Overview: This article
posits that it would be desirable for issuers in public primary
securities markets to beable to issue securities to investors
worldwide using one set of optimal distribution procedures
and disclosure documents, and one set of liability standards
and enforcement remedies. It points out that this state of
affairs is currently not possible because the United States
conditions public issuance in its territory and to some significant
extent to US investors outside its territory on compliance
with its unique set of distribution procedures, disclosure
requirements, and enforcement rules.
Harmonization of world rules is not the answer to this problem.
There is no reason to assume that the world would choose an
optimal level of disclosure, particularly because the United
States will push for world rules that are closely equivalent
to its own. Moreover, there is substantial doubt as to whether
worldwide agreement can be reached on the issue of disclosure,
let alone distribution and enforcement rules. Nor is mutual
recognition the answer. The approach creates basic inequities
for domestic issuers and has not worked well in the European
Union, which has the advantage of supranational institutions,
despite much fanfare about the single passport. Broader versions
of mutual recognition, such as portable reciprocity, founder
on problems of enforcement.
The article proposes instead the establishment of an offshore
free zone. This would require that the United States, like
other countries, permit its investors to participate in the
offshore market for primary distributions of foreign issuers
free of restrictions other than minimum disclosure requirements.
One major benefit of this approach is that it would permit
the use of common distribution procedures.
Internationalization
of Primary Public Securities Markets Revisited ...download
PDF
By Prof. Hal
ScottHarvard Law School
Overview: Argues
that the optimal standardized issuance of securities in
cross-border financing requires a relaxation of US registration
and disclosure standards for foreign issuers. Rejects conventional
harmonization and mutual recognition approaches in favor
of an international standard based on developing disclosure
models of customary private-placements.
The Unfounded
Fear Of Regulation-S:
Empirical Evidence On Offshore Securities Offerings...download
PDF
By STEPHEN J. CHOI University of California, Berkeley; University
of Southern California - Law School
Overview: Regulation-S
provides US issuers with an exemption from the registration
requirements of the Securities Act of 1933 to the extent that
securities are offered and sold solely outside the United States.
Through resales back into the United States, however, US investors
may become exposed to unregistered securities initially distributed
abroad through Regulation-S. This Article identifies two distinct
risks from an offshore securities offering. First, issuers may
conduct an offering under Regulation-S as a means to sell securities
indirectly into the United States through resales in situations
where the US secondary market overvalues the issuer's securities.
Second, even where the US secondary market does not overvalue
an issuer's securities, the managers of the issuer may utilize
Regulation-S to engage in self-dealing and other opportunistic
behavior for their own private benefit at the expense of US
investors. Employing a dataset of 701 offerings conducted pursuant
to Regulation-S from 1993 to 1997, this Article presents evidence
that insider self-dealing may result in a greater offering discount
for certain overseas offerings. Given the specific risks facing
US investors, the Article then argues that the SEC's 1998 reforms
to Regulation-S represent only an untailored response. Instead,
the Article recommends specific reforms that both reduce the
risk facing US investors and lessen the regulatory burden on
offshore securities offerings that pose little risk of investor
abuse.
The Informational
Effect of an Offshore Securities Offering:
Evaluating the Risk to US Investors...download
PDF
By STEPHEN J. CHOI University of California, Berkeley; University
of Southern California - Law School
Overview: School of
Law Center for the Study of Law and Society University of
California Berkeley, California 94720 The Informational
Effect of an Offshore Securities Offering: Evaluating the
Risk to US Investors. [Prepared for the Washington University
Law Quarterly 1999-2000 F. Hodge O'Neal Corporate and Securities
Law Symposium].
Assessing the Cost of Regulatory
Protections:
Evidence on the Decision to Sell Securities Outside the United States
...download PDF
By STEPHEN J. CHOI University of California, Berkeley; University
of Southern California - Law School
Overview: This paper
examines the factors that affect the decision of US companies
to issue securities offshore compared with inside the
United States. Utilizing a data set of 1,444 domestic private
placements and offshore offerings from 1993 to 1997, the paper
reports that firms that experienced a private securities fraud
lawsuit in the past resort to foreign sources of capital more
frequently. Similarly, companies in standard industrial classification
groups that are targeted more often with private securities
fraud litigation are also more likely to issue securities
offshore than to conduct domestic private placements. Not
all issuers, however, choose to exit the US regime. The paper
employs past experience with a SEC investigation as a proxy
for the amount of risk that the issuer may pose to investors.
Issuers with private securities fraud litigation experience
that also encountered a past SEC investigation are more likely
to raise capital through a domestic offering, consistent with
the hypothesis that some issuers choose to raise capital in
the United States when the bonding and signaling value of
the US legal liability regime outweighs the costs associated
with anti-fraud liability.
Investing Abroad:
Regulation-S and US Retail Investment in Foreign Securities...download
PDF
By S. ERIC WANG Harvard Law School
