Rhetoric and Reality: A Historical Perspective on the SEC's Regulation of Foreign Private Issuers

Abstract

Rhetoric can drive reform. Watch-words like “mutual recognition” and “global competition” have masked a political economy story which has driven the SEC’s deregulation of foreign private issuers. While the substantive result may have been appropriate, the over-all SEC regulatory process did not produce a nuanced and holistic regulatory product. Instead, this process resulted in one-size fits all regulation for foreign private issuers. Filipino or Chinese issuers listed only in the United States are now regulated in equal measure as a U.K. issuer listed on the London Stock Exchange and New York Stock Exchange. This is despite the differing risk profiles and regulatory posture of these issuers. This essay's historical analysis highlights these issues as well as the difficulty of implementing more rigorous and insulating regulatory techniques such as cost-benefit analysis as rhetoric and the politics of regulation overwhelm such approaches. The relevance of this story is front and center as we face coming SEC regulatory reform in light of the financial crisis under new watch-words such as “investor protection”.

Keywords: foreign private issuers, deregistration, global competition for listings, international securities regulation, SEC, rhetoric and the administrative law process