Joint Committee on Statutory Instruments Fifteenth Report



APPENDIX II

Memorandum by HM Treasury

PUBLIC OFFERS OF SECURITIES (AMENDMENT) REGULATIONS 1999 (S.I. 1999/734)

  1. The Committee has requested a memorandum on the following point:-

    By virtue of article 11(3)(h) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, as applied to the Public Offers of Securities Regulations 1995 by regulation 2(e) of this instrument, an offer of Euro-securities is not deemed to be an offer to the public in the United Kingdom if an advertisement in respect of it is issued to a trustee of a trust having net assets in excess of £10 million (and thus is not, for the purposes of the application of Council Directive 89/298/EEC, an offer of Euro-securities which are the subject of a generalised campaign of advertising or canvassing).

    Conversely, where an advertisement in respect of an offer of Euro-securities is issued to a trustee of a trust having net assets of less than £10 million it is deemed to be an offer to the public in the United Kingdom (and thus is, for the purposes of the application of Council Directive 89/298/EEC, an offer of Euro-securities which are the subject of a generalised campaign of advertising or canvassing).

    Explain why the issue of an advertisement relating to Euro-securities to a trustee of a trust having net assets of £10,000,000 is not a generalised campaign of advertising or canvassing within the meaning of Article 2(2)(1) of Council Directive 89/298/EEC but the issue of that advertisement to a trustee of a trust having net assets of £9,900,000 is such a generalised campaign.

  2. The Treasury would comment as follows. Article 2(2)(l) of Council Directive 89/298/EEC provides that the Directive does not apply to Euro-securities which are not the subject of a generalised campaign of advertising or canvassing. The Directive does not define "a generalised campaign of advertising or canvassing" and thus allows Member States a degree of latitude in defining what kinds of advertising are compatible with the Euro-securities exemption. Regulation 7(2)(s) of S.I. 1995/1537 as unamended contained such a definition. The purpose of regulation 2(e) of the above instrument is to substitute a clearer, more workable definition. One element of the policy underlying the revised definition is that advertising should not be regarded as amounting to a "generalised campaign" where it is directed solely at persons sufficiently expert to understand the risks involved. For this purpose it seemed desirable to align the definition with Article 11 of S.I. 1996/1586 which already lists categories of "expert" person. One such category (that mentioned in Article 11(3)(h)) is trustees of "large" trusts. Inevitably there is a risk of arbitrariness in setting the threshold above which a trust is to be regarded as "large". Self-evidently, setting a figure of less than £10 million would have meant that a greater range of advertising would have been consistent with the Euro-securities exemption (and a much lower figure might have embraced non-expert trustees of small trusts); setting a figure of more than £10 million would have allowed a lesser degree of advertising.

  3. The Treasury are satisfied that the figure of £10 million strikes an acceptable balance in policy terms whilst being consistent with existing domestic law in this area and with the Directive.

30 March 1999


 
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