Introduction

This chapter provides an overview of microprudential data collection and supervision in the securities industry. The origins and development of securities regulation can be found elsewhere in this Handbook. Securities regulation was enacted in the USA to protect individual investors from unfair practices and potential abuses in the public markets, with the foundation of that protection being transparency in the markets, through mandatory disclosures. The concept is two pronged: one, that the act of disclosure itself makes the one disclosing more honest, and two, that by having relevant information available, an investor can make a more informed decision before making an investment. The model developed by the USA has been followed in many other countries.

The disclosure requirements ensure that there is a wealth of data available to investors and to the regulators themselves, who are responsible for enforcing the laws and maintaining fair and orderly markets. Crises and breakdowns in the markets have led to new legislation to ensure the continued transparency that is the hallmark of the capital market system; for example, in 2000, after it was revealed that companies were providing analysts and other insiders with information that investment banks were then sharing selectively with their clients, Regulation FD was enacted to require issuers to simultaneously disclose material information to analysts, large investors and the public.