International Reach of Securities Regulation: A Comparative View on Brazilian and U.S. Law (original) (raw)
Related papers
This Paper, written for the “Globalization of the United States Litigation Model” symposium at Brooklyn Law School (October 21, 2011), inquires on whether emerging capital markets are shifting toward enhanced regulatory intensity in the enforcement of their securities laws, under the context of global legal convergence. It ventures into this puzzle of globalization, corporate law enforcement, and financial development, in light of the increasing phenomenon of regulatory convergence and international cooperation among securities regulators, in the realm of capital market surveillance and enforcement. Focus is placed on the emerging Latin American region, namely Brazil’s securities market. The study explores Brazil’s securities enforcement system during the wave of legal and institutional reform dating back to the turn of the century, resulting from competing dynamics between incumbent controlling owners resisting change, and global forces demanding enhanced corporate law and governance. A decade onward, aim is set at identifying and reflecting upon selected instances that, when combined and analyzed, suggest that Brazil has pursued the enforcement of its securities laws with enhanced regulatory intensity — both as a result of i) adopting a more robust institutional design with enforcement structures and practices characteristic to developed global markets, and; ii) boosting implementation of these practices, in view of preliminary evidence of enforcement on the ground, in terms of actual enforcement activity and resources allocation toward market surveillance. The evidence identifies a transformation of Brazil’s securities enforcement system during the past decade, revolving around its Securities and Exchange Commission (CVM). The research showcases how CVM came to embody features of securities enforcement systems in developed markets — like the U.S. model. These features are much in line with what the U.S. academic literature has envisioned as enforcement guidelines that emerging capital markets should follow for effective enforcement. They include, among others, CVM (1) adopting a fundamental policy to prioritize enforcement; (2) modeling its structure after the U.S. SEC’s “sole-entity” model, including an independent Board of Commissioners; (3) undergoing a conversion into an ex-post law enforcement-driven agency; (4) achieving considerable political independence from the executive branch; (5) establishing a stand-alone enforcement program with a mandate; (6) having access to an enhanced tool-kit to combat serious corporate wrongdoing in “real-time”; (7) institutionalizing the ability to settle with wrongdoers; and (8) relying on a “multiple-enforcers” approach involving active collaboration among public, private, and self-regulatory enforcement channels — by establishing partnerships with the industry, via a sophisticated self-regulatory regime, sharing the burden of market surveillance with a quasi-governmental FINRA-like SRO; with the criminal justice authorities; with the international community; and, to a lesser extent, with the judiciary. Accordingly, the latter half of the decade witnessed an increase in implementation in terms of budget, staffing, and actual enforcement activity, yielding a surge in administrative actions, sanctions, and settlements, and a more visible targeting of serious misconducts. The study sheds light on how these developments may speak to the globalization of securities enforcement and the influence of developed markets in the evolution of emerging securities enforcement systems. It showcases how Brazil’s recent experience with securities enforcement, could well be a reflection of the path lying ahead for emerging capital markets in today’s global arena.
SSRN Electronic Journal, 2000
Foreign capital and institutional investors play a key role in the Brazilian capital and financial markets. Internationally promoted regulatory patterns, especially IOSCO principles, have been increasingly influencing administrative rule making by the Brazilian Securities and Exchange Commission (CVM) as well as the adoption of transnational rules in Brazil by means of self-regulatory activity. Even though there is a certain level of convergence of market regulatory standards at the transnational level, implementation and enforcement of rules remains essentially domestic. We analyze two case studies regarding the transposition of international standards into the Brazilian legal system, which illustrate this tension between the transnational and domestic dimensions of financial markets regulation. The first case concerns a CVM rule on disclosure of executive compensation and the its interpretation by local courts. The second case refers to the adoption of suitability rules.
