolvency law in credit economies

What are the aims of financial law？

2 Scope and policies of financial regulation

What is regulation？

Regulation and the ordinary law

Other fields of regulation

Main heads of financial regulation

Other heads of regulation

Microeconomic regulation

Who is regulated？

Summary of regulated firms

Differences between banks and securities firms

Conglomerates

Internationalnancial markets

Policies of regulation

Purposes of regulation

Defects of regulation

Conclusion on policies

Regulatory capitalism against free markets： state intervention

Objectives of regulators： mission statements

Conclusion on mission statements

Who are the regulators？

Single or split national regulators

Regulators in federal countries

Regional and international regulators

Independence of regulators

Methods of supervision

Liability of regulators

Other official and semi-offcial institutions

Central banks

International financial organisations

Basel Banking Supervision Committee

International Organisation of Securities Commissions

Financial Stability Forum

Financial Action Task Force

Accounting organisations

International Association of Deposit Insurers

SWIFT

Tiering of regulation

3 Historical background

A long view

The beginnings in Britain

United States in the 1930s

Spread of formal regulation

Continental Europe

European Union

Main recent trends

Key recent events

Central bank independence

Fair dealing

Conclusion

4 Comparison of regulatory regimes

Jurisdictions of the world

Legal families for the purposes of financial law

Characteristics of measurement criteria

General financial law criteria

Application of general criteria to legal systems

Legal and political infrastructure as a criterion

Other general criteria

Commonality of underlying regulatory law

Criteria for measuring regulatory law

Comparison of the US and the UK

Background influences on the regulatory regime

Part 2： Country summaries

5 Country Summaries： United Kingdom

Introduction

United Kingdom

Introduction

Financial Services Authority

Statutory objectives

Regulated activities in summary

Territorial scope

Exempt persons

Principles， rules and guidance

FSA Handbook

Authorisation

Sanctions for unauthorised business

Principles

Conduct of business rules

Prudential source books

FSA general sanctions

Sanctions for breach of rule-book

Inter-professional Code

Controllers and close links

Approved persons

Auditors and actuaries

Prospectuses and listing

Financial promotion

Collective investment schemes

Recognised investment exchanges and clearing houses

Financial Services Compensation Scheme

Ombudsman and complaints

Insolvency intervention

FSA funding

Confidentiality

Co-operation

Misleading statements and market manipulation

Insider dealing

Market abuse

Money laundering

Gaming

Competition

6 Country summaries： United States

General

Main legislation

Regulation of banks

Regulation of securities markets

Regulation of commodities

Regulation of insurance

Territorial ambit of securities laws

Powers of regulators

Bank holding companies

Foreign banks

Securities prospectuses

Registration of “public” companies

Liabilities for misleading information

Regulation of broker-dealers

Disclosure of benecial ownership

Tender offers

Regulation of investment companies and mutual funders

Regulation of investment advisors

Sarbanes-Oxley Act 2002

7 Summary： European Union Directives

Order of Directives

Background to EU Council Directives

EU Prospectus Directives 2003

Prospectus Regulation 2004

Purpose

Public offers and exemptions

Prospectus

Responsibility

Approval of the prospectus

Publication of the prospectus

Community passport

Home Member State

Languages

Issues incorporated in third countries

Competent authorities

Sanctions

Recast Banking Consolidated Directive 2006

Introduction

Application

Authorisation

Activities subject to mutual recognition

Authorisation

Prudential regulation

Markets in Financial Instruments Directive 2004

Introduction

Application

Definition of investment services and activities

Ancillary services

Definition of financial instruments

Definition of professional and retail clients

Definition of regulated markets and multilateral trading facilities

Exemptions

Authorisation and organisation

Multilateral trading facilities

Investment advisers

Relations with third countries

Compliance with operating conditions

Conflicts of interest

Conduct of business obligations

Marketing to clients

Information to clients

Suitability

Client agreements

Reports to clients

Best execution

Client order handling rules

Limit orders

Tied agents

Conduct of business exemptions for eligible counterparties

Obligation to uphold integrity of markets， report transactions， and maintain records

