Securities Legislation Research Articles

Investment tokens as financial market tools

The rapid evolution of the digital financial asset market and its growing integration with traditional financial instruments, coupled with its global reach and unrestricted cross-border capital mobility, necessitate a thorough research of these market instruments. Specifically, it calls for an assessment of their potential as alternatives to conventional financial instruments. At the same time, there are many factors contributing to an increased risk of regulatory gaps in the financial market: structural vulnerability of the market of digital financial assets, high volatility of the value of crypto-assets, low transparency, the possibility of a spillover of risks from the market of digital financial assets to other financial markets, as well as the lack of regulatory consensus among financial regulators in the countries of the world. The research objective is to determine the role of investment tokens in today’s financial market, their utility in attracting investment resources on blockchain-based trading platforms, and the nuances of their classification as securities. The article delves into the core concepts and intricacies of regulating securities tokens and analyses quantitative metrics depicting the development of the investment token market and its relative share in the global financial market compared to other financial assets. Notably, the author outlines key criteria for securities regulators to consider when determining whether tokens should be classified as securities. The article reveals the main models of the initial offering of investment tokens, highlights their features, and shows their adaptability to changing conditions within the digital financial asset market and the evolving needs of market participants. It is evident that all current models for raising funds through investment tokens, including IEO, IDO, and STO sub-models, trace their roots back to the Initial Coin Offering (ICO) model and, fundamentally, do not differ significantly from traditional capital-raising models such as Initial Public Offering (IPO) and Secondary Public Offering (SPO) in traditional financial markets. This substantiates the need for global financial regulators to take actions aimed at officially classifying investment tokens as securities. Expanding securities legislation requirements to encompass issuers of investment tokens, particularly concerning information disclosure, promises to mitigate instances of fraud within the digital financial asset market. Such measures would fortify investor protection and reduce the vulnerability of financial markets as a whole.

Legal regulation of the use of distributed ledger technologies in financial sector of Singapore

Singapore is one of the leading countries in digitalization and blockchain technology. Since 2016, Singapore has implemented the Ubin project to create a national digital currency. In 2019, Singapore passed the Payment Services Act. The paper aims to analyze Singapore's legislation and MAS policies and identify approaches that can be used to improve legislation in other states. To meet that aim, the general scientific techniques and methods of scientific cognition, such as analysis, synthesis, deduction, induction, system-structural and formal-logical approaches are utilised. Based on the analysis, it is concluded that Singapore extends the provisions of securities legislation to digital tokens, which have the characteristics of securities or futures. Digital tokens, which are cryptocurrencies, are regulated by the Payment Services Act containing criteria to distinguish payment tokens from other virtual objects. Using this approach minimizes difficulties in regulating the circulation of, for example, bitcoins. In addition, MAS has developed a set of rules enshrining requirements for cryptocurrency exchanges, which reduces the risks of fraud and money laundering using cryptocurrencies. The paper also analyses MAS reports on developing a state's digital currency. The paper concludes that other states can use Singapore's experience to shape or modernize their legislation.

Assessing the impact of globalization on stock market in Ukraine

The article is devoted to studying the impact of globalization processes on the development of national economies. In particular, the indicators of assessing the impact of globalization on financial and non-financial indicators of countries' development are considered. Attention is paid to the place of Ukraine in the KOF Globalization Index 2020 ranking, namely in terms of economic, social, and political globalization. The author has formed three groups of indicators that allow assessing the influence of globalization on the securities market of a country. The first group includes indicators that help determine the degree of integration of the national securities market into the global one. The second group includes indicators that determine the extent to which domestic securities legislation and principles of securities market regulation are adapted to international standards. The third group of indicators is aimed at quantifying the impact of trends in the global securities market on the national. The article examines the impact of one of the indicators of the third group on the securities market of Ukraine. In particular, the correlation analysis of the relationship between the Ukrainian PFTS index and the indices of American, British, European, and Polish stock markets was conducted. The author made conclusions about the availability of the significant correlation between global stock indices, as well as the weak impact of global securities market trends on the dynamics of the Ukrainian market. It was also revealed during the analysis, that the level of correlation between indices depends on whether the financial market is in crisis. Particularly, the analysis covered three periods: the 2008-2010 financial crisis, the 2020-2021 Covid-19 crisis, and the 2010-2020 period between the crises.

