Disparate Regulatory Schemes for Parallel Activities: Securities Regulation, Derivatives Regulation, Gambling, and Insurance

Abstract

Although bearing striking similarities to each other in many respects, securities investments, non-securities derivative investments, insurance and gambling are subject not only to different regulatory regimes but also to vastly different levels of government interference. Traditionally, stringent prohibitions characterize the insurance and gambling industries, whereas regulation of investments in securities and derivatives occurs primarily through disclosure requirements. Also there is striking contrast in the current approaches taken to securities and non-securities derivatives regulation. If, however, these activities are so similar in nature, does a rational basis exist for widely differing regulatory schemes? If no rational basis can be found how do we identify whether the current deregulation trend moving through the derivatives markets is a sensible change when regulation in the securities market is increasing? This article ultimately questions the absence of a consistent approach in regulating securities, nonsecurities derivatives, insurance and gambling. Among other things, the article questions whether deregulation of the derivatives market is a prudent maneuver in light of its similarities with more heavily regulated activities.

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