Securities Regulation V. Consumer Protection: French Financial Market Legislation

Abstract

In the United States, the philosophical direction of securities laws in the twentieth century has moved away from the rule of caveat emptor towards a requirement of full disclosure, based on the economic premise that complete and timely information makes capital markets efficient. Since the nineteenth century, France has shifted away from the rule of caveat emptor in securities or financial transactions as well, but the tendency of French regulation has been towards moralistic rules that restrict or prohibit transactions where there is a perception of unequal bargaining power. Despite recent regulatory reforms, French securities laws are intertwined with antique consumer protection laws that remain applicable, apparently by historical accident, to financial transactions where there is no fragile consumer to protect. This article examines specific inefficiencies in French securities laws caused by historical rules aimed at protecting consumers. It analyzes French usury rules and the risks they pose to the development of a French market for high-yield subordinated debt. It discusses the rules regulating financial canvassing activities and their effects on recent French legislative reforms concerning private placements. Finally, it considers protectionist restrictions on the performance of financial transactions by French investors on foreign securities markets.

Keywords: securities, financial markets, securities regulation, France, consumer protection

JEL Classification: K10, K22, K33