Amendments to the Exchange Act In the nearly twelve decades

  3. Main Amendments to the Exchange Act In the nearly twelve decades since the enactment of the German Exchange Act (1896), the world as su...

 

3. Main Amendments to the Exchange Act In the nearly twelve decades since the enactment of the German Exchange Act (1896), the world as such and the exchanges in particular have witnessed major changes in the economic, social, and political environment. It is no surprise, then, that the German Exchange Act has been subject to changes, too. The following overview presents the most important amendments: 155 Bekanntmachung der Neufassung des Börsengesetzes, July 17, 1996, BGBL. I at 1030-46 (Ger.). 156 Bekanntmachung der Neufassung des Börsengesetzes, Sept. 9, 1998, BGBL I at 2682- 2700 (Ger.). 157 See Fleckner, Gesetzgebung, supra note 10, for the legislation on stock corporations (Aktiengesellschaften).

 158 For overviews, see, for example, Klaus J. Hopt, Capital Markets Law, in MAX PLANCK ENCYCLOPEDIA OF EUROPEAN PRIVATE LAW, supra note 4, at 141-45; Lars Klöhn, Kapitalmarktrecht, in EUROPARECHTLICHE BEZÜGE DES PRIVATRECHTS § 6 (Katja Langenbucher ed. 2008) (Ger.). 159 See Fleckner, Exchanges, supra note 4, 660-61. 546 Virginia Law & Business Review 7:513 (2013) a) Reform of 1908.160 The reform of 1908 overhauled, most notably, the law of derivatives trading after the original concept had proved to be a complete failure. Although the economic and political crises of the decades following the 1908 reform (including the two world wars) led to a great number of individual measures, the Exchange Act and its regulatory approach remained largely unchanged. This is probably not a testament to the quality of the revised Act and the isolated interventions on the financial markets, but rather an indication of the fact that the Act’s content mattered little in the context of the problems that the exchanges and their surroundings faced in that period. b) Exchange Listing Act of 1986. 161 The first fundamental revision of the Exchange Act brought the Exchange Listing Act of 1986. The Act had two objectives: First, it implemented into German law the requirements of the Listing Directive (1979)

,162 the Prospectus Directive (1980),163 and the Interim Report Directive (1982).164 Second, the Act introduced a new market segment (Geregelter Markt) to facilitate the access of small businesses to the capital markets. This reform also brought an Exchange Admission Regulation (Börsenzulassungs-Verordnung) into force that specifies the requirements of the Exchange Act for the admission of securities to exchange trading.165 c) Reform of 1989.166 The most important change that came with the reform of 1989 was the introduction of the “derivatives trading capacity by virtue of information” (Termingeschäftsfähigkeit kraft Information). In addition, the 160 Gesetz, betreffend Änderung des Börsengesetzes [G], May 8, 1908, RGBL. at 183-94 (Ger.). 161 Gesetz zur Einführung eines neuen Marktabschnitts an den Wertpapierbörsen und zur Durchführung der Richtlinien des Rates der Europäischen Gemeinschaften vom 5. März 1979, vom 17. März 1980 und vom 15. Februar 1982 zur Koordinierung börsenrechtlicher Vorschriften (Börsenzulassungs-Gesetz) [G], Dec. 16, 1986, BGBL. I at 2478, 2478- 83 (Ger.). 162 Council Directive 79/279 of 5 March 1979 coordinating the conditions for the admission of securities to official stock exchange listing, 1979 O.J. (L 66) 21-32 (EC). 163 Council Directive 80/390 of 17 March 1980 coordinating the requirements for the drawing up, scrutiny and distribution of the listing particulars to be published for the admission of securities to official stock exchange listing, 1980 O.J. (L 100) 1-26 (EC). 164 Council Directive 82/121 of 15 February 1982 on information to be published on a regular basis by companies the shares of which have been admitted to official stockexchange listing, 1982 O.J. (L 48) 26-29 (EC). 165 Verordnung über die Zulassung von Wertpapieren zur amtlichen Notierung an einer Wertpapierbörse (Börsenzulassungs-Verordnung—BörsZulV), Apr. 15, 1987, BGBL. I at 1234-54. 166 Gesetz zur Änderung des Börsengesetzes [G], July 11, 1989, BGBL. I at 1412, 1412-16 (Ger.). 7:513 (2013) Stock Exchange Law 547 Exchange Act was brought in line with changes in daily life, specifically the ongoing automation and the increase in cross-border trading. Last but not least, European law again demanded some changes to meet the requirements of the amendments to the Prospectus Directive (1987).

