...an accelerating pace of such transnational investing and offerings. An important component of these developments are the scope of mandatory disclosure requirements that issuers must satisfy to list their securities for trading or to conduct their offerings in a country.

Under the current system of securities law, issuers need to comply with the disclosure requirements prescribed by the regulations of the country in which it proposes to make the share offerings. The rapid growth in international portfolio investment and globalization has forced us reexamine the fundamental premise of regulation: the territorially based scope of national securities laws. The benefits of cross-border share offerings have triggered the search for an alternative system of securities law, which would encourage the growth cross-border portfolio investments.

There are three different approaches that have been promulgated by researchers namely, multinational/trans-national regulations approach, multiple disclosure standards approach and uniform minimum disclosure approach. Recently, there have been a few instances of practical applications of these approaches, the most noteworthy of which are the single European market plan and the IOSCO proposal. This article attempts to bring forth the salient features of these two attempts; and in conclusion it is hoped that other nations are inspired from these two examples and aspire to establish a uniform disclosure norm for public share offering across the globe.

KEYWORDS: Cross-border, Share-offerings, International Securities laws

I. Introduction

The world has witnessed an unprecedented growth of international trade and investments. Foreign investments are generally classified in the following categories-

1) International Direct investment

In this type of foreign investment, the investor invests directly by through capital investment and establishing a business in the foreign country. This may be in the form of joint venture with local investors or a solely owned enterprise. In this form of investment the investment is direct, as the investors have control over the direction and management of that company.

2) International Portfolio investment

In this type of foreign investment, the investor acquires ownership interests (such as shares) in a company located in a foreign country, but does not have control over the direction and management of that company. The company, the shares of which are being acquired, may be a public company or private company. (1)

The subject of this research paper is the second form of foreign investment i.e. international portfolio investment (also referred to as 'cross-border portfolio investment'). This form of investment may be either through private equity placements or through public offering of shares. (2) In the former, the company faces minimal disclosure regulations because such transactions are treated as private commercial matters and as there is no substantial public interest involved. However, public offering of shares is subject to applicable disclosure regulations and the scope of this article is limited to this type of cross-border investments.

A brief synopsis of each part in the rest of article is given below-

In part II--'Current Trends towards International Portfolio Investment', I submit that there has been an enormous increase in cross-border investment and have discussed the factors that have initiated this trend.

In part III--'Regulatory and Legal issues in Cross-border Share Offerings', I have discussed the objective of securities laws and submit that mandatory disclosure regulations across the globe, seek to achieve certain universally accepted goals. I further put forth that, by and large, cross-border share offering are governed by the regulations of the country where the company intends to make the offering. I have also discussed the dilemmas faced by nations in drafting the disclosure regulations for share offerings within their jurisdiction.

In part IV--'The System of Securities Law', I argue that the present territorially based system of securities law is an impediment for international portfolio investments. I have put forth three approaches that have been postulated by scholars around the globe as a replacement to the existing system of territorially based securities law and have discussed the merits in these approaches.

In part V--'Instances of Regulatory Co-operation', I have introduced the reader to some important instances where nations have attempted to facilitate cross-border share offering through regulatory co-operation.

In part VI--'Features of the new Prospectus directive and analysis of the IOSCO proposal', I have attempted to capture the salient features of the new prospectus directive and the IOSCO proposal. I have also attempted to highlight the drawbacks of the IOSCO proposal.

II. Current Trends towards International Portfolio Investment

Historically, whenever companies required additional funds, they acquired it either by through loans or by selling ownership interest in the company (sale of shares). (3) In either case, companies predominantly sought finance from within the country of incorporation.

However, in the last 15 years, the world has witnessed dramatic changes in business and political environment, which has created a global environment which is conducive for cross-border investments. More and more companies now look for capital beyond home country's borders home country's borders. (4) There is now a growing trend amongst companies to raise capital by issuing securities in capital markets of foreign countries. This is done by listing their shares on foreign exchanges and inviting foreign investors to subscribe to the shares of the company.

1) Reasons for growth of cross-border portfolio investments

There are various factors that have triggered the growth of cross-border investments. Factors such as current account deficits (5) amongst nations, the growth of international trade, rapid technological environment and the concomitant need for businesses to manage foreign-currency exposure, and increased awareness of the benefits of international portfolio investments are some of the more immediate reasons for the growth of cross-border portfolio investments. (6) Supplementing these factors is the general global trend towards open market and liberalization in which more and more countries are relaxing their foreign exchange control regulations and doing away with restrictions on foreign ownership of assets. The confluence of all these factors, have created an economic and political environment that has fostered the growth of cross-border portfolio investment.

International portfolio investment is beneficial to both, the investors as well as the company. International portfolio investment is lucrative for investors, as they can invest in developing markets and earns quick dividends from the rapid growth of companies in these developing markets. From the standpoint of the companies, international portfolio investment enables them to access established capital markets and target better sources for finance. This is because many countries do not have a developed capital market and the companies located in such countries are inhibited in their access to established capital markets. Therefore these companies seek to raise capital from established capital markets of other countries.

Other factors that have contributed to the to the increase in international portfolio investments are the record numbers of initial public offerings by companies, the explosive rise of stock markets, the on-going technological revolution that facilitates research and the use of personal computers to explore investment opportunities in the global markets. In conclusion I submit that the phenomenon of cross-border portfolio investment is a market response to the needs of both issuers and investors. (7)

III. Regulatory and Legal issues in Cross-border Share Offerings

1) Introduction

The next important issue to be discussed is the laws and regulations applicable to cross-border share offering. In this context, it is pertinent to note that the...

NOTE: All illustrations and photos have been removed from this article.



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