Best execution obligations weigh on brokers when they execute orders to trade in shares for clients. These obligations have been seen as an outflow of general agency duties, and have been complemented by regulatory requirements related to best execution, dissemination of trading data, the handling of client orders and – in the United States – an obligation to execute at the best publicly available price or better (price protection). Here, different sets of real-world rules are analyzed with regard to transactional efficiency. Economic analyses are used to compare the effects of different rules, and are underpinned by a detailed analysis of relevant rules in the United States, the European Union, France, Sweden and England & Wales. Several normative conclusions can be drawn. Best execution rules that impose an agency duty on brokers do not seem to contribute in a discernible way to increased transactional efficiency. In contrast, disclosure rules that require both brokers and trading venues to provide ex post information about execution quality, and about how client orders have been routed, may contribute to mitigating the information asymmetry between brokers and clients. The compliance costs associated with such rules are outweighed by the positive effects on transactional efficiency. Lastly, a solution such as the US National Market System, which entails consolidated collection and dissemination of market data as well as price protection, can deliver significant efficiency gains through the virtual consolidation of trading venues. It also allows for more detailed regulations on different aspects of order execution, allow order execution regulations to function better, and is conducive to deeper integration of trading. However, creating such a system entails large initial investments. In the end, the choice whether to create a tightly-knit market system or not has wide-ranging implications for market structure, the design of regulatory rules and market integration.

The protection of investors; a transparent, efficient and fair market; and a reduction of systemic risks are the market objectives of a prudent securities regulator. The implementation of a sound legal framework can achieve the aforementioned objectives and will put a country’s stock exchange in the prime position to function at its optimum. A well functioning stock exchange provides governments and industry with the opportunity to raise long term capital and finance new projects. The Ghanaian government, recognizing the benefits to be derived from a well functioning stock exchange, established the Ghana Stock Exchange, and promulgated legislation to govern the securities industry. In 2011 the International Monetary Fund performed an assessment of Ghana’s financial markets and identified the securities industry legislation as archaic and required amendment. The International Monetary Fund endorsed the IOSCO objectives and principles of securities regulation, by suggesting that Ghana align its securities industry laws with the IOSCO objectives and principles. IOSCO principles have been identified as one of the key standards and codes for a sound financial system and their implementation should be prioritised. Following the report by the International Monetary Fund, the Ghanaian Securities Exchange Commission announced a comprehensive review of the legislation regulating the securities industry. A draft Securities Industry Act, 2013 was prepared, and is yet to accepted by parliament and promulgated by the president. This mini-dissertation performs an assessment of the current securities industry laws against the IOSCO principles and finds that the current legal framework is not aligned with the IOSCO principles. An assessment of the proposed Securities Industry Act, 2013 against the IOSCO principles is performed and it is found that the draft bill when promulgated and implemented will bring Ghana’s securities industry laws in line with the IOSCO principles. An analysis of the securities industry laws of Nigeria and South Africa is conducted, with the aim of identifying lessons, which Ghana can learn from the aforesaid jurisdictions, whose securities industry laws are aligned with the IOSCO objectives and principles. This mini-dissertation concludes by recommending the adoption of the proposed Securities Industry Laws, 2013 by the Ghanaian parliament. It recommends that the Securities Exchange Commission adopts: Nigeria and South Africa’s methodology to enhance its financial independence and operational independence; South Africa’s risk-based system to ensure the prevention of systemic risk; aspects of South Africa and Nigeria’s methodology for the enforcement of regulations to enhance its enforcement powers; and Nigeria’s domestic remedies which have been implemented to enhance its cooperation with foreign regulators. / Dissertation (LLM)--University of Pretoria, 2014. / gm2015 / Centre for Human Rights / LLM / Unrestricted

This paper argues in favour of principle-based securities regulation for Canada. The author examines the current state of Canadian securities regulation and why change is needed. The author then examines the characteristics of principle-based regulation and contrasts it against rule-based regulation while exposing the advantages and disadvantages of both regulatory models. In proposing a principle-based model for Canadian securities regulation, the author looks to the use of this type of regulation in the capital markets of certain Canadian provinces, the United States and the United Kingdom and then examines certain attributes of Canadian capital markets that have to be considered in the application of principle-based securities regulation to Canada. In supporting principle-based regulation as the modern form of securities regulation, the author discusses lessons learned from the global financial crisis and how those lessons can be applied in the promotion of principle-based securities regulation for Canada.

