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Transparency Regulation in Financial Markets – Moving into the Surveillance Age?

Published online by Cambridge University Press:  20 January 2017

Iris H-Y Chiu*
Affiliation:
University College London.

Extract

In the wake of the global financial crisis, the trajectory of legal reforms is likely to turn towards more transparency regulation. This article argues that transparency regulation will take on a new role of surveillance as intelligence and data mining expand in the wholesale financial sector, supporting the creation of designated systemic risk oversight regulators.

The role of market discipline, which has been acknowledged to be weak leading up to the financial crisis, is likely to be eclipsed by a more technocratic governance in the financial sector. In this article, however, concerns are raised about the expansion of technocratic surveillance and whether financial sector participants would internalise the discipline of regulatory control. Certain endemic features of the financial sector will pose challenges for financial regulation even in the surveillance age.

Type
Symposium on the Financial Crisis in the EU (Part 1)
Copyright
Copyright © Cambridge University Press 2010

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References

1 Barbara Crutchfield George, Lynn V. Dymally, Maria K. Boss, “The Opaque And Under-Regulated Hedge Fund Industry: Victim Or Culprit In The Subprime Mortgage Crisis?”, 5 NYU Journal of Law & Business (2009), at p. 359, argues that the shortfall lies in insufficient disclosure in some sectors of the financial market, particularly the wholesale sector relating to complex structured products and sophisticated investment sectors such as hedge funds; Richard E Mendales, “Collateralized Explosive Devices: Why Securities Regulation Failed To Prevent The CDO Meltdown, And How To Fix It”, University of Illinois Law Review (2009), at p. 1359, argues that the shortfalls in disclosure pertain to the quality of disclosure and insufficient relevant disclosure being provided of the underlying loan pools supporting the toxic CDOs which have ultimately corrupted banks’ balance sheets.

2 Milton H. Cohen, “Truth in Securities Revisited”, 79 Harv. L. Rev. (1966) at p. 1340.

3 FSA Handbook COLL 1.2, 4.

4 Regulation D, Securities Act 1933.

5 Article 3(2), Prospectus Directive, see also H-Y Chiu, “’Not a Public Offer’ – Where Does the European Commission's Draft Prospectus Proposal Leave Small Issuers?”, 24 Business Law Review (Aug/Sep 2003), pp. 192 et sqq.

6 This may change with the EU Proposal to regulate alternative funds, see <http://ec.europa.eu/internal_market/investment/alternative_investments_en.htm#proposal> (last accessed on 21 July 2011).

7 Securities Acts Amendments of 1975, Pub. L. No. 94-29, § 7, 89 Stat. 11 (codified at 15 U.S.C. § 78k-1(a)(2) (1976)).

8 SEC, Regulation NMS: Final Rule (Fed Register Vol 70 No. 124). Dean Seligman's 2002 committee recommendation to privatise the provision of market transparency was resisted in favour of market transparency as a public good, see Joel Seligman, “Rethinking Securities Markets: The Sec Advisory Committee On Market Information And The Future Of The National Market System”, 57 Business Lawyer (2002), pp. 637 et sqq.

9 MiFID Commission Regulation (EC) No 1287/2006.

10 Under the MiFID, the categorisation of clients as “professional” may entail less imposition of disclosure and a lesser extent of duties owed under “suitability” or “appropriateness”, see Article 24, MiFID and 27-33, MiFID Commission Directive 2006.

11 Iris H-Y Chiu, “Delegated Regulatory Administration in EU Securities Regulation”, 40 International Lawyer (2007), pp. 737 et sqq., discussing that the mandatory level of market transparency in the EU is a minimum level, and information providers such as exchanges and Reuters and Bloomberg provide much deeper levels of transparency as commoditised information products.

12 See Niamh Moloney, How to Protect Investors: Lessons from the UK and EU (Cambridge: CUP 2009), at chapters 1 and 2.

13 Colin Scott, “Analysing Regulatory Space: Fragmented Resources and Institutional Design”, Public Law (2001), pp. 329 et sqq.

