Eilis Ferran

Principles of Corporate Finance Law

This book explores the relationship between law and corporate finance. Corporate finance theory seeks to understand how incorporated firms address the financial constraints that affect their investment decisions by using varied financial instruments that give holders different claims on the firms assets. Recent scholarship in this area explores precisely how legal mechanisms affect corporate finance and the development of financial markets. The legal environment is crucially important in explaining the choices that companies make about their capital structure. The book examines the key elements of the legal environment relating to corporate finance in the UK. This evolving environment has just undergone a remarkable period of far-reaching change. This was driven in part by the desire of the UK government to modernise its domestic company law, and in part by policy choices at the EU level which rely heavily on the adoption of new regulation to promote closer integration of European financial markets. In this book, Eilis Ferran provides a detailed analysis of the technical issues arising from the new UK and European law on corporate finance, and combines this with exploration of the broader policy framework and with cutting edge research.

After the Crisis: The Regulation of Hedge Funds and Private Equity in the EU

This article examines the recent development of EU regulatory policy with respect to the alternative investment industry up to and including the adoption of a major new Directive. This Directive is just one part of a much larger package of new EU measures relating to the financial markets but its emergence merits being singled out for three reasons. First, the account of how it came about and what it sets out to do touches upon two overarching concerns that are frequently expressed about laws that are made in the immediate aftermath of a crisis: opportunistic use of crisis situations to achieve unrelated goals, and crisis-induced regulatory overreaction. Second, with the regulation of alternative investments being addressed internationally as well as in Europe, close examination of this area provides revealing glimpses of ways in which key players in the EU policy formation process have simultaneously used the financial crisis to exert influence internationally and used international developments to further an internal agenda. Finally, out of the exceptional level of controversy that surrounded the legislative process for the Directive come some important insights on relations between the EU Institutions and, in particular, on the European Parliament’s increasing deftness in putting its mark on EU financial market regulation.

Can Soft Law Bodies be Effective? Soft Systemic Risk Oversight Bodies and the Special Case of the European Systemic Risk Board

The global response to the financial crisis has included the establishment of new, or significantly revamped, institutions specifically dedicated to the task of overseeing systemic risk. Internationally, the Financial Stability Forum has morphed into the Financial Stability Board (FSB) and has been given a broader mandate. In Europe, a new body, the European Systemic Risk Board (ESRB), has been assigned the role of monitoring and assessing systemic risks. National systemic risk oversight bodies are being set up as well. Strengthening and reinforcing are words that feature prominently in many policy statements relating to these institutional developments but many of these bodies, including the FSB and the ESRB, are designed to operate without legally-binding powers. This raises questions about how powerful they will actually prove to be. In this article we suggest that lack of formal power need not prevent systemic risk oversight bodies from acting in a credible and authoritative manner. We draw on existing experience of soft laws and institutions in international financial regulation to support this assessment. However, we also acknowledge that softer approaches have been shown to have weaknesses, particularly with respect to surveillance and enforcement. We suggest that the financial crisis has highlighted the limits of what can be achieved through informal methods and the importance of exploring harder alternatives. We consider what the ESRB in particular can learn from the wealth of accumulated experience at the international level with respect to both strengths and weaknesses of an informal approach. At the same time, we emphasise that there is much about the ESRB’s structure that is special because of its place within the EU constitutional and legal framework and in respect of which lessons drawn from international level experience do not pertain. We explore the implications of the ESRB’s special situation. Close connections to bodies with formal power may enhance the ESRB’s effectiveness. On the other hand, this capacity to have hard effect could also inhibit the ESRB. The net result could be the loss of some of the advantages, such as flexibility and willingness to experiment, that are associated with a softer approach. An edited version of this article, entitled ‘Can Soft Law Bodies be Effective? The Special Case of the European Systemic Risk Board’, which focuses mainly on the ESRB and European law, is forthcoming in the European Law Review (December 2010).

Regulatory Lessons from the Payment Protection Insurance Mis-selling Scandal in the UK

Why has the cycle of product mis-selling, widespread consumer detriment, complaints and (eventually) the imposition of penalties and the securing of redress from the finance industry proved to be so hard to break? This paper examines the payment protection insurance (PPI) mis-selling scandal in the UK with a view to identifying whether the Financial Services Authority’s experience in that matter is bringing the UK any closer to finding regulatory solutions that are likely to produce a meaningful advance in curbing mis-selling problems. The FSA has said that its actions taken in the PPI market illustrate the type of intervention that its successor, the Financial Conduct Authority, can be expected to make.

