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Artificial Intelligence (‘AI’) technologies present great opportunities for the investment management industry (as well as broader financial services). However, there are presently no regulations specifically aiming at AI in investment management. Does this mean that AI is currently unregulated? If not, which hard and soft law rules apply?
Investments are a heavily regulated industry (MIFID II, UCITS IV and V, SM&CR, GDPR etc). Most regulations are intentionally technology-neutral. These regulations are legally binding (hard law). Recent years saw the emergence of regulatory and industry publications (soft laws) focusing specifically on AI. In this Article we analyse both hard law and soft law instruments.
The contributions of this work are: first, a review of key regulations applicable to AI in investment management (and oftentimes by extension to banking as well) from multiple jurisdictions; second, a framework and an analysis of key regulatory themes for AI.
This article examines data collected from users of the German Federal Ombudsman Scheme (GFOS). The data was collected as part of a research project to understand how the GFOS operates in practice and how its procedures and outcomes are accepted by its users. We begin from the premise that experience of procedural justice during this alternative dispute resolution (ADR) process will build institutional legitimacy, and the article makes three contributions to the literature on procedural justice. First, we extend evidence of the link between procedural justice and legitimacy to a novel institutional context that is different in many ways to the criminal justice focus of much of the extant literature. Second, we consider the motivations of service users to engage with ADR as potential moderators of that link. Third, we analyze the relationship between procedural justice, subjective outcomes, and the actual outcomes provided to service users. Overall, we conclude that the link between procedural justice and legitimacy can be identified among those with very different motivations for using the GFOS.
The Financial Market Stabilisation Act of 2008 and the Supplementary Financial Market Stabilisation Act of 2009 allow the German state to gain unlimited control over banks of systemic importance. The emergency character of both acts is to be understood against the background of the turbulences of the financial crisis and the short time span available for bank rescue. Prior to the Acts, neither German insolvency law nor company law nor capital market law provided the means to safely restructure troubled banks. The content and evaluation of these state interventions in the banking sector under the pressure of the financial market crisis are relevant not only for Germany, but in a broader international context.
The first mechanism to obtain unlimited control over banks of systemic importance, which has been applied in the takeover of Hypo Real Estate in 2009, relies on company and takeover law instruments such as capital increases and squeeze-outs. These instruments have been modified by the two Financial Market Stabilisation Acts as regards state-initiated takeovers of systemically important banks. However, these modifications and additional measures, e.g., for combating shareholder strike suits, raise doubts on their compatibility with EC law and German constitutional law. Indeed, actions at the German Federal Constitutional Court are already pending.
The second mechanism to obtain unlimited control involves expropriating the shareholders of systemically important banks. This comes with advantages such as transactional certainty and compliance with EC law. However, expropriation touches on the fundamental principles of the German economic order and especially on the constitutionally guaranteed right of ownership. The Rescue Takeover Act, which has been introduced by the Supplementary Financial Market Stabilisation Act, does not breach this constitutional guarantee. However, great care has to be taken in the application of the Act in the individual case.
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