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13 - Equilibrium Investor Protection

Active Mutual Fund Fees

from Part III - The Regulation of Market Professionals

Published online by Cambridge University Press:  20 October 2022

By
Michel A. Habib  and
D. Bruce Johnsen
Edited by
Arthur B. Laby
Arthur B. Laby
Affiliation:
Rutgers University, New Jersey School of Law
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Summary

The Securities and Exchange Act of 1934 charged the US Securities and Exchange Commission (SEC) with regulating financial markets as “necessary or appropriate in the public interest or for the protection of investors.”1 Many came to believe this language gave the SEC too little guidance and too much discretion. In 1996, Congress directed the SEC to consider, in addition to the protection of investors, whether a proposed rule will promote “efficiency, competition, and capital formation.”2 As the SEC interpreted these words beginning in 2012, the Act requires it to incorporate economic analysis into the rulemaking process. Absent a clear statutory mandate to impose a specific rule, the analysis must justify the rule by identifying a market failure as well as the rule’s likely effect on market outcomes.3

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The Cambridge Handbook of Investor Protection , pp. 241 - 258
Publisher: Cambridge University Press
Print publication year: 2022

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