Multilateral trading facilities and systematic internalisers

Freedom to provide investment services and activities

Branches

Access

Regulated markets

Powers to be made available to competent authorities

Professional secrecy

Auditor whistle-blowing

Co-operation between regulators

Recast Capital Adequacy Directive 2006

Financial Conglomerates Directive 2002

UCITS Directives 1985-2001

Introduction

Application

Authorisation

Management companies

Depositaries

Eligible investments

Prospectus and reports

General obligations of Ucits

Supervision

Deposit Guarantee Directive 1984

Introduction

Deposits

Branches

Investor Compensation Directive 1997

Market Abuse Directives and Regulation 2003-2004

Introduction

Definition of inside information

Definition of market manipulation

Examples of market manipulation

Definition of financial instrument

Prohibitions on insider dealing

Insiders

Tipping and inducement

Tippers

Prohibitions on market manipulation

Issuer disclosure

Non-confidential disclosure to employees， professionals

Disclosure of manager dealings

Research analysts and investment recommendations

Direction by market operators

Statistical services

Whistle-blowing

Exemptions

Financial markets covered

Territorial scope

Sanctions

Regulator co-operation

Transparency Directive 2004

Introduction

Application

Home Member State

Periodic reports

Liability

Exemptions from periodic reporting

Information about major holdings

Additional information

Information for holders of securities

Equal treatment

Miscellaneous

Implementing directive

Directive on Distance Marketing of Consumer Financial Services

Other existing or proposed EU Directives

Insolvency and associated directives

8 Other country summaries

Introduction

Afghanistan

Albania

Alderney and Sark

Algeria

American Samoa

Andorra

Angola

Anguila

Antigua and Barbuda

Argentina

Armenia

Aruba

Australia

Austria

Azerbaijan

Bangladesh

Bahamas

Bahrain

Barbados

Belarus

Belgium

Belize

Benin

Bermuda

Bhutan

Bolivia

Bosnia and Herzegovina

Botswana

Brazil

British Virgin Islands

Brunei

Bulgaria

Burkina Faso

Burundi

Cambodia

Cameroon

Canada

Cayman Islands

Central African Republic

Chad

Chile

China

Colombia

Comoros

Congo （Brazzaville）

Congo （Kinshasa—formerly Zaire）

Costa Rica

Cote d’ Ivoire

Croatia

Cuba

Cyprus

Czech Republic

Denmark

Djibouti

Dominica

Dominican Republic

East Timor （Timor L ‘Este）

Ecuador

Egypt

El Salvador

Equatorial Guinea

Eritrea

Estonia

Ethiopia

Fiji

Finland

France

Gabon

Gambia

Georgia

Germany

Ghana

Gibraltar

Greece

Grenada

Guatemala

Guernsey

Guinea

Guinea-Bissau

Haiti

Honduras

Hong Kong

Hungary

Iceland

India

Indonesia

Iran

Iraq

Ireland

Isle of Man

Israel

Italy

Jamaica

Japan

Jersey

Jordan

Kazakhstan

Kenya

Korea

Kuwait

Kyrgyzstan

Laos

Latvia

Lebanon

Lesotho

Liberia

Libya

Liechtenstein

Lithuania

Luxembourg

Macau

Macedonia

Madagascar

Malawi

Malaysia

Mali

Malta

Marshall Islands

Mauritania

Mauritius

Mexico

Moldova

Mongolia

Montenegro

Montserrat

Morocco

Mozambique

Myanmar

Namibia

Nepal

Netherlands

