Robert M. Lawless and Elizabeth Warren
This article assesses the state of empirical legal research and chronicles the field's history focusing on bankruptcy. This article begins with a discussion of what might have attracted bankruptcy scholars to extract an empirical vein in their scholarly work. It offers a short chronicle of the development of empirical bankruptcy scholarship from Justice Douglas to the current generation. Because of the relative paucity of such scholarship outside the U.S., this chronicle inevitably focuses on that country. It is divided into separate discussions of individual and corporate bankruptcy. It elaborates the substantial amount of empirical scholarship in bankruptcy as compared with other fields, the grounds on which academic debates play out offer significant explanatory factors. This article concludes with some discussion regarding empirical questions on which bankruptcy scholars might probably focus future attention.
This Chapter examines conduct of business (COB) regulation, which governs the conduct of financial intermediaries in providing financial products and services. It considers financial intermediaries’ functional lines of business, particularly their securities activities. The Chapter discusses the rationales for COB regulation, the modal regulatory strategies used, and frameworks within which COB regulation operates. It then looks at COB regulation in the US, focusing on important market and regulatory developments in recent decades, including the adoption of a bifurcated regulatory regime in the aftermath of the 1929 market collapse and Great Depression; divergent rules of conduct, with reference to duties of loyalty and care; disclosure practices; and remuneration-based risks faced by broker-dealers. COB regulation in the US is then compared with that in Australia and the EU. Finally, the Chapter assesses reforms that have been proposed or adopted in the wake of the global financial crisis of 2007–09.
Dimity Kingsford-Smith and Olivia Dixon
This Chapter examines the paradox underlying the regulation of consumer interest in financial markets. It explains how consumer interest in financial markets is shaped by the ‘financialization’ of welfare provision. The discussion begins by considering the paradoxical need to regulate to reduce investment risk while also regulating to retain risk. The Chapter then looks at consumer interest in goods and services markets, the concept of ‘financial citizen’ and its limitations especially the insights of behavioural psychology and financial literacy, financialization, and citizenship. It also describes the ‘financial citizen’ as protected investor and as well-informed and confident investor or consumer. Finally, it analyses the regulation of the ‘financial citizen’ since the 2007–09 global financial crisis, with reference to the creation of consumer protection authorities, product intervention, mortgage-lending practices, simplified product disclosure, mitigation of conflicts of interest in financial advice, the distinction between wholesale and retail investors, and institutional restructuring.
This chapter argues that poverty is created, maintained, and regulated. Global poverty occupies a unique position as both the ‘blind spot’ and raison d’être of an international legal system that has long attempted to secure a veneer of cooperation, justice, and legitimacy over a reality of competition, conquest, and exploitation. As such, it vividly illustrates the radical indeterminacy and ‘schizophrenia ‘ that ‘ tear[s] apart the fragile structure’ of international law. That this contradiction appears to be little analysed, that there is so little conversation to detail, is testament to the strategies deployed to naturalize, excuse, and obscure the ‘fact’ of poverty.
Douglas W. Arner
This Chapter discusses regulation and supervision of financial institutions operating across borders. The cross-border supervision of internationally active financial institutions raises a distinct set of institutional and coordination risks to financial stability. It begins with a discussion of questions relating to market access and licensing before turning to questions of supervision, regulation, and resolution. The Chapter concludes with a discussion of the outlook for continued globalization of financial services.
This chapter examines the provisions of the Treaty on the Functioning of the European Union regulating capital movements both within the internal market and between Member States and third countries (Articles 63–65 TFEU). It reflects critically on the impact of these provisions on the activities of two distinct categories of market participant: corporate actors and (Union) citizens. The legal framework governing both intra- and extra-EU capital movements is characterized as an unusual mixture of the familiar and the exceptional. On the one hand, the free movement of capital is now an integral part of the internal market. At the same time, however, it retains key distinguishing features: a unique evolutionary trajectory; an external scope of application; and an uncharacteristic degree of residual direct Member State control.
Luca Enriques and Sergio Gilotta
This Chapter examines the debate over mandatory disclosure (MD) to the general public as a regulatory technique for financial markets, with emphasis on issuers of securities. It begins by outlining the goals that underlie MD as well as the various rationales for MD as opposed to voluntary disclosure, paying particular attention to information as a public good, externalities entailed by corporate disclosure, the agency problem, the need for a subsidy to informed traders, and standardization in information. It then discusses the limits and costs of MD before concluding with an assessment of some of the challenges faced by policymakers with regard to MD.
This Chapter examines evidence on the structure of ownership, control, and financing of corporate sectors in developed countries to draw lessons for economic development and the development of financial markets. It records the critical role that equity markets played in the ownership and financing of corporations throughout the twentieth century and how this occurred in the absence of formal systems of regulation, relying on a variety of informal institutional arrangements. The Chapter contrasts these informal arrangements in equity markets with the formal regulation that is required in banking. It describes the shift from micro-regulation of individual banks to the macro-prudential regulation of banking systems as a whole. It argues that these should be part of a clearly defined partnership between the state and banks by which the state protects core components of a banking system in return for banks delivering key economic and public functions. Finally, the Chapter questions whether the traditional elements of financial markets are correct in light of, first, the explosion of mobile money and, second, the emergence of China and Korea as major economic powers with equity markets that are very different from standard models.
This chapter deals with issues of regional economic integration in a comparative perspective. It is divided into two parts: a conceptual and a theoretical part. The conceptual part starts with a definition and typology of economic integration. It then presents features of institutional design that capture the institutional variation and development of regional economic integration. This conceptual apparatus has been used recently to map regional economic organizations and describe their variation and development. The theoretical part begins with economic theories of integration, which have, however, little to say about the political process of integration and the role and effects of institutions and organizations. It then moves on to political theories of economic integration, which have mainly been developed in the context of European integration: intergovernmentalism, supranationalism, and constructivism.
This Chapter deals with enforcement and sanctioning as part of financial regulation. It examines issues such as the role of private enforcement in supplementing public enforcement, the extent to which individuals should be held accountable compared to their employers, and how to design effective sanctions. It first provides an overview of enforcement strategies that a regulator may adopt, followed by a discussion on enforcement and its relation to the compliance strategies employed by regulated firms. It then reviews empirical studies of enforcement activity in the UK and the US, with particular emphasis on the impact of different enforcement styles, including private enforcement. It also explores the role of discretion in enforcement, along with the type of sanctions and how they are applied to individual cases. The article concludes by analysing the mechanisms used by regulators to facilitate enforcement in cases where financial markets and firms have a cross-border dimension.