167 d) Second Financial Market Promotion Act of 1994. 168 The Second Financial Market Promotion Act of 1994 established a central act for the regulation of the capital markets, the Securities Trading Act (Wertpapierhandelsgesetz), 169 and a national regulatory authority, the Federal Supervisory Office for Securities Trading (Bundesaufsichtsamt für den Wertpapierhandel), now the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). 170 The Second Financial Market Promotion Act implemented the Transparency Directive (1988)171 and the Insider Trading Directive (1989).172 A decade ago, the Transparency Directive and the three Directives mentioned at the beginning (of 1979, 1980, and 1982) were consolidated in a new directive (2001)173 that, in turn, has been overhauled in the meantime (2004).174 The Insider Trading Directive has been replaced by the Market Abuse Directive (2003).175 The creation of a Securities Trading Act and a regulatory agency on the federal level had a major impact on the relevance of the Exchange Act and its application by the states in which the exchanges are located. It is true that the 167 Council Directive 87/345/EEC of 22 June 1987 amending Directive 80/390/EEC coordinating the requirements for the drawing-up, scrutiny and distribution of the listing particulars to be published for the admission of securities to official stock exchange listing, 1987 O.J. (L 185) 81-83 (EC). 168 Gesetz über den Wertpapierhandel und zur Änderung börsenrechtlicher und wertpapierrechtlicher Vorschriften (Zweites Finanzmarktförderungsgesetz) [G], July 26, 1994, BGBL. I at 1749, 1760-70 (Ger.). 169 Id. at 1749-60. 170 BAFIN, Federal Financial Supervisory Authority, http://www.bafin.de/EN (last visited Feb. 13, 2013). 171 Council Directive 88/627 of 12 December 1988 on the information to be published when a major holding in a listed company is acquired or disposed of, 1988 O.J. (L 348) 62-65 (EC). 172 Council Directive 89/592 of 13 November 1989 coordinating regulations on insider dealing, 1989 O.J. (L 334) 30-32 (EC). 173 Directive 2001/34 of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities, 2001 O.J. (L 184) 1-66 (EC). 174 Directive 2004/109 of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC, 2004 O.J. (L 390) 38-57 (EC). 175 Directive 2003/6 of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse), 2003 O.J. (L 96) 16-25 (EC). 548 Virginia Law & Business Review 7:513 (2013) Exchange Act was never supposed to settle all questions arising in the context of stock exchanges in one single codification. Therefore, policymakers had no reservations about removing regulatory matters from the Exchange Act as early as eleven months after its adoption.176 The Second Financial Market Promotion Act of 1994, though, was a major blow to the Exchange Act’s weight when it implemented the new European requirements by virtue of the newly created Securities Trading Act and not as part of the already existing Exchange Act. Admittedly, the Second Financial Market Promotion Act also added regulatory issues to the Exchange Act, such as the establishment of a market surveillance unit at the exchanges. But at the same time, it transferred important matters from the Exchange Act to the Securities Trading Act, for instance concerning the duties to immediately disclose relevant new information to the public (Ad hoc-Publizität). e) Third Financial Market Promotion Act of 1998.177 The Third Financial Market Promotion Act of 1998 provided for a revision of the prospectus regime, among other matters. f) Fourth Financial Market Promotion Act of 2002. 178 As already mentioned, the Fourth Financial Market Promotion Act of 2002 replaced the old Exchange Act of 1896 with a revised new version. The most visible change in the regime was the abolition of the official exchange brokers (amtliche Kursmakler). The law of derivative trading was once again put on a new conceptual basis and, on this occasion, transferred to the Securities Trading Act. A remarkable oddity was the regulation of alternative trading systems within the Exchange Act. g) MiFID Implementation Act of 2007.179 The last fundamental reform came with the MiFID Implementation Act of 2007; this Act led, once again, to a new Exchange Act that replaced the one of 2002. The most striking changes are the unification of the formerly two market segments at the exchanges and, in the Securities Trading Act, the revision of the rules for alternative trading systems. The name of the reform act speaks for itself with regard to its back- 176 Sections 70-74, regarding brokerage services, of the Exchange Act of 1896 were transferred to Sections 400-05 of the Commercial Code of 1897. See Börsengesetz, June 22, 1896, at §§ 70-74; HANDELSGESETZBUCH, May 10, 1897, at §§ 400-05. 177

 Gesetz zur weiteren Fortentwicklung des Finanzplatzes Deutschland (Drittes Finanzmarktförderungsgesetz) [G], Mar. 24, 1998, BGBL. I at 529, 529-32, (Ger.). 178 Gesetz zur weiteren Fortentwicklung des Finanzplatzes Deutschland (Viertes Finanzmarktförderungsgesetz) [G], June 21, 2002, BGBL. I at 2010, 2010-28 (Ger.). 179 Finanzmarktrichtlinie-Umsetzungsgesetz, July 16, 2007, BGBL. I at 1330, 1351-68, (Ger.). 7:513 (2013) Stock Exchange Law 549 ground: the MiFID Implementation Act aims to implement the aforementioned MiFID, the directive on markets in financial instruments (2004).180 The MiFID succeeded the Investment Services Directive (1993),181 and is further specified by a Commission Regulation (2006)182 and a Commission Directive (2006). 183 The MiFID mandates the member states to provide for rules that govern “regulated markets,” 184 a term that the Directive defines at its outset, 185 and to establish national authorities that supervise such markets. 186 Unlike the older directives, the MiFID directly affects the organization of the exchanges, though it does not prescribe a certain structural form that all European exchanges have to adopt.