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Revisiting Securities Regulation in the Aftermath of the Global Financial Crisis: Disclosure – Panacea or Pandora’s Box?
In: The Journal of World Investment & TradeThe United States introduced federal securities regulation by adopting the Disclosure-Based Regulation (DBR) in 1933 resembling the doctrine of caveat venditor (DCV) as a substitute for the doctrine of caveat emptor (DCE) in the securities market. The overarching objective of the DBR was to protect investors by enabling them to make ‘informed decisions’. Although the change aimed to protect investors, the causes of the GFC suggest that the DCV exists only in theory, while issuers of securities are still enjoying the benefits of the DCE in practice. Financial innovations that intend to camouflage the risks inherent in the complex derivative products should be strictly regulated through a merit regulation which should be applied to only public offers, and the DBR should still remain in force for other securities. It concludes that the DBR has now emerged as more a ‘Pandora’s box’ than a panacea.
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3)
Ibid, 1583.
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7)
See Alex Pollock, ‘Regulatory Implications of the Housing and Mortgage Bubble and Bust’ Global Macro EconoMonitor (11 Jul 2008) <http://www.economonitor.com/blog/2008/07/regulatory-implications-of-the-housing-and-mortgage-bubble-and-bust/>.
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33)
Stephen Foley, ‘US Fed Rides to the Rescue of AIG with 85 bn Bail-Out’ The Independent (18 Sep 2008) UK.
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40)
Janet Morrisssey, ‘The Penalty for “Extraordinary Evil”: Madoff Gets 150 Years’ The Time (29 Jun 2009), 1 <http://www.time.com/time/business/article/0,8599,1907677,00.html>.
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44)
242 US 539, 550 (1917).
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66)
Ibid, 1113.
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68)
Ibid, 1114.
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69)
See David Barboza, ‘Complex El Paso Partnerships Puzzle Analysis’, The New York Times (23 Jul 2002) C1; Karl R Popper and Konrad Lorenz as cited in Schwarcz, above n 65, 1114 (footnote 26).
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70)
Schwarcz, above n 65, 1114.
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71)
Schwarcz, above n 65, 1115.
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74)
Schwarcz, above n 65, 1115.
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75)
Schwarcz, above n 65, 1117.
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99)
426 S.W.2d 554, 557 (1968).
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105)
140 N E 2d 819 Ohio Ct App (1957).
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109)
110 U S 108, 111 (1984).
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110)
140 N E 2d 819 Ohio Ct App (1957).
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116)
342 N E 2d 619, 619 Ind (1976).
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117)
342 N E 2d 619, 619 Ind (1976).
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118)
342 N E 2d 619, 619 Ind (1976).
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119)
342 N E 2d 619 Ind (1976).
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124)
Quoted in H.R. Rep. No. 73-85 (1933) 2.
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150)
See generally, Gerard Baker, ‘More Regulation will Harm, Not Help, Recovery’ The Times (Sept 19, 2008) UK 32; Nancy Funkhouser, ‘Reining in on Mortgage Brokers: The Need to Enforce Existing Regulations’ (2010) 64 University of Miami Law Review 1145.
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Revisiting Securities Regulation in the Aftermath of the Global Financial Crisis: Disclosure – Panacea or Pandora’s Box?
In: The Journal of World Investment & TradeThe United States introduced federal securities regulation by adopting the Disclosure-Based Regulation (DBR) in 1933 resembling the doctrine of caveat venditor (DCV) as a substitute for the doctrine of caveat emptor (DCE) in the securities market. The overarching objective of the DBR was to protect investors by enabling them to make ‘informed decisions’. Although the change aimed to protect investors, the causes of the GFC suggest that the DCV exists only in theory, while issuers of securities are still enjoying the benefits of the DCE in practice. Financial innovations that intend to camouflage the risks inherent in the complex derivative products should be strictly regulated through a merit regulation which should be applied to only public offers, and the DBR should still remain in force for other securities. It concludes that the DBR has now emerged as more a ‘Pandora’s box’ than a panacea.
| All Time | Past Year | Past 30 Days | |
|---|---|---|---|
| Abstract Views | 82 | 34 | 3 |
| Full Text Views | 106 | 4 | 0 |
| PDF Views & Downloads | 23 | 7 | 0 |