International Diversity in Securities Regulation: Some Roadblocks on the Way to Convergence

Abstract

This paper is motivated by a seemingly growing gap between the dominant themes in two closely related fields -- securities regulation and corporate governance -- especially in what regards their international, or comparative, aspects. In the field of securities regulation the dominant trend is one of harmonization and convergence of domestic national regimes. The opposite is true in the field of corporate governance. The few initiatives toward convergence have so far failed and current analyses either acknowledge or champion international diversity. Concentrating on international securities regulation, the Paper critically assesses these trends and the degree to which they may be reconciled. After an overview of recent harmonization projects, the Paper argues that corporate law and securities regulation are best viewed as two integrated components of one larger field. The two fields can also be classified as private law and public law, respectively. The Paper then demonstrates how the inertia and relative stability (path dependence) of corporate governance systems may interject similar features into processes of international convergence in securities regulation. The harmonization project of IASC and IOSCO is discussed in this context and regulators are urged to conduct a corporate governance impact assessment on a general basis. Finally, the Paper argues that the public law/private law distinction could further exacerbate path dependence dynamics where the distinction carries legal weight such as in many Civil Law countries. Evidence from three decades of harmonization initiatives in the European Union is consistent with the argument.

JEL Classification: K22, G18, G3, G38