NCJ Number
126883
Journal
Washington and Lee Law Review Volume: 45 Issue: 4 Dated: (Fall 1988) Pages: 1297-1319
Date Published
1988
Length
23 pages
Annotation
The role of self-regulation in the securities industry is examined in terms of its benefits, criticisms, its operation before and during the October 1987 market crisis, and possible improvements.
Abstract
The self-regulation of the securities industry serves three functions: promotion, standard setting, and discipline. Self-regulation is generally regarded better than governmental regulation in enforcing ethical standards. It also costs less, is more flexible, and is informed by the experience of the industry. However, it has been criticized for representing an inappropriate delegation of governmental power, for laxity, and for issues related to due process, duplication of governmental regulation, and antitrust problems. During the week of October 19, 1987, which experienced the largest stock market decline in modern history, self-regulation proved its value by keeping the markets open, policing the financial viability of firms, and generally rallying the energies of market participants. However, it also showed weaknesses that suggest the desirability of strengthening government oversight through the clarification of an increasingly incoherent governmental regulatory structure. 147 footnotes