14 Houman B. Shadab, “Counterparty Regulation And Its Limits: The Evolution Of The Credit Default Swaps Market”, 54 New York Law School Law Review (2009/10), pp. 689 et sqq., reviews the reliance on counterparty discipline especially in the wholesale sector and points out the regulatory gaps; see also Iris H-Y Chiu, “Enhancing Responsibility in Financial Regulation – Critically Examining the Future of Public-Private Governance Parts I and II”, Law and Financial Markets Review (2010), pp. 170 and 286 respectively where a comprehensive review of mixed regulatory strategies pre-global financial crisis is made.

15 Kevin Werbach, “Sensors And Sensibilities” 28 Cardozo Law Rev (2007), pp. 2321 et sqq.

16 Timothy A. Canova, “Financial Market Failure As A Crisis In The Rule Of Law: From Market Fundamentalism To A New Keynesian Regulatory Model”, 3 Harvard Law and Policy Review (2009), pp. 369 et sqq.; John W. Head, “The Global Financial Crisis Of 2008–2009 In Context – Reflections On International Legal And Institutional Failings, ‘Fixes’, And Fundamentals”, 23 Pac. McGeorge Global Bus. & Dev. L.J. (2010), pp. 43 et sqq.; Evan N. Turgeon, “Boom And Bust For Whom?: The Economic Philosophy Behind The 2008 Financial Crisis”, 4 Virginia Business and Law Review (2009), pp. 139 et sqq.

17 See John C. Coffee, “Market Failure and the Economic Case for a Mandatory Disclosure System”, 70 Va L R (1984), pp. 717 et sqq.; see also Joel D. Seligman, “The Historical Need for a Mandatory Corporate Disclosure System”, J of Corp Law (1983), pp. 1 et sqq.

18 Marcel Kahan, “Securities Law and the Social Costs of ‘Inaccurate’ Stock Prices”, 1991 Duke L.J. (1992), pp. 977 et sqq., and Jeffrey N. Gordon and Lewis A. Kornhauser, “Efficient Markets, Costly Information and Securities Research”, 60 NYU LRev (1985), pp. 761 et sqq.; also Merritt B. Fox, “Rethinking Disclosure Liability in the Modern Era”, Wash U Law Quarterly (1997), pp. 903 et sqq., all of whom support mandatory continuous disclosure as key to maintaining stock price accuracy according to the semi-strong form of the efficient capital markets hypothesis, such stock price accuracy is thus informationally enabling for investors.

19 Rafael La Porta, Florencio Lopez de Silanes and Andrei Schleifer, “What Works in Securities Laws?”, NBER Working Paper (2004), available on the Internet at <http://mba.tuck.dartmouth.edu/pages/faculty/rafael.laporta/working_papers/WhatWorksInSecuritiesLaws/securities06112004complete.pdf> (last accessed on 21 July 2011), 61 Journal of Finance (2006), pp. 1 et sqq.; John C. Coffee, “Law and the Market: The Impact of Enforcement” (2007), available on the Internet at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=967482> (last accessed on 21 July 2011). The equivalent civil compensation regimes in the UK are under s90, 90A and Schedule 10A of the Financial Services and Markets Act, allowing civil compensation for dishonestly made or omitted disclosures, subject to proof of reliance.

20 Allen Ferrell, “The Case For Mandatory Disclosure In Securities Regulation Around The World”, 2 Brooklyn Journal of Corporate, Financial & Commercial Law (2007), pp. 81 et sqq., and earlier article supporting the same point, Paul G. Mahoney, “Mandatory Disclosure as a Solution to Agency Problems”, U Chi Law Rev (1995), pp. 1047 et sqq.

21 FSA Final Notice to Universal Salvage Plc (2004), available on FSA's website <www.fsa.gov.uk> (last accessed on 21 July 2011); “Photo-Me fined £500,000 for delay in disclosing inside information”, 21 June 2010.

