Comparing Apples and Oranges? Public, Private, Tax, and Criminal Law in Financial Markets Regulation
Max Planck Institute for Tax Law and Public Finance
June 13, 2012
Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2012-04
This paper discusses different means of regulation, taking the example of post-crisis financial markets regulation. It is remarkable that the general discussion about reforming financial regulation centres on the substantive standards of the new rules and neglects the problem of choosing the right regulatory instruments. The paper focuses on four basic instruments of law enforcement (administrative sanctions; civil liability; corrective taxation; criminal sanctions) and takes three examples of regulatory choice in financial markets regulation. Using a number of different yardsticks for comparison, it analyses the relative strengths and weaknesses of the four instruments and employs a cost-benefit analysis.
It turns out that civil liability – while limited in its scope – exhibits the best cost-benefit ratio. Criminal law, by contrast, seems very inefficient. Administrative law and corrective taxation come in second best. The return from using these instruments has to be assessed on a case-by-case basis.
Number of Pages in PDF File: 23
Keywords: Financial markets regulation, regulatory choice, sanctions, corrective taxation
JEL Classification: D61, G18, G21, G28, H32, K13, K14, K22, K34, K42working papers series
Date posted: June 16, 2012 ; Last revised: July 4, 2012
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