Securities Regulation By Enforcement: An International Perspective
Yale Journal on Regulation, 1990
Harvey Pitt and Karen Shapiro present a comprehensive review of the Securities and Exchange Commission's regulatory and enforcement activities during the past decade' and discuss the use of ex post enforcement actions as a means of controlling the behavior of market participants. They note several dangers inherent in the use of enforcement actions to regulate behavior, such as the absence of sufficiently precise definitions of the prohibited activities and the lack of procedural safeguards associated with the formal rulemaking process Because Pitt and Shapiro generally support comprehensive regulation of the financial markets, however, they stop short of raising a more fundamental concern-that the use of enforcement actions to define prohibited conduct short-circuits debate over whether the conduct should be regulated at all. In the United States, because the Securities, and Exchange Commission (SEC) is generally perceived as a model regulatory agency' and perhaps becaus...
International Diversity in Securities Regulation: Some Roadblocks on the Way to Convergence
1998
This paper is motivated by a seemingly growing gap between the dominant themes in two closely related fields -- securities regulation and corporate governance -- especially in what regards their international, or comparative, aspects. In the field of securities regulation the dominant trend is one of harmonization and convergence of domestic national regimes. The opposite is true in the field of corporate governance. The few initiatives toward convergence have so far failed and current analyses either acknowledge or champion international diversity. Concentrating on international securities regulation, the Paper critically assesses these trends and the degree to which they may be reconciled. After an overview of recent harmonization projects, the Paper argues that corporate law and securities regulation are best viewed as two integrated components of one larger field. The two fields can also be classified as private law and public law, respectively. The Paper then demonstrates how t...
The Need for Competition in International Securities Regulation
SSRN Electronic Journal, 2001
This paper advocates opening up international securities regulation to greater regulatory competition than the scant competition that exists at present. After sketching the contours of an international regime of regulatory competition in securities laws and the reasons why such competition is desirable, the paper provides a detailed response to objections that have been raised to a proposal for a competitive securities regime that was principally focused on the United States, objections that would accordingly also be raised against this paper's proposal. These include whether the U.S. securities regime is directed at mitigating problems regarding disclosure of interfirm externalities and whether international competition will result in a regulatory race to the lowest level of disclosure. Because the analysis in support of regulatory competition in securities law draws upon the learning regarding competition across U.S. states over the production of corporate law, which has been successful in creating a regime that, on balance, benefits shareholders, the paper concludes by demonstrating that recent critiques of the efficacy of statecharter competition are unfounded.
Financial Market Self-regulation in Brazil: legal disruption between market, Law and politics
Revista Brasileira de Estudos Jurídicos, 2020
This paper analyzes considers self-regulation as a means of legal disruptionat the national and international level. At the domestic level, self-regulation challenges the state-centered notion of legitimate coercion and production of Law. From an international perspective, Brazilian self-regulation has grown under the influence of the internal adoption of international standards created by private transnational governance bodies. Firstly, this paper arguments that self-regulation can impose legal and accountability challenges on the traditional model of sources of Law. Secondly, it proposes measures to mitigate the conflicts of interests imposed by the creation and enforcement of rules by private parties.
IOSCO and the spreading of a US-like regulatory philosophy around the world
European Business Law Review, Vol. 25, Issue 6 – 2014, 2014
The objective of this article is to describe the International Organization of Securities Commissions – IOSCO, its internal procedures, normative product and implementation process, and to test the role played by the US Securities and Exchange Commission – SEC since the Organization’s birth. The pervasiveness of the US Securities Laws will be tested both on the most important document IOSCO has ever adopted, the Objectives and Principles of Securities Regulation, representing the regulatory philosophy of the Organization; and, as a more detailed case study, on the documents concerning the regulation of Credit Rating Agencies, a very hot topics for international finance. Moreover, it will be analyzed the position of the US in the cross-border enforcement cooperation process established under the auspices of IOSCO in the last twenty years and how this has recently changed. The results seem to suggest that IOSCO’s has been deeply affected by the US Securities Laws even if, more recently, the emerging of new important markets is progressively turning the Organization into a multipolar forum where the US is no longer the only “regulatory” superpower.