Netherlands Antilles

New Zealand

Nicaragua

Niger

Nigeria

Norway

Oman

Pakistan

Panama

Papua New Guinea

Paraguay

Peru

Philippines

Poland

Portugal

Puerto Rico

Qatar

Romania

Russia

Rwanda

Samoa

San Marino

Sao Tome & Principe

Saudi Arabia

Senegal

Serbia

Seychelles

Sierra Leone

Singapore

Slovak Republic

Slovenia

Solomon Islands

Somalia

South Africa

Spain

Sri Lanka

St Kitts and Nevis

St Lucia

St Vincent and the Grenadines

Sudan

Suriname

Swaziland

Sweden

Switzerland

Syria

Taiwan

Tajikistan

Tanzania

Thailand

Togo

Trinidad and Tobago

Tunisia

Turkey

Turkmenistan

Turks and Caicos Islands

Uganda

Ukraine

United Arab Emirates

United Kingdom

United States of America

Uruguay

Uzbekistan

Vanuatu

Venezuela

Vietnam

Virgin Islands （US）

Yemen

Zambia

Zimbabwe

Part 3： Classes of business

9 Authorisation of banks and securities firms

Introduction

Conditions of authorisation

Sanctions for non-authorised business

Exemptions

Compliance

10 Banks

The business of bank

Definition of banking

Exclusions from the denition of banking

Illustrations of the denition of banking

Territorial scope of banking

Branches

Restrictions on non-banking activities and financial conglomerates

11 Securities firms

Introduction

What is a security or an investment

General

Examples of the definition of securities or investments

Perimeter problems of definition

Examples of scope of investments

What is investment business

Main classes

Country examples of regulated activities

Exemptions

Broker-dealers and underwriting

Firms

Purposes of regulation

Definition of dealing for authorisation purposes

Prime brokerage agreements generally

Outline of prime brokerage agreement

Arrangers of deals in investments

Firms

Purposes of regulation

Definition of arranging deals for authorisation purposes

Investment management

Firms

Purposes of regulation

Definition of investment management for authorisation purposes

Investment management agreements

Custodian of investments

Firms

Purposes of regulation

Definition of authorisation purposes

Custodian agreements

Investment advisers

Firms

Purposes of regulation

Definition for authorisation purposes

Regulation of investment advisers

Investment advice agreements

Investment research and analysts

Corporate fiduciary business

Regulation of derivatives

What are derivatives

Derivatives as gaming or insurance

Are derivatives securities or investments？

12 Exchanges， listing and settlement systems

Financial markets generally

Introduction

Buying a share

Main financial markets

Main features of exchanges

Organisation and regulation of exchanges

General

Examples of definitions and regulation of exchanges

Listing and continuing obligations of listed companies

Sarbanes-Oxley Act of 2002

Differences between formal exchanges and private “exchanges”

Payment and securities settlement systems

Payment systems

Steps in the securities settlement process

Central counterparties

Settlement systems for securities （book-entry securities）

Regulation of central counterparties and of payments and book-entry settlement systems