22 See Arts. 5 and 13, Prospectus Directive; further, the content of prospectuses are prescribed in copious detail in Level 2 Commission legislation, Commission Regulation ECNo. 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses. The Commission Regulation is further explained by guidance issued by the Committee of European Securities Regulators in CESR, CESR's recommendations for the consistent implementation of the European Commission's Regulation on Prospectuses nº 809/2004, January 2005 (available on the Internet at <www.cesr-eu.org>);and CESR's frequently updated Questions and Answers on the Prospectus Directive, also available on the same website.

23 R.P. Beatty and J.R. Ritter, “Investment Banking, Reputation, and the Underpricing of Initial Public Offerings”, 15 Journal of Financial Economics (1986), pp. 213–232; T. Loughran and J.R. Ritter, “Why don't Issuers Get Upset about Leaving Money on the Table in IPOs?”, 15 Review of Financial Studies (2002), pp. 15 et sqq.; Steven M. Dawson, “Initial Public Offer Underpricing: The Issuer’s View – A Note”, 42 Journal of Finance (1987), pp. 159 et sqq.

24 François Degeorge, François Derrien and Kent Womack, “Analyst Hype in IPOs: Explaining the Popularity of Bookbuilding” (2005), available on the Internet at <http://ssrn.com/abstract=582963> (last accessed on 21 July 2011).

25 David Weil, Archon Fung, Mary Graham and Elena Fagotto, “The Effectiveness of Regulatory Disclosure Policies”, 25 Journal of Policy Analysis and Management (2006), pp. 155 et sqq.

26 Kathleen Weiss Hanley and Gerard Hoberg, “The Information Content of IPO Prospectuses”, 23 Review of Finance Studies (2010), pp. 2821 et sqq.

27 Troy A. Paredes, “Blinded by the Light: Information Overload and its Consequences for Securities Regulation”, 81 Washington University Law Quarterly (2003), pp. 417 et sqq.; Robert Prentice, “Whither Securities Regulation? Some Behavioral Observations regarding Proposals for Its Future”, 51 Duke Law Journal (2002), pp. 1397 et sqq.; Thomas Gilovich, Dale Griffin and Daniel Kahneman (eds), Heuristics and Biases: The Psychology of Intuitive Judgment (Cambridge: Cambridge University Press 2002) generally.

28 Robert J. Schiller, Irrational Exuberance (New Jersey: Princeton University Press 2000); Werner F.M. De Bondt and Baruch Fischhoff, “Do Analysts Overreact?”, in Thomas Gilovich, Dale Griffin and Daniel Kahneman (eds), Heuristics and Biases: The Psychology of Intuitive Judgment (Cambridge: Cambridge University Press 2002), at p. 678 and Jill Fisch, “Regulatory Responses to Investor Irrationality: The Case of the Research Analyst”, 10 Lewis & Clark Law Review (2006), pp. 57 et sqq.

29 M. Fox, A. Durnev, R. Morck and B.Y. Yeung, “Law, Share Price Accuracy and Economic Performance: The New Evidence”, available on the Internet at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=437662> (last accessed on 21 July 2011).

30 John C. Coffee Jr., Gatekeepers (OUP 2006), at pp. 245–253.

31 The failure of sophisticated intermediaries and informediaries in the investment market is discussed in Paul M. Healy and Krishna G. Palepu, “The Fall of Enron”, 17 Journal of Economic Perspectives (2003), pp. 3 et sqq.; further, behavioural theorists posit that even sophisticated players on the secondary market rely heavily on market sentiment and noise trading to allocate capital, see Robert J. Shiller, Irrational Exuberance (NJ: Princeton University Press, 2000) generally.

32 Paula J. Dalley, “The Use And Misuse Of Disclosure As A Regulatory System”, 34 Florida State University Law Rev (2007), pp. 1089 et sqq.

