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Regulating Investors Not Issuers: A Market Based Proposal |
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| The present securities regulatory regime in the United States focuses on the protection investors. Investor protection, in turn, leads to a robust capital market. The federal government accomplishes its goal of investor protection through the registration and direct regulatory control of issuers, intermediaries, and self-regulatory organizations in the securities markets. The Article contends that this regulatory approach is ill advised. Rather, the Article argues that regulators should instead regulate investors. Although against current wisdom, a securities regime that regulated investors would allow regulators to take a more market-driven approach toward investor protection, resulting in a less paternalistic regime. For those investors with good information on issuers in the market, for example, no mandatory regulations are necessary. Rather investors will contract for desired protections; those market participants failing to provide valued protections will receive less for their securities or services. As a result, market participants will voluntarily provide desired protections. The paper, therefore, proposes to classify investors based on their informational resources. Such classification frees those investors able to protect themselves to engage in a wide variety of investments while allowing regulators to focus their resources on investors less well equipped. | |
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Copyright
© 2000 by California Law Review, Inc. |
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