Private settlement systems

13 Collective investment schemes

Introduction

General

Parties involved in a collective investment scheme

Legal form of fund

Listed funds

Regulated and unregulated funds

Authorisation and regulation of funds

General

Investment policy， short sales and borrowing

Other requirements

General regulation

Regulators’ powers

Hedge funds

Definitions of collective investment schemes and exemptions

Key features of definitions

Country examples of fund definition and regulation

United Kingdom

United States

Regulation of investment companies

European Union

British Virgin Islands

China

Switzerland

Collective investment scheme contracts

Outline of investment management contract

Outline of custodian contract

Outline of investment policy

Securitisations

Part 4： Conduct of business

14 Conduct of business

Introduction

Regulation of conduct of investment business generally

Terms of business and customer agreements

European Union customer agreements

Summary of terms of retail customer agreements

Sophisticated investor agreements

Duties of skill， care and diligence

Introduction

Suitability， recommendations and risk warnings

Country illustrations of suitability

Best execution

Excessive mark-ups

Front-running and customer order priority

Timely execution， aggregation and allocation

Inducements and soft commissions

Margin regulations

Advertising and promotion

Main products

Main media for promotion

Policies

Main sources of law

Principles ofnancial promotion

Promotion in the European Union

UK financial promotion

Financial promotion in France

Records and reporting to the regulator

Introduction

Purposes of records

Reporting to the regulator

Illustrations of record-keeping obligations

15 Conflicts of interest

Introduction

Conflicts of interest in the European Union

Conglomerates

Other examples of conflicts

Self-dealing and secret profits

Managing conflicts

Chinese walls

Pros and cons of Chinese walls

Recognition of Chinese walls

Practical steps to establish Chinese walls

16 Client assets， custodianship， and trusts

Use of trusts in financial law

Introduction

Examples of use of trusts in financial law

International survey of trust recognition

Objections to the trust internationally

Advantages of trusts

Client assets

Introduction

Client investments and client money

Trustee holds title

Trustee misappropriation

Segregation of client and firm assets

Examples of regulatory regimes for client assets

Use of client assets： re-pledging and stocklending

Impact of client asset trusts on netting with central counterparties

Common law constructive trusts and tracing

Introduction

Examples of tracing

International reception of tracing

Conclusion on trusts generally

Part 5： Prospectuses

17 Prospectus requirements

Introduction

Outline procedures for the marketing and sale of a new issue of debt securities

Regulation of underwriting

Purposes of disclosure

Policies for and against prospectus regulation

Types of prospectus

Forms of prospectus

Listing of bond issues

Issues to the public require a prospectus

Securities covered

Means of publication of prospectus

Marketing only by means of an approved prospectus

Summary of main exemptions from prospectus requirements

Exemptions for claims which are not securities

Exemption for private offerings

Exemption for offerings to sophisticated investors

Exemptions for offerings by governmental and public bodies

Exemption for deposits with banks

Exemption for issues by banks

Exemption for syndicated loans by banks

Exemption for issues of commercial paper

Exemptions for issues to existing security holders and equity-linked securities

Exemption for issues to employees

Exemption for listed securities

Exemption for foreign issues

Exemption for secondary market trading

Exemption for small issues

Exemption for insolvency reorganisations

Miscellaneous exemptions

Control of resales of exempt offers

Integration of exempt and on-exempt offers

Comparison of public and exempted offerings

Shelf registration

Other country examples of exempt prospectuses

Application of prospectus requirements to international bonds

Application of prospectus requirements to loan syndications

18 Prospectus liabilty： misrepresentation and non-disclosure

Sources of law

Summary of enhanced liability under regulated prospectuses

Heads of general misrepresentation liability in England

Heads of misrepresentation liability in the United States

EU Prospectus Directive 2003

Aspects of general law of misrepresentation

Misrepresentor’s knowledge of the misrepresentation generally

Knowing or reckless misrepresentation

Negligence and due diligence

Innocent misrepresentation

What is a misrepresentation

True information subsequently becomes false

Access to information

Inducement （reliance）

Causation

Materiality

Remedies for misrepresentation

Who can sue？

Who is liable for a prospectus？

Misrepresentation liability of managing banks and co-managers

Exclusion of liability

19 Prospectuses： due diligence and prospectus contents

Due diligence

Introduction

Regulatory guidance

Case law on due diligence

Due diligence practice