33 Niamh Moloney, How to Protect Investors: Lessons from the EC and the UK (Cambridge: Cambridge University Press 2010), at chapters 1–5 generally. Chapters 1 and 2 depict the typical retail investor as a “trusting” investor, trusting and willing to be part of the investment landscape but should not be expected to be completely rational and powerfully informed.

34 Richard E. Mendales, “Collateralized Explosive Devices: Why Securities Regulation Failed To Prevent The CDO Meltdown, And How To Fix It”, University of Illinois Law Review (2009), pp. 1359 et sqq.

35 Houman B. Shadab, “Counterparty Regulation And Its Limits”, supra note 14, at p. 689.

36 Guido Ferranini and Paolo Giudici, “Financial Scandals and the Role of Private Enforcement: The Parmalat Case” (2005), available on the Internet at <http://ssrn.com/abstract=730403> (last accessed on 21 July 2011).

37 S90A.

38 Mendales above, and Barbara Crutchfield George, Lynn V. Dymally, Maria K. Boss, “The Opaque And Under-Regulated Hedge Fund Industry: Victim Or Culprit In The Subprime Mortgage Crisis?”, 5 NYU Journal of Law & Business (2009), pp. 359 et sqq. would argue that the quantity of disclosure needs to be increased across the wholesale financial sector in particular.

39 After the fall of Enron, PwC also advocated reform in both quality of disclosure and modus of delivery to better enable information utilisation by the market, see Samuel A. DiPiazza and Robert G. Eccles, Building Public Trust: The Future of Corporate Reporting (NY: John Wiley & Sons 2002), at chapters 1,3, 5 and 7.

40 The excessive reliance on market discipline has been pointed out to be a flaw, as opined in M. Brunnermeier, A. Crockett, C. Goodhart, A.D. Persaud and Hyun Shin, “The Fundamental Principles of Financial Regulation” (Geneva Reports on the World Economy (2009)) and FSA, The Turner Review: A Regulatory Response to the Global Banking Crisis (March 2009), but how should the change in gear move? Mallaby warns against excessive reliance on internal controls, see Sebastian Mallaby, “Capitalism and its Divided Critics”, in the Financial Times (2 Sep. 2010) but there are also pitfalls in relying excessively on regulators, as Part 4 will discuss.

41 Art. 27.

42 Art. 31.

43 Art. 29.

44 Art. 33.

45 Arts. 22 and 30.

46 Arts. 30 and 32.

47 Art. 28.

48 Art. 26.

49 Art. 24.

50 Art. 45.

51 Defined as “having the characteristic that, even if consumers can observe the utility derived from the good ex post, they cannot judge if the quality received is the ex ante needed one”, see Uwe Dulleck and Rudolf Kerschbaumer, “On Doctors, Mechanics and Computer Specialists or Where are the Problems with Credence Goods” (2001), available on the Internet at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=256694> (last accessed on 21 July 2011).

52 Steven Pressman, “On Financial Frauds and Their Causes: Investor Overconfidence”, 57 American Journal of Economics and Sociology (1998), pp. 405 et sqq.

53 FSA, “FSA takes action against two insurance brokers for failing to protect client money and assets”, 9 June 2010, available on the Internet at <http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/096.shtml> (last accessed on 21 July 2011); “FSA fines Close Investments Ltd £98,000 for client money breaches”, 7 June 2010, available on the Internet at <http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/094.shtml> (last accessed on 21 July 2011); “FSA fines Rowan Dartington & Co Ltd £511,000 for client money breaches”, 7 June 2010, available on the Internet at <http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/093.shtml> (last accessed on 21 July 2011); “FSA levies largest ever fine of £33.32m on J.P. Morgan Securities Ltd for client money breaches”, 3 June 2010, available on the Internet at <http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/089.shtml> (last accessed on 21 July 2011), and at least 2 other instances in 2010.

