The Road Not Taken: Rethinking Securities Regulation and the Case for Merit Review

Abstract

The article assesses the causes of the current financial meltdown and finds that it has resulted from insufficient regulation of the capital markets. The securities legislation of the 1930s enacted in response to the crisis of that era was never strong enough to prevent another severe economic collapse. Even the disclosure-based protection it did afford investors was undermined during the deregulatory movement of the last quarter century. Policy makers must now enact measures that were proposed but passed over during the New Deal reforms so that securities may not be offered or sold if they present undue risks or are based on unsound business practices.

Keywords: financial meltdown, securities registration, exemptions from registration