Comparative Study and Analysis of Elements, Results and Aspects of the Financial - Legal of the Securitie's Cross-listing in The Tehran Stock Exchange (Focusing on Islamic Republic of Iran and US law)

دانشنامه حقوق اقتصادی

Volume 27, Issue 18, June 2021, Pages 129-164   

Document Type: Scientific research

DOI: 10.22067/lowecon.2021.39476

Authors

Saeed Mohammadi Aghdam^{* 1}; Ebrahim Dianatinasab²

¹P.h.D student of financial engineering, Allameh Tabatabae University

²P.h.D of Private law, University of Tehran

Abstract

 
Extended Abstract
Introduction
Financial markets are the markets which conditions are changing quickly with considerable intensity compared to the other markets; therefor, policy makers have to adjust their appropriate decesions and strategies based on that circumestances with the use of accurate and multilateral cognition. Designing instruments in practice, is one of the status of the changes. This change could lead to competition during the time and the variables capture a number of possible determinants of effective competition in different formats like size, types of orders, trading infrastructures, execution procedures, acceptance and listing at the domestic or international level. More importantly, that competition among market centers appears to lead to specialization and fragmentation not convergence to a single artichecture. (Lipson, 2003) That means everything that could intensify competition like listing could be useful.
 
Theoretical frame work
When the firm decides to fund raised, it has to pass general stages in finincing chain, include get the regulator's license about addmision companies' symbols, listing, initial public offering and finally secondary transactions. Each level has its own requirements and regulations. This article aimed to study and review the listing stage. Cross-listing is one of the listing types and is known as listing a security on more than one exchange and leads to increase the competition for bid and offer prices, the liquidity of the securities, the length of time in trading, (The NASDAQ Listing Rules), bonding, more fund rasing, price making, reputation.(Miao, 2012) These effects could transfere between exchanges inside or outside of the countries.
 
Methodology
In this research, reviewing the financial aspects of the phenomenon is the first stage, then we cover the rules and documents of the research by using analytical-interpretive method based on compliance with the nature and regulatory elements in the Iran and United sates of America. this methodology was done base on the logic of the comparative studies.
 
Results & Discussion
Practicing of the cross-listing depends on the adoption of different approaches, each of which has its own dimensions and effects. According to the first approach, regulator treat with a foreign applicant similar to a domestic company, despite of exceptions and exemptions in certain circumstances. Based on the second approach, known as subsituted compliant, based on the structural and regulatory similarity, the regulatory regime of the counterparty recognizes structural and regulatory similarity, if there is no conflict with internal regulations, it was accepeted. All in all, in this regime, some jurisdictions do not apply all local requirments to foreign intermediaries that engage in cross-border transactions with sophisticated investors from the host jurisdiction. The third approach is known as licensing transactions under a memorandum or international - institutional guidelines and standards which both countries are defined and accepted. It means, some jurisdictions utilize a system of unilateral or mutual recognition to deciede whether to apply local regulations to a foreign intermediary. Based on this regime, a jurisdiction generally will not apply local requirements to a foreign intermediary if the home regulatory regime to which that intermediary is subject meets certain investor protection criteria. A mutual recognition system is similar to unilateral recognition system in that the "access" jurisdiction recognize the adequacy of a foreign intermediary's "home" regulation. (IOSCO, 2004)
 
Conclusions & Suggestions
Cross-listing of securities has its own complexity with multilateral aspects in theroy and practice. In the Iranian capital market regulatory ragim, there is just mention the concept of cross-listing and dual-listing but in practice no action was done. Regulatory institution should cover fund-rasing chain by taking some steps, including define the initial public offering and secondary foreign investment transactions in the law and regulations. They sould pay attention to technical-regulatory considerations at regulatory levels, including the encouragement and protection Law, Foreign investment and related regulations, foreign investment executive regulations in stock exchanges and over-the-counter markets, various offer and registration instructions, transactions and disciplinary, and various dispute resolution procedures in the regulations.
Subsequently, according to the capital market reaulation of iran, lisint of foreign securities and their transactions are within the competence of the Supreme Council of the Stock Exchange. Thus, in the second phase as the executive status, this institution can choose a similarity approach to domestic companies and increase exemptions in order to facilitate fund absorbtion and trading activitybeside that, it should be noted that the application of exemptions should be done in terms of the nature of the exemptions so as not to damage the elements of the main regulations such as commercial law or capital market law. It also has to consider general and spicific of the structure of the Iranian securities market including institutions, instruments, legal systems and regulations.
In this regard, the Supreme Council of the stock exchange should classify different requirements in order to be compatible with the structure of the capital market and the general and specific legal systems and select the cases that may be exempted in term of the legal system of the target market. In addition, in case of structural and regulatory similarity, exceptions or exemptions may be applied to issuers, traders / brokers or foreign investors while contracte a memorandum of cooperation. In addition, sould be behave with those exchange that are joint members of an international institution such as the World Federation of Exchnage or IOSCO according to the standards and principles of the relevant institution.
Finally, in order to solve the various challenges of this phenomenon, it has to sign the Memorandum of Understanding and state all the financial-legal considerations in the clauses of the Memorandum of Understanding in terms of different norms and technical requirements. In the near future, Iran has to consider this ability in practice and adjust its regulation and structure to be in conjuction with its consideration and chractristics and it has to improve its cognition about that
 

Keywords

Cross-listing (Dual-listing) of Securities; Stock Exchanges; Capital Market; Camparative law; United State's law; Islamic Republic of Iran's law

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