54 Moloney, How to Protect Investors, op cit.

55 As will be discussed in the next Part.

56 Paul Cox, Stephen Brammer and Andrew Millington, “Pension Fund Manager Tournaments and Attitudes towards Corporate Characteristics”, 34 Journal of Business Finance and Accounting (2007), pp. 1307 et sqq.; Amit Goyal and Sunil Wahal, “The Selection and Termination of Investment Management Firms by Plan Sponsors”, 63 Journal of Finance (2008), pp. 1805 et sqq.

57 Arts. 17, 21 et sqq. and 27.

58 Iris H-Y Chiu, “Delegated Regulatory Administration in EU Securities Regulation”, 40 International Lawyer (2007), pp. 737 et sqq.

59 Art. 12, Commission Regulation 2006.

60 The same critique could be levied upon the recent CESR recommendation to allow OTC derivative transaction reporting to be channelled through trade repositories as well, not recommending a central information mechanism. See “Consultation on Transaction Reporting on OTC Derivatives and Extension of the Scope of Transaction Reporting Obligations” (24 August 2010), available on the Internet at <www.cesr-eu.org> (last accessed on 21 July 2011).

61 Art. 21, MiFID, Arts. 44–46, MiFID Commission Directive.

62 Jonathan R. Macey and Maureen O’Hara, “The Law and Economics of Best Execution”, 6 Journal of Financial Intermediation (1997), pp. 188 et sqq.

63 Art. 44(3), MiFID Commission Directive 2006.

64 CESR, Best Execution under MiFID: Questions and Answers (May 2007).

65 By the establishment of the Consumer Financial Protection Agency.

66 Susan Emmenegger, “Procedural Consumer Protection and Financial Market Supervision”, in Harold James, Hans-W. Micklitz and Heike Schweitzer (eds), The Impact of the Financial Crisis on the European Economic Constitution (Florence: European University Institute, 2009), at p. 19.

67 FSA, Distribution of Retail Investments (March 2010).

68 FSA, Guidance Note on Consumer Redress Schemes (Oct. 2010).

69 FSA, The Assessment and Redress of Payment Protection Insurance Complaints (August 2010).

70 Susan L. Rutledge, “Consumer Protection and Financial Literacy Lessons from Nine Country Studies”, World Bank Policy Research Working Paper (2010), pp. 5326 et sqq.

71 Erik Gerding, “The Subprime Crisis And The Link Between Consumer Financial Protection And Systemic Risk” (2009), available on the Internet at <http://ssrn.com/abstract=1291722> (last accessed on 21 July 2011).

72 Adam J. Levitin, “The Consumer Financial Protection Agency Pew Financial Reform Project, Briefing Paper #2, 2009”, available on the Internet at <http://ssrn.com/abstract=1447082> (last accessed on 21 July 2011).

73 Joshua D. Wright and Todd J. Zywicki, “Three Problematic Truths About The Consumer Financial Protection Agency Act Of 2009” (2009), available on the Internet at <http://ssrn.com/abstract_id=1474006> (last accessed on 21 July 2011).

74 Saule Omarova and Adam Feibelman, “Risks, Rules, and Institutions: A Process for Reforming Financial Regulation”, 33 University of Memphis Law Review (2009), pp. 881 et sqq. arguing that crisis containment is different from regulation for the long term.

75 Sharon Tennyson, “Analyzing the Role for a Consumer Financial Protection Agency” (2009), available on the Internet at <http://ssrn.com/abstract=1525603> (last accessed on 21 July 2011).

76 Susan L. Rutledge, “Consumer Protection and Financial Literacy Lessons from Nine Country Studies”, World Bank Policy Research Working Paper (2010), pp. 5326 et sqq.

