Abstract
This chapter sheds light on the current debate on public versus private enforcement of securities regulation in Europe. An integral part of that debate concerns whether securities law should be enforced by public authorities, private parties, or a mix of both. However, for enforcement to be effective, a combination of public and private enforcement is crucial for ensuring a robust capital market. As this chapter illustrates, the EU suffers from several shortcomings in the private enforcement structure, including the diversity in the law governing prospectus liability and diversity in collective redress mechanisms.
In this chapter, we argue that theoretical analysis of private enforcement is heavily influenced by the US debate and the specific legal and institutional features of the class action lawsuit. We highlight the importance of analysing the trade-offs associated with secondary market securities class actions in a securities law framework that differs significantly from the EU with regard to the mandatory disclosure and civil liability rules. The divergent market characteristics and civil procedure rules complicate the comparative analysis. To be sure, this analysis not only has theoretical implications but is of practical relevance for policymakers concerned with the design and implementation of an optimal securities law enforcement structure across Europe.
The analysis in this chapter focuses on liability rules, which also have implications in the context of the debate about the harmonisation of the enforcement infrastructure. We argue that the introduction of more intense harmonisation does not always result in a general improvement in the enforcement environment, with the consequence that the imposition of the same rules, with different institutional backgrounds, increases the differences in markets. We argue that more intense harmonisation should complement changes in the general institutional framework. In sum, to allow investors to litigate their direct losses collectively, lawmakers will need to make changes in national civil procedure rules, such as discovery, access to information held by competent authorities, and fee-shifting, to help strengthen the private law enforcement framework.