Regulating Investors Not Issuers: A Market-Based Proposal

57 Pages Posted: 14 Feb 2000

See all articles by Stephen J. Choi

Stephen J. Choi

New York University School of Law

Multiple version iconThere are 2 versions of this paper

Date Written: 2000


The present securities regulatory regime in the United State focuses on the protection of investors. Investor protection, in turn, leads to a robust capital market. The federal government accomplishes its goal of investor protection through the registration and direct regulatory control of issuers, intermediaries, and self-regulatory organizations in the securities markets. The Article contends that regulators should instead regulate investors. Although against current wisdom, a securities regime that regulated investors would allow regulators to take a more market-driven approach toward investor protection, resulting in a less paternalistic regime. For those investors with good information on issuers in the market, for example, no mandatory regulations are necessary. Rather investors will contract for desired protections; those market participants failing to provide valued protections will receive less of for their securities or services. As a result, market participants will voluntarily provide desired protections. The Article, therefore, proposes to classify investors based on their informational resources. Such classification frees those investors able to protect themselves to engage in a wide variety of investments while allowing regulators to focus their resources on investors less well-equipped.

Suggested Citation

Choi, Stephen J., Regulating Investors Not Issuers: A Market-Based Proposal (2000). California Law Review, 2000. Available at SSRN: or

Stephen J. Choi (Contact Author)

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

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