《证券法》修改背景下中国证券立法的演进与评价 - 证券法基本原则角度的审视 -

《证券法》修改背景下中国证券立法的演进与评价 - 证券法基本原则角度的审视 -

Canada

This paper reviews assessment of financial market infrastructures (FMIs) and authorities’ responsibilities in Canada. The report shows that the FMIs have operated normally under a well-established legal and oversight framework that is distinct for Canada. The Bank of Canada (BOC) has issued a Guideline that defines the criteria for identifying FMIs. Recognition of a clearing agency is also required under provincial securities legislation where terms and conditions and the clearing rule would apply. The current oversight approach can benefit from stronger enforcement powers available to the BOC. Provincial securities regulators are encouraged to train FMI oversight staff in advanced quantitative skills to support risk assessment. Further enhancement in managing liquidity and operational risks will help ensure the robust functioning of FMIs. Improvements in cyber resiliency continue in line with international guidance, including industry-wide exercises carried out by FMI operators and participants. However, compliance to endpoint security needs to be tightened by self-attestations and audits of FMI participants. The categorization and reporting of operational incident severity levels could be further coordinated.

The first leader of the Katerynoslav nobility K. Lalosh

The article is devoted to the court cases of the family of the first (1784–1787) leader of the Katerynoslav nobility Kostyantyn Lalosh. In current researches there is only brief information about his military career and mention of his presence in the regional administration in the 1780s (N. Surieva, L. Tsiganenko). The research is carried out in the context of social history. Such methods as prosopography, biography were applied. The main focus is on the documents of the trial at the Ekaterinoslav chancery court in 1792. The dispute was around the inheritance of Lalosh’s deceased wife, Marfa. Two sides of the conflict were her son from the first marriage, Alexander Ostrogradsky, and from the second marriage – Nikolai Lalosh. The interests of the latter were represented by his father. The materials illustrate the plots of social, everyday history of the region, give a description of the historical and legal traditions of the Left Bank and Southern Ukraine in the last quarter of the XVIII century. In particular, they demonstrate the effect of debt securities legislation, inheritance legislation, marriage and family legislation. Mention is made about the members of the well-known families of the Hetmanate the Lalosh’s wife Marfa was connected to: the Ostrogradsky, the Pikovtsy, the Lizozuby. The case includes the unique documents: the copies of private letters, registers of family expenses and purchases. In addition to this, other cases from other judicial institutions such as the Yekaterinoslav Viceroy’s Board, where K. Lalosch tried to solve the problem of debt, property, inheritance were involved. Documents appeal to Russian imperial legislation, the norms of the III Lithuanian Statute, which continued to exist on the territory of the former Hetmanate. K. Lalosh appealed in his lawsuits to the so-called "Little Russian law", and being of Serbian origin, Russian military personnel. The following legal concepts are mentioned as "materyzna" (mother’s inheritance), "vino" (daughter’s dowry from family property), etc. All this attests to the developed and complex institute of inheritance on the territory of the Left Bank Ukraine, where Lalosh’s wife came from. Family lawsuits illustrate the process of incorporation of the nobility of the Left Bank, Southern Ukraine into the society of the Russian Empire. This happened not only through the service, privileges from the state, but also through satisfaction of property interests, unification of legal institutions. The article substantially complements the data on the first leader of the Katerynoslav nobility and his descendants.

Prospects of Legal Regulation of Crypto Economy and ICO in Russia and Other Countries

This article discusses the key issues of legal regulation of the crypto economy in some countries (USA, Switzerland, France, Russia, Belarus, Israel, and the EU as a whole). Special attention is paid to the legal regulation of ICO as a way to attract foreign investments. The statements of regulatory authorities of different countries are considered; the existing practice of ICO project regulation and the current state of the primary token placement market are analyzed; the aspects of the extraterritorial effect of the U.S. securities legislation are studied, and so are thekey risks for the investor and the creator of an ICO project. A separate paragraphis devoted to the known methods used by law enforcement services (e.g. Europol)to fight money laundering and terrorism financing through criminal cryptocurrencytransactions. As a result of the analysis, taking into account the current practice of combating money laundering, recommendations are made to changethe relevant legislation. In addition, this article discusses the problems of legal uncertainty regarding the taxation of crypto assets. The authors analyzed the currentlegal framework in the Russian Federation aimed at regulating the turnover of crypto assets. In particular, the bill on digital financial assets was considered. The overall conclusion of the study is that, in general, Russia today has the opportunityto become one of the leaders in the new market. Russia ranks second in the world in the number of ICOs, and the country has launched a number of blockchainprojects that are popular around the globe.

