Download This PaperRegulating Stock Market Crashes and Information Uncertainty: A Matter of Regulatory Style and Structure?
Tulane Law Symposium, "The Promise and Perils of Convergence in Financial Regulation and Consumer Protection,Symposium Hosted by TULANE LAW REVIEW" Tulane University Law School New Orleans,Designing Optimal Models of Financial Regulation in a Changing Financial Environment, ISBN: 978-1-63484-829-9
20 Pages Posted: 8 Sep 2015 Last revised: 12 Feb 2016
Date Written: September 7, 2015
Abstract
As recent global stock market crashes have brought to light – particularly massive sell outs which were instigated in response to panics about the actual state of economic growth of strategic investment partners and emerging economies, nothing moves consumers and investors more than information uncertainty – fueled by lack of transparency, loss of investor confidence or suspicions related to inaccurate information disclosure.
Whilst the structure of financial regulation played a role in the 2008/2009 Financial Crisis, particularly reflected in responses of many leading economies which adopted unified financial regulatory structures – in response to changing environmental factors and global developments such as conglomeration and globalization – as well as the need to address the increased impact of risk in regulation, and the rise of shadow banking, many other factors and dynamics appear to be operating in recent stock market crashes at Wall Street and global stock markets.
As highlighted with the tripartite arrangements for financial supervision in the United Kingdom, as well as recent stock markets crashes at Wall Street, the crucial factors fueling panics and sudden crashes, frequently boils down to information asymmetries, extent of uncertainty, and lack of transparency and disclosure of vital financial data.
Amongst other vital issues, this paper addresses whether or not it is advantageous to regulate both securities investments and consumer financial instruments through entities such as the Financial Conduct Authority in the United Kingdom, or through various specialized agencies, as is accomplished in the United States through the Securities and Exchange Commission and the Consumer Financial Protection Bureau.
Keywords: systemic risks, unified services supervision, securities, financial regulation, financial stability, consumer protection, investor protection, banking legislation, investment directives, insurance regulation, transparency, information asymmetries
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