The Foundations of Securities Law

Abstract

How does the law address topics such as the sale and trade of securities and the regulation of stock exchanges and investment firms? Given the growing importance of capital markets, securities law is highly relevant, but unfortunately also quite complicated. This complexity is also reflected in its literature; reading about securities law, one may relate to Brian Cheffins' chess analogy: Since everyone is expected to be familiar with the first fifty moves, authors often just write about the end game. Therefore, there is a need to explain the first fifty moves, i.e. the very foundations of securities law. Part I of this paper describes when and how securities markets evolved. Part II discusses the relationship between market and bank financing. Parts III and IV outline which types of securities and stock exchanges exist. Part V addresses how (and to what extent) securities law has been harmonised, in particular in the European Union. Part VI concludes.

Most parts of this paper are descriptive. However, it also refutes the frequent claim that only in Common Law countries securities markets are important and investors well protected. The origins of securities markets are partly continental European (namely Italian and Dutch), and there are a number of common trends which concern most countries of the world. Moreover, the foundations of securities law are relatively similar across countries, as will be demonstrated in this paper.

Keywords: securities law, securities regulation, securities markets, stock exchanges, corporate finance, shares, bonds, warrants, Asset-Backed Securities, Alternative Trading Systems, internalisation, EU securities law, international securities law, history of securities law, market finance

JEL Classification: D53, F30, G24, G30, G38, K22, N20, N40, O16, P50