BEAUTY PAGEANT OF COMPANIES: A COMPARATIVE STUDY OF PUBLIC ISSUE OF SHARES FOCUSING SRI LANKAN LAW

Public issue of shares, popularly known as IPO (Initial Public Offer), is a method adopted by public quoted companies to raise capital. It is regulated in most of the countries although the standard of regulation differs. Author describes IPO as a beauty pageant since the companies expose themselves by disclosure in order to be selected for the purpose of investment by the public. The regulation of IPO is important due to many reasons, including the involvement of money of the general public and the intangible nature of the financial product that is under issue. The main objective of this study is to analyse the law relating to IPO in Sri Lanka on a comparative analysis in order to identify loop holes. In this regard the comparative jurisdictions selected for this study (United Kingdom and Malaysia) have moved forward by taking away the provisions pertaining to disclosure documents/prospectuses from their companies legislation and have them included under the securities legislation, while Sri Lanka has not done so. The reality, very often, is that the public who subscribe for public issue of shares is not profited because the share prices decline from the purchase price. This is due to shortcomings in the law. The writer finds that the scrutiny mechanism of the regulator/s is unsatisfactory and there is no method adopted to monitor the utilization of funds received by the companies. This research is done mostly using secondary data and a minor part is based on primary data.

Beyond Dirks: Gratuitous Tipping and Insider Trading

Did an investment banker who gratuitously shared material nonpublic information with his brother— with no expectation of receiving anything in return — commit securities fraud? And is the investment banker’s brother-in-law jointly liable for trading securities on the basis of what he knew to be gratuitous tips? The Supreme Court is poised to answer those questions in Salman v. United States, after steering clear of insider trading law for nearly two decades. It has been even longer still since the Court last addressed securities fraud liability relating to stock trading tips; it articulated a “personal benefit” test for joint tipper-tippee liability in 1983 in Dirks v. SEC, a decision reinforcing the “classical” theory of insider trading. In 2015, a circuit split arose as to whether gratuitous tipping constitutes a violation of the antifraud provisions in the federal securities laws, and the Court has granted certiorari in Salman to resolve that issue. This article disagrees with the Second Circuit’s finding that gratuitous tips do not result in a personal benefit and supports the Ninth Circuit’s conclusion that such tips are illegal. But in arguing that gratuitous tips satisfy the personal benefit test, this article draws from a potent combination of four post-Dirks developments in corporate and securities law: 1) the Court’s endorsement of the “misappropriation” theory in United States v. O’Hagan; 2) federal securities legislation in 1984, 1988, and 2012 that evidences Congress's support for an expansive antifraud proscription against insider trading and tipping; 3) the SEC’s decision to effectively ban the practice of selective disclosure through its adoption of Regulation FD; and 4) state court decisions that construe fiduciary disloyalty to include not only self-dealing but also other conscious actions taken by agents in bad faith. These developments should prompt the Court not only to affirm the Ninth Circuit’s decision but also to look beyond Dirks to consolidate the Court’s prior complementary theories of insider trading liability — the classical and misappropriation theories — into a new unified framework that would regard insider trading as a “fraud on contemporaneous traders.”

When do Voluntary Payments Through Mediation under the Promissory Note Take Place?

This paper considers a question of occurrence of a voluntary payment by means of mediation under the promissory note, which depends on the time of occurrence of the holder's right for recourse. Particular attention is given to the judicial practice of application of the debt securities legislation relating to the holder's right of recourse. For the first time it is defined that, on the theoretical level, there is some correlation between the occurrence of the holder's right to a recourse and a voluntary payment as a means of mediation by persons not party to the bill circulation, or those already liable on the bill. In addition, the article touches upon the question of the right of the holder to a recourse and of the conditions for the appearance of such a right in accordance with the provisions of the bill law.

РЕФОРМА ПРАВОВОГО РЕГУЛЮВАННЯ СИСТЕМИ КЛІРИНГУ ТА РОЗРАХУНКІВ ЗА ЦІННИМИ ПАПЕРАМИ В УКРАЇНІ

Recent developments in the regulation of securities clearing and settlement system in Ukraine aimed at harmonization of Ukrainian securities legislation with the European and international regulatory standards are discussed in this article. Attention is focused on the key provisions of the Law of Ukraine “On Depository System of Ukraine” which has become one of the cornerstones of the legislative framework for the securities market regulation. These provisions are compared with the rules of UNIDROIT Convention on Substantive Rules for Intermediated Securities and the level of harmonization of the Ukrainian securities legislation with the international standards is evaluated. Particular attention is paid to the concepts of intermediated securities and intermediaries, the issues of transfer and exercise of the rights in securities and rights attached to securities under the specified Law are explored, as well as the insolvency of intermediaries and its effect on their relations with the securities account holders is scrutinized. Attention is also devoted to the regulation of netting in Ukraine and major innovation introduced in legislation in this respect. The outcomes of the author’s analysis are summarized and general comments are provided as to the degree of finality of harmonization process in the Ukrainian securities regulation and regulation of clearing and settlement systems.

