Showing papers in "Law and Financial Markets Review in 2016"
TL;DR: The UK company law, in its arguably insular shareholder-focused framework, has been called into question regarding its fitness for purpose in the continuing litany of corporate malpractices and scanda....
Abstract: UK company law, in its arguably insular shareholder-focused framework, has been called into question regarding its fitness for purpose1 in the continuing litany of corporate malpractices and scanda...
15 citations
TL;DR: In this paper, the new MiFID II rules on high frequency trading (HFT), other forms of algorithmic trading (AT) and direct electronic market access (DEA) are discussed.
Abstract: This article analyses and discusses the new MiFID II rules on high frequency trading (HFT), other forms of algorithmic trading (AT) and direct electronic market access (DEA). In particular, it discusses the benefits and risks of AT, HFT and DEA, the MiFID II definitions of these terms, the scope of the rules, as well as the applicable substantive rules.
12 citations
TL;DR: In this paper, the issues in the search for greater sustainability in financial markets are analyzed and one of the greatest challenges facing financial markets is the consequences of climate change, with regard to trillions of dollars of carbon assets that are now stranded in the ground, yet continue to appear as assets of resources companies.
Abstract: This article analyses the issues in the search for greater sustainability in financial markets. Presently one of the greatest challenges facing financial markets are the consequences of climate change. The impact of climate change is direct in financial markets with regard to the trillions of dollars of carbon assets that are now stranded in the ground, yet continue to appear as assets of resources companies. This carbon is stranded because of the commitment to reducing emissions in the Paris 2015 agreement. The approach to fossil fuels is undergoing a tectonic shift whereby investment is switching rapidly to renewable energy. Coalitions are forming around the need to maintain and support natural capital as the context for all wealth generation.
6 citations
TL;DR: In this article, the authors argue for the establishment of a comprehensive legal and regulatory framework for Islamic Banking and Finance (IBF) in India and examine the two major reasons for the need for IBF in India.
Abstract: In light of India’s growing Muslim population, which is projected to become the largest in the world by 2050, and the subsequent need to address their financial integration, this paper argues for the establishment of a comprehensive legal and regulatory framework for Islamic Banking and Finance (IBF) in India. It examines the two major reasons for the need for IBF in India. First, a significant proportion of Indian Muslims are unable to make investments because their investments are not adequately supported by banks and second, this has deepened their financial exclusion. It also identifies the barriers to the growth of IBF in India, which prevents investments from Muslims abroad as well. It also looks at past efforts to incorporate IBF into the financial system. This paper seeks to make certain suggestions for reform in the legal framework so as to accommodate IBF. It examines the two approaches towards the integration of IBF. The first is that of a dual banking system, where IBF operates under a special...
5 citations
TL;DR: Wang et al. as mentioned in this paper reviewed relevant laws and regulation in China relating to auditors, mainly company law, securities regulation and banking regulation, and found that weak legal and regulatory system regulating the auditors in China's financial market may be one of the key factors for the above accounting issues.
Abstract: After the outbreak of the recent financial crisis, auditors were blamed for their inability to predict the failure of companies. The role of auditors in providing sufficient and relevant information has been at the top of the agenda for discussion in various Western countries and international organisations. In China, which has seen repeated domestic and overseas accounting scandals, there is a more fundamental problem related to the role of auditors in enhancing the accuracy and timeliness of information disclosed, in addition to the sufficiency and relevancy of information disclosed. With reference to the systems in the US and the EU and by reviewing relevant laws and regulation in China relating to auditors, mainly company law, securities regulation and banking regulation, the weak legal and regulatory system regulating the auditors in China's financial market may be one of the key factors for the above accounting issues. There are ambiguous provisions concerning external audit requirements, insufficie...
4 citations
TL;DR: In this paper, the authors explore the illustrative case of cooperative banks and show that culture can significantly influence the effectiveness of the decision-making process and, thus, the risk appetite/profile of banks.
Abstract: The macroeconomic impact of banks' misconduct led users of financial services to be deterred from using the system to the detriment of market integrity and called upon policymakers and supervisors to turn to “culture” as a means to regain public trust and eventually guarantee the stability of the real economy. From this vantage point, the crisis showed that culture did indeed matter, as it can significantly influence the effectiveness of the decision-making process and, thus, the risk appetite/profile of banks. Culture and behaviour have been shown to be the main threats to financial stability that policymakers and supervisors have currently to cope with. What is already clear is that culture is an important subject to focus on when supervising banks. Nevertheless, the problem is that current academic thinking lacks both clarity and expertise on what “culture” is all about and how it should be implemented by banks. This article addresses this gap by exploring the illustrative case of cooperative banks. Ex...