77 The European Securities Markets Authority (ESMA), the European Banking Authority (the EBA) and the European Insurance and Occupational Pensions Authority (EIOPA). See the legislative proposals available on the Internet at <http://ec.europa.eu/internal_market/finances/committees/index_en.htm#package> (last accessed on 21 July 2011). These authorities have been established by REGULATION (EU) No 1095/2010, No. 1093/2010 and No. 1094/2010, 24 Nov. 2010, respectively.

78 Art. 37, Regulation Of The European Parliament And Of The Council establishing a European Securities and Markets Authority.

79 Susan Emmenegger, “Procedural Consumer Protection and Financial Market Supervision” in Harold James, Hans-W. Micklitz and Heike Schweitzer (eds), The Impact of the Financial Crisis on the European Economic Constitution, supra note 66, at p. 19.

80 Art. 9, Regulation establishing the European Securities and Markets Authority, mirrored in the Regulations establishing the European Banking Authority and European Insurance and Occupational Pensions Authority.

81 Available on the Internet at <http://ec.europa.eu/internal_market/finservices-retail/docs/investment_products/20091215_prips_en.pdf> (last accessed on 21 July 2011) on standardising key issues of pre-contractual information and selling practices for optimal consumer protection.

82 FSA, The Assessment and Redress of Payment Protection Insurance Complaints (August 2010).

83 FSA, Mortgage Market Review: Arrears and Approved Persons (June 2010), the rules now found in MCOB of the FSA Handbook.

84 BCOBS 5.1 generally. This position is an improvement from the pro-bank standard provisions issued by the British Bankers’ Association’s Banking Code.

85 FSA Handbook.

86 John Y. Campbell, Howell E. Jackson, Brigitte C. Madrian and Peter Tufano, “The Regulation of Consumer Financial Products: An Introductory Essay with Four Case Studies” (2010), at <http://ssrn.com/abstract=1649647> (last accessed on 21 July 2011).

87 Kern Alexander, Rahul Dhumale, and John Eatwell, Global Governance of Financial Systems: The International Regulation of Systemic Risk (Oxford Univ. Press, 2006).

88 Monica Billio, Mila Getmansky, Andrew W. Lo and Loriano Pelizzon, “Measuring Systemic Risk in the Finance and Insurance Sectors” (March 2010), available on the Internet at <http://web.mit.edu/alo/www/Papers/billio_etal.pdf> (last accessed on 21 July 2011).

89 Onnig H. Dombalagian, “Requiem for the Bulge Bracket?: Revisiting Investment Bank Regulation”, 85 Indiana Law Journal (2010), pp. 777 et sqq., at p. 798.

90 Monica Billio, Mila Getmansky, Andrew W. Lo and Loriano Pelizzon, “Measuring Systemic Risk in the Finance and Insurance Sectors”, supra note 88; Xin Huang, Hao Zhou and Haibin Zhu, “A framework for assessing the systemic risk of major financial instituitions” (2009), available on the Internet at <http://ssrn.com/abstract=1335023> (last accessed on 21 July 2011).

91 Steven Schwarz, “Systemic Risk”, 97 Georgetown Law Journal (2008), pp. 193 et sqq., at p. 206.

92 Kern Alexander, Rahul Dhumale, and John Eatwell, Global Governance of Financial Systems: The International Regulation of Systemic Risk, supra note 87; John Goddard, Phil Molyneux and John O.S. Wilson, “The Financial Crisis In Europe: Evolution, Policy Responses And Lessons For The Future” (2010), available on the Internet at <http://ssrn.com/abstract=1414935> (last accessed on 21 July 2011).

93 Saule Omarova and Adam Feibelman, “Risks, Rules, and Institutions: A Process for Reforming Financial Regulation”, supra note 74, at p. 881.

94 Looking at leverage, liquidity, concentration, correlation, connectedness and sensitivities, see Andrew Lo's testimony to the U.S. House of Representatives Committee on Oversight and Government Reform, November 2008, available on the Internet at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1301217> (last accessed on …). See also John Y. Campbell, Howell E. Jackson, Brigitte C. Madrian and Peter Tufano, “The Regulation of Consumer Financial Products: An Introductory Essay with Four Case Studies”, supra note 86, a more technical paper on measuring liquidity, leverage, losses and linkages as being crucial to indicating signs of systemic risk.

