Escaping Entity-Centrism in Financial Services Regulation

78 Pages Posted: 2 Apr 2013 Last revised: 23 Dec 2013

Anita K. Krug

University of Washington School of Law

Date Written: December 11, 2013

Abstract

In the ongoing discussions about financial services regulation, one critically important topic has not been recognized, let alone addressed. That topic is what this Article calls the “entity-centrism” of financial services regulation. Laws and rules are entity-centric when they assume that a financial services firm is a stand-alone entity, operating separately from and independently of any other entity. They are entity-centric, therefore, when the specific requirements and obligations they comprise are addressed only to an abstract and solitary “firm,” with little or no contemplation of affiliates, parent companies, subsidiaries, or multi-entity enterprises. Regulatory entity-centrism is not an isolated phenomenon, as it permeates the laws and rules governing many facets of a firm’s operations. Moreover, it can be discerned in laws and rules covering many types of financial services activities. In other words, entity-centrism in financial services regulation is pervasive. It is also deeply problematic.

This Article calls attention to entity-centrism as manifested in financial services regulation, shows why entity-centrism counters regulatory objectives, and assesses possible explanations for the phenomenon. It does so primarily by evaluating two recent regulatory failures that reveal how entity-focused laws and rules privilege entity boundaries over the various ways in which multiple entities (or entities and individuals) work together as a common enterprise. Accordingly, the Article contends that financial services regulation should look past entity boundaries and that lawmakers and regulators should think more broadly, critically, and creatively to address the persistent and significant regulatory difficulties that entity-centrism has spawned.

Keywords: financial institutions, investment adviser regulation, hedge funds, mutual funds, broker-dealer regulation, financial services, securities regulation

JEL Classification: G20, K22

Suggested Citation

Krug, Anita K., Escaping Entity-Centrism in Financial Services Regulation (December 11, 2013). Columbia Law Review, Vol. 113, No. 8, p. 2039, 2013; University of Washington School of Law Research Paper No. 2013-08. Available at SSRN: https://ssrn.com/abstract=2243052 or http://dx.doi.org/10.2139/ssrn.2243052

Anita K. Krug (Contact Author)

University of Washington School of Law ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98195
United States
206-543-4145 (Phone)

HOME PAGE: http://www.law.washington.edu/directory/Profile.aspx?ID=504

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