Abstract
Under the conventional view, securities law is intended to protect ordinary (retail) investors. However, some scholars from the school of Law & Economics (L&E), guided by considerations of economic efficiency, claim instead that the principal function of securities law is to reduce transaction costs and risk to professionals. This paper examines those claims empirically. Our research design blends content analysis methods with expert survey techniques to arrive at numerical assessments of determinants of Polish securities law. We find that the L&E view is supported by our data very weakly, only insofar as consumer protection is not the main driver of securities law. The veracity of this claim appears to be time-dependent. We do not find sufficient support for the main components of the L&E view, i.e., that securities law is meant to reduce transaction costs and risk to professionals. However, our data does not refute the L&E hypotheses, and, therefore, we consider them to be an open question. We phrase our conclusions cautiously because of the relatively small number of experts surveyed and of statutory sources of securities law in Poland.
Highlights
There is a widespread belief that securities law is meant to protect ordinary investors
We find that the Law & Economics (L&E) view is supported by our data very weakly, only insofar as consumer protection is not the main driver of securities law
A widely held view in the law and economics literature states that securities law aims at reducing transaction costs and risk to professional investors rather than at protecting consumers
Summary
There is a widespread belief that securities law is meant to protect ordinary (retail) investors. The European Commission stated in no uncertain terms that the financial crisis “shattered” retail investor trust in capital markets, and consumer protection rules are seen to be “instrumental” in restoring that trust within the EU [5] Considerations of protecting retail investors permeate much of EU securities law [6,7]. The rationale for that is the assumption that consumers (retail investors) require additional protection because of having a perceived weakness in relation to professional participants in securities markets. Securities markets are complex, and retail investor experience and knowledge of securities products does not usually match that of professionals’
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