Same as LAW 379M, Topic: Security Market Policy. This is a Business School course, cross-listed with the Law School. Students interested specifically in the legal regulation of securities should pay special attention to the Law School's courses Securities Regulation and Capital Markets.
This course provides a general framework – both theoretical and practical – to identify, analyze, and understand the tradeoffs that government regulators make when deciding financial and securities markets policy. You will develop the tools to understand the market failures and inefficiencies that lead to these choices, as well as their consequences on capital raising, investor welfare, securities trading, corporate governance, and financial stability.
At the end of the course you should understand how the legal and economic boundaries between investors, companies, and financial intermediaries give rise to incentives and behaviors that (1) fuel financial innovation, (2) lead to market abuses and fraud, (3) engender systemic risk, and (4) drive the need for continuous regulatory calibration to promote and maintain orderly and efficient markets.
General topic areas are fixed, but the learning exercises and assignments will be guided by current market developments and practices among asset managers, securities dealers, banks, public corporations, and investment companies. Students are expected to carry a significant reading and writing load throughout the semester.
Topic areas covered
A brief history of financial markets
Evolution of banking, from Medici to Morgan; development of public securities markets; panics, crises, and the rise of capital market regulators
The policy and politics of making rules
Congress, regulatory agencies, and the courts; identifying market failures; understanding the policy tradeoffs
Securities fraud and misconduct
Insider trading, offering fraud, and financial misreporting; defining abusive market practices; detection methods and market surveillance
Financial market stability
Causes and consequences of systemic risk; private market finance and shadow banking; international regulatory cooperation
Technology disruptions and financial innovation
Approving new financial products; algorithmic trading and machine learning risks; FinTech and democratizing finance
Social responsibility in securities regulation
Disclosure of ESG factors; pursuit of human rights; promoting diversity and inclusion
Bauguess, Scott W 