Harmonization of Caribbean Securities Acts - Some Issues for Consideration

The launch of the CARICOM Single Market and Economy (CSME), which inter alia, facilitates the free movement of capital among Member States has implications for the legal and regulatory frameworks governing the financial services sectors. Notwithstanding the Revised Treaty of Chaguaramas and the commitments made by CARICOM Heads of Government, there has not been any serious attempt by Member States to implement harmonized securities legislation to further the integration efforts. This paper seeks to explore some of the issues to be considered in the development and implementation of harmonized securities legislation in CARICOM Member States.

Challenges to the Takeover Early Warning System in the EU: The Case of Germany

The paper shows the regulation of particular duties of investors and issuers in relation to direct or indirect holdings of publicly listed shares, building together an early warning system indicating an imminent change of control in companies.The early warning system is based on several duties, including: (1) the duty to disclose changes in the shareholdings in public companies above and below certain thresholds; (2) the duty to submit a takeover bid after reaching a certain threshold (the so-called controlling stake) or to publish forthwith a decision to launch a voluntary bid; (3) the duty to disclose in a timely manner relevant price-sensitive information in order to prevent insider dealing, as well as not to distribute any misleading information that would manipulate the market. The system is underpinned by the concept of ‘acting in concert’ whereby these three duties can be triggered with respect to more investors acting as a group with a view to acquiring or divesting shares in a company in order to influence the management of the company who would otherwise, individually, remain below the relevant thresholds.The purpose of the early warning system is to protect participants of the capital markets, minority shareholders and other stakeholders (management board members, creditors, employees, local communities, etc). The protection is achieved through increased transparency of the capital markets which enables the timely reaction of all interested parties: either by selling or buying the shares or by the activation of defence strategies before the actual change of control takes place.The paper also comments on recent changes in EU and German secu-rities legislation.

Recognition of the Economic Security in the Form of Assurance Fund as a Protection to Landowners and the Economic Stimulator in Malaysia

The increase of land fraud statistics in Malaysia’s administration system shows that the legal security, at present, is not able to guarantee landowners in the long run. Furthermore, there are registered landowners who are not able to recover their losses due to the stripping of title done erroneously by the government. This occurs due to the Malaysia’s administration system only practices two principles out of the three principles in the Torrens systems, which are the mirror principle and the curtain principle. The retention of these two principles for the last 40 years since the National Land Code came into effect on the 1st January, 1966, and this has revealed the failure of the government in guaranteeing the landowners in the form of the economic security. This can indirectly impact the real estate investment in Malaysia due to the complaints pertaining to the loss of trust in the Malaysia administration system. Based on the studies conducted, we can see that the recognition towards economic security in the form of assurance fund can impact the increase of real estate investment in Malaysia. This can bring benefits not only to land owners as a protection but also towards the increased securities legislation in the form of the Malaysia land administration system, which could attract in an increase in the interest of investors to invest in Malaysia. So, the interviews with the directors of the land office in Peninsular Malaysia, legal practitioners, and insurance companies have been conducted to support this study. The results of this study hopefully will assist our land administration system in creating a form of economic security in order to make our system more guarantees, efficient, and good governance in resolving matters related to land, especially to address the issue of fraud and forgery. Furthermore, it is expected to help the landowners and innocent buyer in seeking protection of economic loss is not due to their own mistakes and to increase the investment in Malaysia.

Use of Cash-Settled Derivatives in Public Takeovers: A Challenge for Legislators, Regulators and Courts

In last couple of years, the activities of certain investors on world capital markets raised controversies as to their duties to disclose shareholdings in publicly listed issuers. These activities involved the use of cash-settled security-based financial instruments, such as call options and swaps, which enabled their holders to conceal their takeover intentions and virtually acquire access to shares in target companies, while staying out of scope of the legislation in force. This was apparently possible since cash-settled financial instruments did not provide their holders with any right either to acquire the referenced shares or to direct the voting under those shares in the general meeting of the target. The non-disclosure of positions in cash-settled financial instruments referencing the target shares left other investors, shareholders and boards of directors without the relevant information on possible changes of control, which might have influenced the target’s stock prices and possible defence strategies in case of a hostile takeover. The question whether these investors violated their duties or not is still unsettled among scholars which is why some states like Germany decided to expressly include these financial instruments in the securities legislation disclosure duties.

