Does Regulatory Jurisdiction Affect the Quality of Investment-Adviser Regulation?

48 Pages Posted: 16 Jan 2017 Last revised: 12 Apr 2019

See all articles by Ben Charoenwong

Ben Charoenwong

National University of Singapore - Department of Finance

Alan Kwan

The University of Hong Kong

Tarik Umar

Rice University

Date Written: January 31, 2019

Abstract

The Dodd-Frank Act shifted regulatory jurisdiction over “mid-size” investment advisers from the SEC to state-securities regulators. Client complaints against mid-size advisers increased relative to those continuing under SEC oversight by 30%-40% of the unconditional probability. Complaints increasingly cited fiduciary violations and rose more where state regulators had fewer resources. Advisers responding more to weaker oversight had past complaints, were located farther from regulators, faced less competition, had more conflicts of interest, and served primarily less sophisticated clients. Our results inform optimal regulatory design in markets with informational asymmetries and search frictions.

Keywords: Financial Advisers, Consumer Finance, Financial Misconduct, Fraud, Financial Regulation

JEL Classification: G18, G24, G28, D04, D18, K42

Suggested Citation

Charoenwong, Ben and Kwan, Alan and Umar, Tarik, Does Regulatory Jurisdiction Affect the Quality of Investment-Adviser Regulation? (January 31, 2019). Fifth Annual Conference on Financial Market Regulation. Available at SSRN: https://ssrn.com/abstract=2899883 or http://dx.doi.org/10.2139/ssrn.2899883

Ben Charoenwong

National University of Singapore - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu/faculty-profiles/519-ben

Alan Kwan (Contact Author)

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Tarik Umar

Rice University ( email )

Houston, TX
United States

HOME PAGE: http://https://business.rice.edu/person/tarik-umar

Register to save articles to
your library

Register

Paper statistics

Downloads
480
Abstract Views
2,544
rank
58,850
PlumX Metrics