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Regulation in a Multi-Sectored Financial Services Industry: An Exploratory Essay


Howell E. Jackson


Harvard Law School

May 1, 1999

Harvard Law School Discussion Paper No. 258

Abstract:     
This essay reviews differences in regulatory structure across sectors of the financial services industry in the United States and then explores the difficulties these differences pose to our current system of regulation and also to proposals for financial modernization. The Essay begins with a description of a range of financial transactions from simple contracts to pooled investment vehicles to complex financial intermediaries. After reviewing the policy justifications underlying regulation across the financial services industry, the Essay summarizes the distinctive regulatory structures that characterize U.S. oversight of each major sector of the industry: private contract, securities regulation, futures contracts, investment companies, depository institutions, insurance companies, and employee benefit plans. The essay then reviews the legal definitions that are used to classify which regulatory structure applies to which financial transactions. Distinctions are drawn between formal and functional definitions of financial products, and the Essay claims that functional definitions, which suffer from both overinclusion and indeterminacy, are typically bounded by four types of limitations: de minimus exceptions, sophisticated investor exclusions, institutional carve-outs, and extra-territorial exemptions. The Essay continues to review a series of recent legal disputes in which private parties and government regulators have disagreed over the application of this system of classifying financial products. The Essay then draws some preliminary conclusions as to why disputes over legal classifications of financial products are so common and concludes by exploring the implications of the foregoing analysis for recent proposals to modernize the U.S. system of financial regulation.

Number of Pages in PDF File: 117

JEL Classification: G20, K23, L51, O16

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Date posted: May 31, 1999 ; Last revised: January 18, 2009

Suggested Citation

Jackson, Howell E., Regulation in a Multi-Sectored Financial Services Industry: An Exploratory Essay (May 1, 1999). Harvard Law School Discussion Paper No. 258. Available at SSRN: http://ssrn.com/abstract=166651 or http://dx.doi.org/10.2139/ssrn.166651

Contact Information

Howell Edmunds Jackson (Contact Author)
Harvard Law School ( email )
Griswald 402
1563 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-5466 (Phone)
617-495-5156 (Fax)
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