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5A - Comprehension Asymmetries in Financial Regulation

from Part II - Application

Published online by Cambridge University Press:  21 June 2019

Wendy Wagner  and
Will Walker
Wendy Wagner
Affiliation:
University of Texas School of Law
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Summary

In financial regulation, regulated entities are required to prepare disclosures that detail the risks of their transactions. However, these regulatory requirements sometimes neglect to ensure that financial entities have strong incentives to understand the risks themselves, much less ensure the disclosed risks are comprehensible to others. This chapter applies the concept of comprehension asymmetries to financial regulation and uncovers ways that the existing laws and rules tolerate and sometimes exacerbate wilfull ignorance and incomprehensible disclosures. The chapter closes with suggestions for reform.

Keywords

financial regulationdisclosureSecurities and Exchange CommissionPlain English requirementsfinancial riskinvestorsfraudDodd Frank Actcomplexificationwillful ignorance
Type
Chapter
Information
Incomprehensible!
A Study of How our Legal System Encourages Incomprehensibility, Why It Matters, and What We Can Do About It
 , pp. 80 - 102
Publisher: Cambridge University Press
Print publication year: 2019

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