Regulatory Transparency and the Alignment of Private and Public Enforcement

67 Pages Posted: 3 Sep 2020 Last revised: 15 May 2021

See all articles by Amy P. Hutton

Amy P. Hutton

Boston College - Carroll School of Management

Susan Shu

Boston College - Carroll School of Management

Xin Zheng

University of British Columbia

Date Written: May 15, 2021

Abstract

We propose and find that enhanced regulatory transparency facilitates alignment between private and public enforcement. Utilizing the SEC’s 2004 decision to publicly disclose its comment letters, we explore the actions of a public enforcer (the SEC) and a private enforcer (shareholder litigants). The two parties’ enforcement targets are more aligned in the post-public-disclosure period. The increased alignment is attributable to two channels. First, SEC’s actions are subject to greater public scrutiny, enhancing regulator incentives and reducing regulatory capture. Second, shareholder plaintiffs gain information previously accessible only by regulators, enabling litigants to identify cases with “merit,” reducing nuisance suits and earning larger settlements.

Keywords: Regulation, SEC, securities litigation, class action lawsuit, regulatory transparency

JEL Classification: G18, G38, K41, K42, L51, M40, M41, M48

Suggested Citation

Hutton, Amy P. and Shu, Susan and Zheng, Xin, Regulatory Transparency and the Alignment of Private and Public Enforcement (May 15, 2021). Available at SSRN: https://ssrn.com/abstract=3684840 or http://dx.doi.org/10.2139/ssrn.3684840

Amy P. Hutton

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617 552 1951 (Phone)

Susan Shu (Contact Author)

Boston College - Carroll School of Management ( email )

Boston College
140 Commonwealth Ave.
Chestnut Hill, MA 02167
United States
617-552-1759 (Phone)

Xin Zheng

University of British Columbia ( email )

2053 Main Mall
Vancouver, B.C. V6T 1Z2
Canada

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