When Lawyers Start Thinking Like Economists: The SEC in Response to Technological Change
Journal IssueVolume 7 – Issue 1, 1999
Since its founding, the Securities and Exchange Commission (SEC) has employed a disclosure-enforcement framework, combined with a cooperative relationship with the securities industry, as the key means of ensuring market legitimacy and investor confidence. This article argues that not only is this framework deeply rooted within the SEC, but is equally ingrained in the public psyche. It is the deep belief of the public in this "prosecutorial orientation” that has sustained the SEC's disclosure-enforcement framework in the face of charges of obsolescence, inefficiency and agency capture. But as the SEC is increasingly called upon to concern itself with questions of efficiency and capital formation in the global economy, the stage may be set for a shift away from the disclosure-enforcement orientation and towards a more active, "promotional role" in the economy. In addition to external market forces, however, any qualitative shift in the SEC's regulatory mission will be affected only if there is a comparable shift in the public philosophy regarding the SEC's regulatory intent and a change in the internal orientation of the SEC. The author contends that seeds of these changes have long since been sowed.