Rethinking Conduct Regulation

Professor Iain MacNeil will speak on 'Rethinking conduct regulation' on the 21st May 2015 at the University of Oxford Law Faculty . The Law and Finance Seminar Series brings to Oxford leading scholars from around the world working at the forefront of the intersection of the law and finance fields to present work in progress.

Abstract

Recent years have seen a sharp rise in penalties and compensation for misconduct in financial markets. One interpretation of that trend is that conduct regulation is working well because the more intense enforcement that has followed the global financial crisis is both remedying past wrongs and deterring future misconduct. However, the more convincing interpretation is that conduct regulation is failing. I will argue that there are three main explanations for that failure. The first is that regulatory intervention relies on forms of market failure and cost/benefit analysis that do not link clearly with the FSMA 2000 legal framework for rule-making and accountability. The second is that conduct regulation has evolved in a manner whereby its relationship with the general law, as well as its ethical foundation, is unclear. The third is that the complexity of the system of conduct regulation has reached a level that is counterproductive for the promotion of consistent and durable standards of good conduct across financial markets. I will argue that it would be better to cut back conduct regulation to a much smaller core focused on market integrity. That would allow much of the work of conduct regulation to be subsumed within general legal rules and would allow space for ethical codes to exert a more meaningful influence on the conduct of market participants.