Corporate Law, Codes and Social Norms—Finding the Right Regulatory Combination and Institutional Structure

UK corporate regulation ranges from detailed rules set out in primary legislation and supported by civil and criminal sanctions, through to non-legally enforceable, but commercially powerful, guidelines or norms developed by market participants. The general review of company law that took place between 1998 and 2001 included a re-examination of the sources of corporate regulation and the institutional framework. Current reform proposals include reorganisation of the sources of regulation and the establishment of a new regulatory infrastructure based on existing institutional arrangements for financial reporting. Whilst the proposals may result in a more coherent institutional framework, this paper suggests that they mark a shift towards greater state control of regulation, and addresses the concern that there may be a loss of advantages commonly associated with market-based regulation. The paper also highlights the significance of the continuing preference for criminal sanctions in shaping reform proposals concerning the sources of corporate regulatory rules.

Are US-Style Investor Suits Coming to the UK?

The UK has enacted a new dedicated civil liability regime in respect of issuer disclosures. This article considers how this regime in UK securities law shapes up when compared to equivalent remedies in Canadian and Australian securities laws and when set against the backdrop of current US debate on reforming investor actions. The article demonstrates that a number of investor-unfriendly features have been included in the new UK civil liability regime. When these features are considered alongside an established civil procedure system that provides only limited scope for collective redress, a clear prediction emerges: the UK is unlikely to see a surge of investor claims alleging issuer disclosure failures. The new regime reflects a policy preference for public over private enforcement. One consequence of the approach that has been adopted is that the new regime is not well designed to fill the gap should public enforcement efforts under-deter.

Floating Charges—The Nature of the Security

Companies depend upon loan finance as one of their major sources of capital. However, banks and other financial institutions involved in the business of lending money to companies generally ensure that their exposure to the risk of non-repayment is minimised by taking security over the debtor companys property. One particularly important type of security which is available when money is lent to a company is the floating charge.

The Oxford Handbook of Financial Regulation

The financial system and its regulation have undergone exponential growth and dramatic reform over the last thirty years. This period has witnessed major developments in the nature and intensity of financial markets, as well as repeated cycles of regulatory reform and development, often linked to crisis conditions. The recent financial crisis has led to unparalleled interest in financial regulation from policymakers, economists, legal practitioners, and the academic community, and has prompted large-scale regulatory reform. The Oxford Handbook of Financial Regulation is the first comprehensive, authoritative, and state-of-the-art account of the nature of financial regulation. Written by an international team of leading scholars in the field, it takes a contextual and comparative approach to examine scholarly, policy, and regulatory developments in the past three decades. The first three Parts of the Handbook address the underpinning horizontal themes which arise in financial regulation: financial systems and regulation; the organization of financial system regulation, including regional examples from the EU and the US; and the delivery of outcomes and regulatory techniques. The final three Parts address the major reoccurring objectives of financial regulation, widely regarded as the anchors of financial regulation internationally: financial stability; market efficiency, integrity, and transparency; and consumer protection. The Oxford Handbook of Financial Regulation will be an invaluable resource for scholars and students of financial regulation, and for economists, policy-makers and regulators. Contributors to this volume - Kern Alexander is the Chair of Law and Finance at the University of Zurich, and Senior Research Fellow at the Centre for Financial Analysis & Policy, University of Cambridge. John Armour is the Hogan Lovells Professor of Law and Finance at the University of Oxford and a Fellow of Oriel College. Douglas Arner is a Professor in the Faculty of Law of the University of Hong Kong and Co-Director of the Duke University-HKU Asia-America Institute in Transnational Law. Emilios Avgouleas holds the International Banking Law and Finance Chair at the University of Edinburgh. Julia Black is Professor of Law and Pro Director for Research at the London School of Economics Christopher Brummer is Professor of Law at Georgetown University. Simon Deakin is Professor of Law at the University of Cambridge and a Fellow of Peterhouse. Olivia Dixon is a Lecturer in the Regulation of Investment and Financial Markets at the University of Sydney Law School. Luca Enriques is the Allen & Overy Professor of Corporate Law at the University of Oxford, and a Fellow of Jesus College. Michelle Everson is Professor of Law in the School of Law at Birkbeck, University of London. Eilis Ferran is Professor of Company and Securities Law at the University of Cambridge, the University JM Keynes Fellow in Financial Economics, and a Fellow of St Catharines College, Cambridge. Guido Ferrarini is Professor of Business Law and Capital Markets Law at the University of Genoa. Andreas Fleckner is a Senior Research Fellow at the Max Planck Institute for Comparative and International Private Law, Hamburg. Sergio Gilotta is Assistant Professor at the University of Bologna Faculty of Law. Brigitte Haar is the Chair for Private Law, German, European, and International Business Law, Law and Finance, and Comparative Law at the Johann Wolfgang Goethe-University in Frankfurt. Rosa Lastra is Professor in International Financial and Monetary Law at the Centre for Commercial Law Studies, Queen Mary University of London. Iain MacNeil is the Alexander Stone Chair of Commercial Law at the University of Glasgow. Colin Mayer is the Peter Moores Professor of Management Studies at the Said Business School, University of Oxford. Harry McVea is Professor of Law at the University of Bristol. Niamh Moloney is Professor of Financial Markets Law at the London School of Economics and Political Science. Peter O. Mulbert is Professor of Law at the Faculty of Law and Economics, and Director of the Center for German and International Law of Financial Services, University of Mainz and a Fellow of Gutenberg Research College. Eric Pan is Associate Professor of Law at the Benjamin N. Cardozo School of Law, Yeshiva University. Frank Partnoy is the George E. Barrett Professor of Law and Finance at the University of San Diego School of Law. Jennifer Payne is Professor of Corporate Finance Law at the University of Oxford and a Fellow of Merton College. Paolo Saguato is an LSE Fellow in Financial Regulation at the London School of Economics and Political Science. Matt Smallcomb is at Georgetown University School of Law. Dimity Kingsford Smith is Professor of Law at the University of New South Wales. Andrew Tuch is Associate Professor of Law at Washington University Law.