This paper argues in favour of principle-based securities regulation for Canada. The author examines the current state of Canadian securities regulation and why change is needed. The author then examines the characteristics of principle-based regulation and contrasts it against rule-based regulation while exposing the advantages and disadvantages of both regulatory models. In proposing a principle-based model for Canadian securities regulation, the author looks to the use of this type of regulation in the capital markets of certain Canadian provinces, the United States and the United Kingdom and then examines certain attributes of Canadian capital markets that have to be considered in the application of principle-based securities regulation to Canada. In supporting principle-based regulation as the modern form of securities regulation, the author discusses lessons learned from the global financial crisis and how those lessons can be applied in the promotion of principle-based securities regulation for Canada.

This study examines how the Securities and Exchange Commission balances competing regulatory objectives in its decisions to approve requests to withhold proprietary information from firms' financial reports. The confidential treatment process requires the SEC to balance the public interest in protecting proprietary information with the public interest in promoting disclosures to investors. I draw upon the economic and political science literatures on regulatory decision-making to test the strength of these interests on three aspects of the SEC's decisions to grant confidential treatment: the duration of time required to approve the request, the duration of time the SEC agrees to protect proprietary information from disclosure, and whether the firm is successful in securing confidential treatment for all redacted information. I find that the public interest in promoting disclosure and protecting proprietary information influence different aspects of the SEC's decisions to grant regulatory exemptions for confidential treatment. Firms requiring greater monitoring by the SEC receive greater scrutiny and have lower odds of successful redaction. High proprietary costs are associated with significantly longer protection periods but proprietary costs generally are not associated with duration to approval or the success of the application. Finally, I find that the SEC applies greater scrutiny to firms exhibiting objective and salient measures of low financial reporting quality although these firms have higher odds of success. These findings are consistent with the SEC reviewing CTRs to reduce the risk of legislative oversight. This study contributes to the literature on disclosure regulation by providing evidence as to how securities regulators balance competing interests when reviewing requests for disclosure exemptions. These findings also contribute to the role of political influence on disclosure policy, as the SEC's exemption decisions are consistent with avoiding the threat of legislative oversight. Second, these findings contribute to the literature on the SEC's regulatory decisions by demonstrating that the SEC staff appears to allocate resources and apply scrutiny to applications for disclosure exemptions using aspects of registered firms' financial reporting quality. Third, these findings contribute to the literature on redaction as a disclosure choice by providing evidence suggesting that firms with low financial reporting quality are more likely to redact, and I provide evidence on the success of this disclosure choice. Overall, these findings suggest that the public interest in promoting disclosure, as well as the threat of legislative oversight, influence the SECs decisions when granting regulatory exemptions to protect proprietary information.

I examine the impact of the trend of private class actions targeting alleged violations of generally accepted accounting principles (GAAP). I document the specific allegations in GAAP lawsuits and find that allegations involving revenue recognition and asset impairment recognition are two of the most common areas of GAAP cited. I test whether lawsuits lead to a reduction in the allegedly improper behavior, whether sued firms and their peers make other financial reporting changes, and whether these changes change firms’ stock price characteristics. I find that following relevant lawsuits, sued firms, firms in the same industry, and firms with a shared auditor generally exhibit less aggressive revenue recognition, but firms may increase aggressive revenue recognition in certain cases. Next, I examine the impact of asset impairment recognition allegations on the reporting of negative special items. I find few changes directly associated with these allegations but show that other litigation is associated with both increases and decreases in the propensity and size of negative special item reporting. I note that GAAP violations most often arise in an attempt to meet or beat analysts’ estimates, and I show following litigation firms are often more likely to beat analysts’ expectations by a larger margin. I also find significant increases in real earnings management of sued firms and their peers following many lawsuits, indicating a shift away from accruals-based management towards real activities management. Finally, I find mixed evidence of changes in stock return attributes. In some cases I observe significant changes consistent with reduced litigation risk and in others I observe the opposite. The results have implications for accounting standard setting and show that the legal system plays a critical role in shaping the financial reporting environment.

