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date: 26 January 2021

Abstract and Keywords

Gatekeepers are financial intermediaries that operate between issuers and investors. This Chapter considers their potentially valuable role in the financial market, examines gatekeeper failures, and analyses recent attempts at regulation. Limitations on the effectiveness of gatekeepers as an investor-protection device largely concern the conflict of interest arising from their funding model, but are exacerbated by factors which reduce a gatekeeper’s incentive to perform its role well, including both a lack of market competition and litigation risk, and, in relation to credit rating agencies, the development of a regulatory licence. This Chapter assesses the likely success of the regulatory measures put in place to address these issues. It concludes that, despite the raft of measures that have been introduced, regulators have largely failed to tackle the core issues that lead to gatekeeper failure. Although many measures that have been implemented are valuable, the overall effectiveness of the regulatory response may be doubted.

Keywords: gatekeepers, financial regulation, analysts, credit rating agencies, auditors, financial crisis

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