not challenge the federal authorities hundred years ago, they certainly could not challenge them now.351
bankers in the U.S. to affect legislation than their counterparts in the U.K.; only federal securities laws could better oversee every state across the nation. 353
2. Incomparable Advantages of Self-regulatory Mode
Comparing with the U.S. and the E.U. mode, the self-regulatory framework of the U.K. is incredibly more efficient in terms of cost and time, offering more certainty to the capital market.
Litigations are costly in every country. In the U.S. and in the E.U. Member States where the takeover disputes were solved in the court, the acquirers and the target boards have to afford far-flung litigation costs and expensive legal service fees; but in the U.K., the necessary funding to support the Takeover Panel comes from service charges in tender offers and the sales of the City Code.354 Of course, legal professionals more or less have to participate in takeovers in the U.K., too, but their main jobs are to offer legal consultations or to draft legal documents. As a result, takeover participants do not have to bear sky-high price disputes resolutions costs.
The Takeover Panel tackles with takeover disputes with no delay: the professional councils respond to appeals very quickly and involve almost immediately. Forasmuch, deliberate and tactical suits became unnecessary. The English Court of Appeal clearly forbids anyone using litigations to interfere with the real-time decisions from the Takeover Panel. In the R.v.Panel on Take-Overs and Mergers case of 1986, the Data Fin Company was unhappy with the decision from the Takeover Panel, and the Master of the Rolls Sir John Donaldson decided that the Takeover Panel’s decision was so vital that it must withstand judicial review. Nevertheless, even the Takeover Panel’s decision was overturned in the future in judicial reviews; it only could have influences on
353 See Fox, Justin, and Alan Sklar. The myth of the rational market: A history of risk, reward, and delusion on Wall Street. New York: Harper Business, 2009.
354 Armour, John, and David A. Skeel Jr. "Who writes the rules for hostile takeovers, and why-the peculiar divergence of US and U.K. takeover regulation." Geo. LJ 95 (2006): 1727.
future cases.355 As a result, takeover disputes were always solved within a week in the U.K. On the contrary, in the U.S., takeover disputes could last for years.
For instance, in 2003, Oracle launched a hostile takeover of People Soft, and the antitrust review alone took 18 months.356
Most importantly, the Takeover Panel could proactively amends the City Code to cater the needs of the market. The council members would gather together on a monthly basis to discuss difficult cases and the newest financial innovation. In comparison, the Delaware court is relatively passive and lagging, as the judges could only rule and discuss the cases in front of them. In order to overcome such procedural flaws, the Delaware judges would frequently refer to the latest academic findings and articles; moreover, the steady flow of takeover cases also compensate the courts’ lag in takeovers. Still, it could not match the speed with the U.K. hostile takeover regulatory framework, as the Takeover Panel could directly add or adjust the contents in the City Code to reflect the market changes.
3. Functional Premise of Self-regulatory Mode
In order for the self-regulatory mode to be effective and long lasting, the motives of the regulator must be compatible with those of the stockholders of the company – increasing overall profitability and cutting unnecessary costs. 357
Like we mentioned in the previous Chapter, the U.S. securities market had undergone a self-regulatory history for more than 100 years. The Stock Exchange itself was the most prominent self-regulatory entity before 1933, as all the listed companies were its members and were bound by the constitution and listing rules of the NYSE.358 Until the enactment of the Securities Act, the
355 R.v.Panel on Take-Overs and Mergers,[1987]Q.B.815,841,842.
356 Armour, John, and David A. Skeel Jr. "Who writes the rules for hostile takeovers, and why-the peculiar divergence of US and U.K. takeover regulation." Geo. LJ 95 (2006): 1750.
357 Armour, John, and David A. Skeel Jr. "Who writes the rules for hostile takeovers, and why-the peculiar divergence of US and U.K. takeover regulation." Geo. LJ 95 (2006): 1756-1770
358 See Michie, Ranald. The London and New York Stock Exchanges 1850-1914 (Routledge Revivals).
self-regulatory rules of the New York Stock Exchange were the most important legal resource of the federal securities law. However, the brokers and traders had very different self-interest motives; they might froze any deals that would delist the target company, even if the deal were beneficial to both the offeror and the offeree. With the rise of the NASDAQ and AMEX, the NYSE had every reason to make their members happy; it always compromised whenever its listed companies threatened to leave. Therefore, the overall profitability of the company was not the self-regulator’s main concern from the beginning to the end. 359
Indeed, the self-regulatory system of the U.K. was shaped by institutional investors with various motives, but the overall profitability of the company was always their mutual concern, as they had to be responsible for investors who put their money in the institutions. In summary, only when regulators focusing solely on increasing the overall profitability of the listed companies could a self-regulatory hostile takeover framework function well.