Insider dealing on the basis of inside information has been identified as an action against the principle of equal access to information for all those who need such information to make investment decisions. This thesis examines the regulation of insider dealing in financial markets. It analyses in particular the problem of the regulation of insider dealing in the United Arab Emirates (UAE), the shortcomings of this regulation and how it can be improved. The primary objective of the thesis is to offer reasonable recommendations for the reform of insider dealing in the UAE. There have been controversies regarding whether insider dealing should be regulated, the basis of such regulation and the form in which the law should intervene. This thesis has attempted to provide its own approach to the problem of insider dealing. This approach forwards the proposition that allowing insider dealing on the basis of inside information is against the principle of equal access to information and it is detrimental to market transparency. Based on this proposition, the thesis investigates the shortcomings of the current regulation of insider dealing in the UAE. Following this the applied study, which consists of a questionnaire and interviews conducted in the UAE, provides a clearer picture of the current regulation in the country. The study aims at measuring opinions and attitudes of investors and other experts towards the basis and effectiveness of the regulation of insider dealing in local markets in the UAE. This is followed by a legal comparative study. This is both a ‘macro-comparison’ and a ‘micro-comparison’ between the regulation of insider dealing in the jurisdictions of the US, the UK and the Dubai International Financial Centre (DIFC). The ‘macro-comparison’ draws conclusions from comparing the broader systems of regulation in the three jurisdictions. The ‘micro-comparison’ concentrates on a functional comparison between the specific rules related to insider dealing. The legal comparative study is combined with the information generated by the applied study. Together these provide solutions (represented as recommendations) for the reform of the UAE larger system of regulation, and amendments to the rules related to insider dealing.

This dissertation seeks to improve the current understanding of the ways in which institutional reform can promote the development of stock markets in Latin America. Over the past decade, policymakers sought to stimulate the growth of capital markets in the region through the promotion of a standardized set of formal institutions. An example of this approach in the field of company law was the introduction of modern corporate governance practices into nations without a solid enforcement infrastructure. By most accounts, these efforts did not deliver on their promise of stock market development. This work identifies areas for potential reform. As a means to better understand the operation of Latin American stock markets, this dissertation draws from different sources, including the historical experience of industrialized nations, the available literature on institutional reform, the documented shortcomings of legal reform programmes and hand-collected data from various Latin American countries. The resulting analysis suggests that the promotion of Latin American capital markets may require strategies different to those that were set in motion over the past decade. The main contribution of this work is twofold. First, this dissertation brings some nuance to the discussions concerning the challenges faced by Latin American capital markets. A proper understanding of these challenges is essential for policymakers in the region, particularly after the onset of the Latin American Integrated Market. Second, this dissertation explores the use of ‘transitional strategies’ to overcome some of the challenges identified here. The ultimate goal of this project is to inform future reform efforts in Latin America and to offer some insights for policymakers in other emerging countries.

This paper is intended, first, to look at the deterrence versus compliance debate, and the various punishment principles that exist in securities regulation. Secondly, a brief overview of the experiences and complexities of securities regulation and sanctioning in Ontario and Canada will be presented. Third, I introduce and apply the “Responsive Regulation” model and the “enforcement pyramid” as posited by Ian Ayres and John Braithwaite to securities enforcement. I advocate for adoption of a three stage enforcement reform process that incorporates restorative justice through an enforcement pyramid and an “enforcement priority ladder”. The expert reports and statistics are used to develop the argument that the OSC is hindered in its enforcement mandate, ultimately, from a lack of sound enforcement guidelines. The end goal is to provide useful recommendations to the OSC and other Canadian securities regulators in achieving a more self-sustaining and investor focused securities regulatory environment.

This paper is intended, first, to look at the deterrence versus compliance debate, and the various punishment principles that exist in securities regulation. Secondly, a brief overview of the experiences and complexities of securities regulation and sanctioning in Ontario and Canada will be presented. Third, I introduce and apply the “Responsive Regulation” model and the “enforcement pyramid” as posited by Ian Ayres and John Braithwaite to securities enforcement. I advocate for adoption of a three stage enforcement reform process that incorporates restorative justice through an enforcement pyramid and an “enforcement priority ladder”. The expert reports and statistics are used to develop the argument that the OSC is hindered in its enforcement mandate, ultimately, from a lack of sound enforcement guidelines. The end goal is to provide useful recommendations to the OSC and other Canadian securities regulators in achieving a more self-sustaining and investor focused securities regulatory environment.