4 citations
TL;DR: In this paper, the enforcement roles of the BCBS and the IASB in implementing the far-reaching global financial reforms of financial institutions, in particular measures relating to disclosure, proposed by the G20 after the financial crisis, are examined.
Abstract: This article examines the enforcement roles of the BCBS and the IASB in implementing the far-reaching global financial reforms of financial institutions, in particular measures relating to disclosure, proposed by the G20 after the financial crisis. Both the BCBS and the IASB have been involved actively and substantially in developing international standards in line with global financial initiatives. This article, with reference to systems in the US, the EU and China, suggests that the transposition of international standards into national standards in the form of law and regulation combined with a robust licensing mechanism, as compared with a periodic monitoring mechanism, can facilitate the full and consistent implementation of and compliance with the standards by financial institutions. The above framework could be a reference for the implementation of other G20 financial initiatives. The BCBS and the IASB could also take up a more proactive role for preventive financial measures in response to the inc...
3 citations
TL;DR: In this paper, the authors retrace the steps employed by the European Union to mitigate the risk arising across Member States from financial collateral arrangements, especially in a cross-border context, and draw attention to the rationale of the Financial Collateral Directive (FCD) and, after more than a decade, analyses the extent to which the FCD has succeeded in achieving its objectives.
Abstract: The article retraces the steps employed by the European Union to mitigate the risk arising across Member States from financial collateral arrangements, especially in a cross-border context. In this respect it draws attention to the rationale of the Financial Collateral Directive (FCD) and, after more than a decade, it analyses the extent to which the FCD has succeeded in achieving its objectives. In particular, the article studies the deadlocks in implementation of the FCD in the UK under the Financial Collateral Arrangements (No 2) Regulations 2003 in order to illustrate the unresolved legal uncertainties. The article draws attention also to the various strategies set forth and partially undertaken by the international community to overcome the lack of full harmonisation by stressing the importance of the flexible “place of the relevant intermediary approach” (PRIMA) rule on conflict of laws. Yet, despite the efforts, most of the legal flaws are far from being fixed at international, EU, and even domesti...
3 citations
TL;DR: In this article, the authors address the question of international cooperation in the financial benchmark context and conclude that cooperative tools such as ad hoc discussions, supervisory colleges, equivalence measures are needed to prevent misconduct rather than to merely punish it.
Abstract: The London Interbank Offered Rate and forex scandals have shaken public trust in the global financial system. Despite the global nature of the scandals, the role of international cooperation in preventing financial benchmark manipulation has been surprisingly overlooked. Benchmark reform has tended to focus on structural changes to benchmark administration and regulation, with a particular emphasis on benchmark quality, methodology and governance. Where international cooperation has occurred, it has tended to operate ex post, in facilitating cross-border investigations after crises have already been revealed. Where ex ante cooperation has occurred, it has taken the form of high-level standard-setting. It is clear that further cooperation is needed to prevent misconduct rather than to merely punish it. This article addresses the question of international cooperation in the financial benchmark context and concludes that cooperative tools such as ad hoc discussions, supervisory colleges, equivalence measures...
3 citations
TL;DR: The level of public unease at the relationship between the corporation and society shows no sign of abating as discussed by the authors and there is evidence of tension, suspicion and distrust, reawakening ques...
Abstract: The level of public unease at the relationship between the corporation and society shows no sign of abating. Across the world, there is evidence of tension, suspicion and distrust, reawakening ques...
TL;DR: In this paper, the impact of three major regulatory changes that happened on the historic day of 2 July 2001, when badla was banned, rolling settlement replaced accounting period settlement for...
Abstract: The study looks at the impact of three major regulatory changes that happened on the historic day of 2 July 2001, when badla was banned, rolling settlement replaced accounting period settlement for...
TL;DR: In this article, the authors rectify the market governance model of B Holmstrom and J Tirole, and reverse many of their theoretical findings without altering their assumptions, and develop and test a number of hypotheses concerning company board structure and incentives in the presence of informed trading of company shares in the stock market.
Abstract: This article highlights some of the findings of a very extensive paper involving both a new economic theory of governance and a range of major empirical tests. In this extensive paper, I rectify the market governance model of B Holmstrom and J Tirole, “Market liquidity and performance monitoring” (1993) 101 Journal of Political Economy 678–709, reverse many of their theoretical findings without altering their assumptions, and develop and test a number of hypotheses concerning company board structure and incentives in the presence of informed trading of company shares in the stock market. Both Bengt Holmstrom (2016) and Jean Tirole (2014) are recent Nobel Laureates. In my theory, the use of market-based incentives for the CEO and board members diminishes with firm size as larger firms benefit more from this informed trading which I equate with “market monitoring” of board decisions. Most studies of the impact of changes in company board composition prior to this suffer from problems due to the “endogeneity...