Questioning ‘law and finance’: US stock market development, 1930–70

An important tenet of a burgeoning ‘law and finance’ literature is that stock market development is contingent upon corporate law offering ample protection to shareholders. This paper addresses this claim, using as its departure point developments occurring in the United States between 1930 and 1970. It shows that, contrary to what the law and finance literature would predict, during this period and throughout the twentieth century generally the US lacked corporate law that provided extensive protection to shareholders. It also points out that while federal securities legislation introduced in the mid-1930s bolstered investor protection, this reform effort did not energise the stock market in the manner implied by law and finance analysis.

A Study of the Bond/ Debt/Debenture Market in Canada

Historically, the treatment of exchange-traded derivatives under securities legislation has been inconsistent, in part, because of a difference of views as to whether or not they are “securities” or should be treated as such. Derivatives are regulated in Canada through securities regulatory authorities only in the provinces of Alberta, British Columbia, Manitoba, Ontario, and Quebec. Alberta and British Columbia can be grouped together as they take a similar approach. The approach taken by Ontario and Manitoba is also similar, but differs from that taken in British Columbia and Alberta. Lastly, Quebec has recently passed a new Derivatives Act that has introduced yet a third approach to derivatives regulation in Canada. These approaches are summarized below along with other developments that have been undertaken in the past with respect to the regulation of derivatives.this paper seeks to answer the various questions related to the financial market instruments in Canada.

A Historical Introduction to Arizona's Securities Laws

The article recounts the history of Arizona’s securities laws and the distinctly non-federal approach to civil liability that exists under Arizona securities law. Arizona’s first securities legislation was a 1909 bucket-shop act that prohibited betting on price changes in securities and commodities. Three years later, in 1912, Arizona became the second state to enact a blue-sky law. Arizona supplemented the 1912 Act with two more blue-sky laws in 1917 and 1921. These early statutes included registration, licensing, and criminal provisions, but they did not provide for civil liability. In 1951, Arizona’s legislature replaced the blue-sky laws with an entirely new securities act that included statutes that expressly provide for civil liability. The 1951 Act was enacted in the aftermath of highly publicized securities frauds for which existing securities laws provided inadequate civil remedies and criminal penalties. At the federal level, Congress has passed laws that curtail civil actions for securities fraud. Concurrently, the U.S. Supreme Court has repeatedly issued decisions that use strict-statutory interpretation and judicially identified policy considerations to curb civil liability for securities fraud. By contrast, Arizona’s courts have interpreted Arizona’s securities laws to expand civil liability. In interpreting Arizona’s securities laws, the state’s appellate courts have refused to follow federal securities law interpretations that do not advance the policy of investor protection that prompted passage of the 1951 Securities Act.

Questioning 'Law and Finance': US Stock Market Development, 1930-70

An important tenet of a burgeoning 'law and finance' literature is that stock market development is contingent upon corporate law offering ample protection to shareholders. This paper addresses this claim, using as its departure point developments occurring in the United States between 1930 and 1970. We show that, contrary to what the law and finance literature would predict, the US lacked during this period and throughout the 20th century generally corporate law that provided extensive protection to shareholders. We also point out that while federal securities legislation introduced in the mid-1930s bolstered investor protection, this reform effort did not energize the stock market in the manner implied by law and finance analysis.

A Short History of Arizona's Securities Laws: Wildcats, Bucket Shops, and a Radical Bunny

The idea of using government-enforced legislation to protect securities investors was foreign to nineteenth-century thinking. But during the first decade of the twentieth century, interest in state and federal securities legislation developed in several ways. Arizona enacted a bucket-shop law in 1909. A year later, at the 1910 Constitutional Convention, Arizona’s delegates approved a constitutional provision empowering the Corporation Commission to inspect records and investigate corporations that publicly sell stock. In 1912, Arizona became the second state to enact a blue-sky law. The 1912 Act was administered by the newly empowered Corporation Commission. Arizona supplemented the 1912 Act with two more blue-sky laws in 1917 and 1921. These early statutes included registration, licensing, and criminal statutes, but they did not provide for civil liability. To fill the gap, Arizona’s courts judicially implied remedies. In 1951, Arizona’s legislature replaced the blue-sky laws with an entirely new securities act. The 1951 Act included statutes that provide for civil liability of sellers, purchasers, and persons who participate in or induce fraudulent sales. The 1951 Act’s participate-or-induce standard is a defining feature of Arizona’s securities laws. The meaning and application of the standard are among the most litigated issues in Arizona securities law. The article analyzes the major decisions on Arizona’s participate-or-induce standard including five 2011-12 decisions. Aspects of these decisions regarding aiding and abetting under Arizona’s securities laws are also addressed.