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The 'Principles' Paradox


Steven L. Schwarcz


Duke University - School of Law


Duke Law School Legal Studies Paper No. 205
European Business Organization Law Review, Vol. 10, p.175, 2009; Symposium Issue: University of Cambridge Conference on Principles v. Rules in Financial Regulation, Winter 2008

Abstract:     
This essay, prepared for a University of Cambridge conference on Principles Versus Rules in Financial Regulation, posits a new issue in that debate. Although principles-based regulation is thought to more closely achieve normative goals than rules, the extent to which that occurs can depend on the enforcement regime. A person who is subject to unpredictable liability is likely to hew to the most conservative interpretation of the principle, especially where that person would be a potential deep pocket in litigation. This creates a paradox: Unless protected by a regime enabling one in good faith to exercise judgment without fear of liability, such a person will effectively act as if subject to a rule and, even worse, an unintended rule.

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Date posted: April 18, 2008 ; Last revised: December 17, 2009

Suggested Citation

Schwarcz, Steven L., The 'Principles' Paradox. Duke Law School Legal Studies Paper No. 205; European Business Organization Law Review, Vol. 10, p.175, 2009; Symposium Issue: University of Cambridge Conference on Principles v. Rules in Financial Regulation, Winter 2008. Available at SSRN: http://ssrn.com/abstract=1121454

Contact Information

Steven L. Schwarcz (Contact Author)
Duke University - School of Law ( email )
Box 90360
Duke School of Law
Durham, NC 27708
United States
919-613-7060 (Phone)
919-613-7231 (Fax)
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