The Financial Institutions Incentives When They Place Financial Assets With Credit Risk to Retail Investors

42 Pages Posted: 10 Jun 2019

See all articles by Ramiro Losada

Ramiro Losada

Comision Nacional del Mercado de Valores

Multiple version iconThere are 2 versions of this paper

Date Written: 2010

Abstract

This paper analyzes the conflict of interest that exists when a financial institution issues and places a financial asset with credit risk among retail investors. Four regulatory measures are presented and analyzed in order to improve retail investors protection. It is shown that in this type of issues the most effective regulatory measure is that the supervisor sets a price cap. A close approach to this measure would be that the supervisor asks for independent valuations of the financial assets to provide investors and the supervisor itself with a well-founded opinion about the price of the issue. Under this approach, at least a second best social optimum is achieved.

Keywords: conflict of interest, retail investors, regulation

JEL Classification: G12, G18

Suggested Citation

Losada, Ramiro, The Financial Institutions Incentives When They Place Financial Assets With Credit Risk to Retail Investors (2010). CNMV Working Paper No. 43, Available at SSRN: https://ssrn.com/abstract=3400595 or http://dx.doi.org/10.2139/ssrn.3400595

Ramiro Losada (Contact Author)

Comision Nacional del Mercado de Valores ( email )

c/edison 4
Madrid, Madrid 28006
Spain

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