Regulating Informational Intermediation

Abstract

Informational intermediaries — intermediaries who process information (an opinion, a price, a rating, an index, or other certification) out of raw data or other informational inputs — occupy a curious role in financial regulation. Federal laws governing financial transactions seek to regulate the information generated by such intermediaries with a view toward encouraging public use, if not reliance — be they underwriters, auditors, or other gatekeepers assessing the adequacy of issuer disclosures in securities offerings, stock exchanges or other securities information processors compiling market quotations and prices, or credit rating agencies rating corporate debt and asset-backed securities. Financial regulators have also relied upon the diligence and judgment of informational intermediaries to feed quantitative and qualitative information into the risk-management formulas that pervade the regulation of financial issuers, products, and services.