Confidence and Competence: The Conundrum of EC Capital Markets Law

Abstract

This article considers the underlying rationales of EC securities regulation which, since the adoption of the 1999 Financial Services Action Plan, is fast emerging as a discrete and sophisticated regulatory regime for the EC capital market. In particular, it considers the regime's growing reliance on the promotion of pan-EC investor confidence. EC securities regulation is placed in the context of the insights of behavioural economics which challenge the extent to which investor confidence is an appropriate objective for the new pan-EC regime. The powerful influences of the EC's market construction imperative and its constitutional and institutional context, however, expand the role traditionally played by investor confidence beyond the strict regulatory context. Confidence may be an important device for deepening the Commission's regulatory power and placing EC securities regulation on a more secure constitutional footing. A proposal is suggested for how investor confidence may be safely promoted by the new regime.“I can calculate the motions of the heavenly bodies but not the madness of people.”

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