The Law of Non-Existent Markets

Written by: Todd Stevens

International borders are increasingly blending together in the corporate world, so it would seem natural that this would also be the case in corporate law. However, this is frequently far from reality, as securities regulations across the world often reveal themselves to be a patchwork quilt of individual legal systems struggling to interact. Such was the picture painted by Michael Mann, former first director for the Office of International Affairs at the SEC and current partner in the Washington, D.C. office of Richards Kibbe & Orbe, who spoke on the global regulation of financial markets at Chicago-Kent this past Thursday.

“One of the interesting things about international securities markets is that there is no such thing,” Mann said, introducing his presentation. “(The markets) are run by domestic bodies administering domestic laws.”

Having framed the international securities world in this light, Mann went on to emphasize the importance of individual relationships in international securities law. As securities markets differ from country to country, businesses are forced to work with different legal structures in each individual market. Thus, it is incredibly important to remember one’s position in any international business arrangement. An expert in the United States market is not necessarily an expert in the Chinese market, and being successful in the field of securities requires strong, mutually beneficial relationships with legal partners across the globe.

Mann went on to set up an outlook for the future. In the wake of the Supreme Court’s Morrison v. National Australia Bank decision, it is much harder to gain jurisdiction in the United States, even when presented with a company that has significant US contacts. This situation makes it all the more important for firms and their legal departments to focus on how they develop their own internal rules, making sure that they are prepared to deal with foreign legal systems as needed.
More importantly, attorneys working in securities markets need to communicate with utmost clarity the issues confronting clients who want to operate internationally so they can shield themselves against potentially hazardous foreign regulations.

“We need to make sure there’s an understanding in our customer of the rules of the marketplace,” Mann said.

On a grander scale, Mann said that the Morrison decision may offer an opportunity to take a new look at the international securities arena and retool it into something friendlier and more efficient, citing past compromises on insider trading law made by the United States and Switzerland as a possible example.
Similar concessions worldwide would be necessary to create an improved setting. As Mann stated, “If the marketplace is ever going to become internationalized, we need to redraw the jurisdictional boundaries… so that people can protect themselves as they so desire.

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