95 Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111–203, H.R. 4173).

96 S932 of the Dodd-Frank Act, above.

97 S955, ibid.

98 S972, ibid.

99 S961-964, ibid.

100 Art. 8, Regulation on Credit Rating Agencies 2009, OJ l302/1.

101 Art. 10 and Section D of Annex 1, ibid.

102 Arts. 11 and 12, ibid.

103 Art. 21, proposed Directive on Alternative Investment Funds.

104 Art. 24, ibid.

105 Arts. 28 and 29, ibid.

106 CESR Technical Advice on the Review of MiFID (Oct 2010), available on the Internet at <http://www.cesr.eu/popup2.php?id=7279> (last accessed on 21 July 2011).

107 Ibid., at p. 73.

108 “Derivatives Reform”, Financial Times (2 Sep 2010).

109 Regulation on short selling, Arts. 5–6, 16, available on the Internet at <http://ec.europa.eu/internal_market/securities/docs/short_selling/20100915_proposal_en.pdf> (last accessed on 21 July 2011).

110 David Lyon, “Editorial. Surveillance Studies: Understanding Visibility, Mobility and the Phenetic Fix”, 1 Surveillance and Society (2002), pp. 1 et sqq.

111 Discussed in James Theodore Gentry, “The Problem of Monitoring Private Prisons”, 96 Yale Law Journal (1986), pp. 353 et sqq.

112 Michel Foucault, Discipline and Punish: The Birth of the Prison (1977), at p. 249, as quoted in Neil Selwyn, “The National Grid for Learning: Panacea or Panopticon?”, 21 British Journal of Sociology of Education (2000), pp. 243 et sqq.

113 Elia Zureik, “Review: Surveillance Studies: From Metaphors to Regulation to Subjectivity”, 36 Contemporary Sociology (2007), pp. 112 et sqq.

114 S111.

115 S112.

116 S153 and 154.

117 S155.

118 Available on the Internet at <http://www.hm-treasury.gov.uk/consult_financial_regulation.htm> (last accessed on 21 July 2011).

119 Art. 22, Regulation establishing the European Securities and Markets Authority; Art. 20, Regulation establishing the European Banking Authority and Art. 20, Regulation establishing the European Insurance and Occupational Pensions Authority.

120 Art. 3, Regulation on Community Macro Prudential Oversight of the Financial System and Establishing a European Systemic Risk Board, Regulation No. 1092/2010, 24 Nov 2010.

121 Art. 15, ibid.

122 Arts. 16–18, ibid.

123 FSA Handbook, FINMAR 1.2.

124 Arts. 23, 24 and 32 of the Regulation establishing the European Securities and Markets Authority, mirrored in the Regulations establishing the European Banking Authority and European Insurance and Occupational Pensions Authority.

125 Kern Alexander, Rahul Dhumale, and John Eatwell, Global Governance of Financial Systems, supra note 87.

126 Mario Giovanoli, “The Reform Of The International Financial Architecture After The Global Crisis”, 42 New York University Journal of International Law and Politics (2009), pp. 81 et sqq.

127 The Forty Recommendations of the Financial Action Task Force and 9 Special Recommendations Against Terrorist Financing, which have been legislated in the EU Money Laundering Directive 2005, Directive 2005/60/EC and subsequent legislation, and the UK Proceeds of Crime Act 2002 and subsequent amendments.

128 Elia Zureik, “Review: Surveillance Studies: From Metaphors to Regulation to Subjectivity”, 36 Contemporary Sociology (2007), pp. 112 et sqq.

129 Monica Billio, Mila Getmansky, Andrew W. Lo and Loriano Pelizzon, “Measuring Systemic Risk in the Finance and Insurance Sectors”, supra note 88.