Prospectus contents

Strengths and weaknesses of disclosure codes

Contents of corporate prospectuses

Contents of bank prospectuses

Contents of governmental prospectuses

Part 6： Market abuse and frauds

20 Market abuse

Summary of investment frauds

Market manipulation

What is market manipulation

Examples of market manipulation

Market manipulation laws： international summary

Exemption for stabilisation

Exemption for buy-back programmes

21 Insider dealing

Meaning of insider dealing

Policies of insider dealing

Insider dealing under the general law

Specific regulation outside insider dealing statutes

Examples of insider dealing codes

Main prohibitions

Insiders

Tipping

Tippees

Inside information

Securities covered by the prohibitions

Sanctions and enforcement

Conflict of duties

Negative profits

Exemptions

Territorial scope

Practical policies for companies

Part 7： Other topics

22 Sanctions， enforcement， and private claims

Introduction

Criminal sanctions

Offences

Sanctions and remedies

Concurrent civil proceedings

Administrative sanctions

Policies

Administrative contraventions

Administrative sanctions and remedies

Investigation and information-gathering

Criminalisation of regulatory law

Civil sanctions

Introduction

Examples of civil claims

Remedies under general law

Breach of statutory duty

Devices to encourage private rights of action

Class actions

Arbitration

Settlements

Unenforceability of agreements

Consumer watchdogs

23 Regulator liability

Introduction

Reasons for growth of claims against regulators

Typical claims

Regulators

Policies of liability of regulators

Investor and deposit protection funds

Main hurdles to establishing liability

Liability of public officers generally

Bad faith， gross negligence and mere negligence

Immunisation of regulators generally

Liability of bank regulators in the US

Liability of securities regulators in the US

Liability of regulators in Switzerland

Constitutional objections to immunisation in the EU

Overriding EU law

Liability of regulators to regulated institutions

Foreign action against regulators

Conclusions

24 Financial supervision and capital adequacy

Introduction

Trustee and debtor firms

Banks and investment firms

Types of risk

Capital adequacy under Basel Ⅱ

Basel Ⅰ and Ⅱ

The three pillars of Basel Ⅱ

Pillar Ⅰ—minimum capital

Ladder of approaches to the minimum capital requirement available under Basel Ⅱ

Credit risk： standardised approach

Credit risk mitigation generally

Credit risk mitigation： guarantees

Credit risk mitigation： collateral

Basel treatment of collateral generally

Preconditions to the recognition of collateral

Collateral： simple method

Collateral： comprehensive method

Marking to market and remargining

Netting

Specialised lending

Credit risk： internal ratings based approach

Securitisations

Corporate governance and oversight for internal ratings based approach

Long term equity holdings

Subordinated exposures under the internal ratings based approach

Retail and small business exposure

Trading book

Operational risk

Pillar 2—Supervisory review process

Pillar 3—Market discipline

Conclusions

Liquidity

Large exposures

Foreign exchange risk

Systems and controls

25 Insolvency of banks and securities firms， compensation funds

Background

Differences between banks and securities firms

Effect of bank insolvency on regulation

Causes of bank failures

Bank work-outs

Bank insolvency proceedings

General

Bankruptcy ladder

Entry into proceedings

Availability of judicial reorganisation proceedings

Bridge banks and other reorganisation techniques

Management control

Set-off

Security interests

Contract cancellation

Preferences

Trusts

Officer liability

Groups

Cross-border comity

Conclusions on bank insolvency proceedings

Country survey of bank insolvency proceedings

Deposit protection funds

Purposes of deposit protection funds

Insured deposits

Set-off

Funding

Ranking of deposits

Subrogation

Resolution powers

Broker-dealer insolvencies

26 Conflict of laws

General

Summary of conflicts rules

Principles of prescriptive jurisdiction

Recognition and enforcement of penal regulatory laws

Mutual recognition

Double jeopardy

Mutual co-operation between regulators

Mutual legal assistance treaties and other instruments

World Trade Organisation

Territorial scope of investment business

Main international tendencies

Territorial scope in Britain

Territorial scope in the United States

Territorial scope in the EU

Territorial scope of prospectus regulation

Introduction

Issues to sophisticated investors contrasted with issues to the public

Publication in international media

UK and US illustrations

Mutual recognition generally

Single passport for public offers under the EU Prospectus Directive 2003

US selling restrictions in securities issues

Introduction

Regulation S

Section 4（3） of the Securities Act of 1933

Tefra C and D

Standard form selling restrictions

Territorial scope of collective investment schemes

General

Country illustrations

Territorial scope of corporate disclosure

Territorially of market frauds

Territorial scope of financial supervision

Civil claims

Index