Transatlantic Financial Services Regulatory Dialogue

The EU Financial Markets Dialogue led by the SEC and the European Commission has achieved some notable successes, particularly with respect to the consolidated supervision of financial conglomerates and the development of a plan to achieve convergence in corporate financial reporting. On both sides of the Atlantic, there is a clear ongoing commitment to the dialogue as a key mechanism for the development of efficient and credible regulatory solutions that guarantee effective investor protection and a high level of business efficiency. This paper reports on a two-day roundtable discussion that took place at Cambridge University in September 2005 to explore ways in which the academic community can contribute to this transatlantic debate. Lively discussion between the policy-makers, regulators, market participants and academics who attended the roundtable yielded a number of thematic concerns, which, the paper suggests, could form the basis of a programme for further work. Finally, the paper announces the establishment of a seminar series, to be based in the United Kingdom, on the Transatlantic Financial Services Regulatory Dialogue and invites contributions.

The Role of the Shareholder in Internal Corporate Governance: Enabling Shareholders to Make Better-Informed Decisions

Europe has historically lagged behind the United States in viewing the primary role of company law as being to facilitate the operation of businesses in corporate form. In this respect, the report of the High Level Group of Company Law Experts (HLG) to the European Commission of November 2002 marks a distinct break with the past.In facilitative corporate law systems, disclosure is a key mechanism for the regulation of corporate governance agency problems. This paper questions the merits of singling out directors’ disqualification as a pan-European sanction for the enforcement of corporate governance disclosure requirements. It argues that a more effective strategy for promoting consistency in enforcement could be to pay closer attention to the institutional allocation of regulatory responsibilities for corporate governance disclosure. It suggests a model in which responsibility for the monitoring and enforcement of corporate governance disclosure is located with securities regulators. Making securities regulators the primary regulators of corporate governance disclosure would promote pan-European consistency in monitoring and enforcement.Looking beyond disclosure to the actual exercise of internal control by shareholders, this paper also casts a sceptical eye over the HLG’s views on the need for urgent EC intervention to address the problem of investor disenfranchisement. British market participants have made ingenious use of proxy mechanisms to ensure that underlying investors retain control over the exercise of voting rights attached to shares held on their behalf by nominees. This evidence suggests that the case for EC company law intervention to address problems that the market has proved unable to solve is weak. While the situation may be different in other Member States, the existence of such differences militates against top-down EC intervention.