130 Part II. above.

131 Roberta S. Karmel, “The Future Of The Securities And Exchange Commission As A Market Regulator”, 78 University of Cincinnati Law Review (2009), pp. 501 et sqq.

132 William Mock, “On The Centrality Of Information Law: A Rational Choice Discussion Of Information Law And Transparency”, 17 John Marshall Journal of Computer and Information Law (1999), pp. 1069 et sqq.; Olufunmilayo B. Arewa, “Risky Business: The Credit Crisis And Failure (Part I And II)”, 104 Nw. U. L. Rev. Colloquy, at pp. 398 and 421.

133 D.N. Ghosh, “Quirks of the Market Regulator”, 39 Economic and Political Weekly (2004), pp. 1550 et sqq.

134 Cary Coglianese and Robert A. Kagan, “Regulation and Regulatory Processes”, available on the Internet at <http://papers.ssrn.com/abstract=1297410> (last accessed on 21 July 2011).

135 Amitai Etzioni, “The Capture Theory of Regulations – Revisited”, 46 Society (2009), pp. 319 et sqq.

136 James W. Williams, “Envisioning Financial Disorder: Financial Surveillance and the Securities Industry”, 38 Economy and Society (2009), pp. 460 et sqq.

137 Ibid.

138 Kenneth A. Bamberger, “Technologies of Compliance: Risk and Regulation in a Digital Age”, 88 Texas Law Review (2009/10), pp. 669 et sqq.

139 Technocracy is defined as “the government (or control) of society by scientists, technicians, or engineers-or at least the exercise of political authority by virtue of technical competence and expertise in the application of knowledge”, John Gunnell, “The Technocratic Image and the Theory of Technocracy”, 23 Technology and Culture (1982), pp. 392 et sqq.

140 Gunnell, ibid.

141 Clive Harfield, “SOCA: A Paradigm Shift in British Policing”, 46 British Journal of Criminology (2006), pp. 743 et sqq., at p. 755.

142 Tal Z. Zarsky, “Thinking Outside The Box: Considering Transparency, Anonymity, And Pseudonymity As Overall Solutions To The Problems Of Information Privacy In The Internet Society”, 58 University of Miami Law Review (2004), pp. 991 et sqq.

143 A. Boot and J.R. Macey, “Monitoring Corporate Performance: The Role of Objectivity, Proximity, and Adaptability in Corporate Governance”, 89 Cornell L. Rev. (2004), pp. 356 et sqq., at pp. 366–378.

144 Iris H-Y Chiu, “Enhancing Responsibility in Financial Regulation – Critically Examining the Future of Public-Private Governance Parts I and II”, Law and Financial Markets Review (2010), at pp. 170 and 286; and see also Erik F. Gerding, “Code, Crash and Open Source”, 84 Washington Law Review (2009), pp. 127 et sqq. who doubt that proprietary firm measures for internal controls and regulatory monitoring over those are adequate for risk management, and proposes a move away from such insular forms of risk management to one that is “open source”, allowing for public participation and de-proproprietisation of systems.

145 D.N. Ghosh, “Quirks of the Market Regulator”, 39 Economic and Political Weekly (2004), pp. 1550 et sqq.; Onnig H. Dombalagian, “Requiem for the Bulge Bracket?: Revisiting Investment Bank Regulation”, supra note 89.

146 Claire Moore Dickerson, “Ozymandias As Community Project: Managerial/Corporate Social Responsibility And The Failure Of Transparency”, 35 Connecticut Law Review (2003), pp. 1035 et sqq.

147 Richard W. Painter, Getting the Government America Deserves: How Ethics Reform Can Make a Difference (Oxford: OUP 2010, forthcoming), available on the Internet at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1334872> (last accessed on 21 July 2011).

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Transparency Regulation in Financial Markets – Moving into the Surveillance Age?
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Transparency Regulation in Financial Markets – Moving into the Surveillance Age?
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