Principles-based Regulation Research Articles

The Sanctions Principles-Based Regulation: A Blueprint for a New Approach for the EU Sanctions Policy (Part I)

192 Despite the tremendous number of studies devoted to the effectiveness of economic sanctions, the unprecedented number of sanctions applied and the recent European Union (EU) reforms on sanctions, sanctions effectiveness should be still a matter of debate. More than a year after Russia’s full-scale invasion of Ukraine, but G7-led sanctions have not materially hindered Russia’s war effort. This study intends to address this problem by focusing on how to make the use and application of EU sanctions against Russia more effective. In doing so, I argue that the main impediments to EU sanctions effectiveness are systemic in nature and inherent to the EU sanctions policy framework. The piecemeal changes of the EU sanctions regulatory framework undertaken so far have not solved these systemic flaws that undermine the effectiveness of EU sanctions. A fundamental revision of the entire system of the EU sanctions policy framework is needed. This study proposes implementing a comprehensive principles-based framework for EU sanctions policy, where harmonisation and the risk-based approach are its foundations, to make sanctions more effective. The proposed sanctions principles-based framework is broader in its scope than is currently the case; it covers a broader set of principles. The proposed frame includes all the stages of the sanctions process, is addressed to a broader number of actors and its foundations are developed. I recommend that this sanctions principles-based framework should be mandatory for use. This is the first part of a two-part article. Part I of the article discusses the need for the revision of the regulatory approach to the EU sanctions policy to increase the effectiveness of sanctions. It includes the analysis of the EU sanctions as a foreign policy instrument and a comprehensive overview of the EU regulatory framework on sanctions as well as the analysis of imposition of the EU sanctions against Russia. Part I also discusses policy proposals for the effectiveness of the EU sanctions, such as harmonisation of the EU sanction policy and the application of a sanctions risk-based approach.

The Digital Economy: Opportunities and Difficulties Isamic Economy's Future

The advent of technical innovation and economic digitalization via social media platforms and shopping applications has an impact on community social and economic activity. The manual, traditional economic system has been replaced by a modern one. A basic definition of a digital economy is any economic output that uses multifunctional internet-based technologies applied in a variety of digital business models for products or services. The expansion of the Islamic economy's involvement in e-commerce must be promoted in order to support the rise of financing via the digital economy and the empowerment that comes with it. One approach that can be used to create halal product innovations that are popular on the digital economy platform is principle-based regulation. With this technology, one would anticipate that. The results of this study demonstrate that initiatives to support innovation, entrepreneurship, and economic expansion may present a chance to increase access, particularly to Islamic economic inclusion. The digital economy is also anticipated to serve as a platform for the exchange of knowledge about how to better public services, finance, or social services, as well as new technologies that could offer all societal levels first-rate, quick, and reasonably priced Islamic economic services while also enhancing the effectiveness and efficiency of economic activity.

The present and future of the Five Safes framework

The Five Safes has become the default framework for confidential data governance across multiple sectors and countries. Since its inception in 2003, the approach has influenced data management in many ways, particularly in the public sector. As it has become established and widely used, both its advantages and limitations have come to the fore, along with an understanding of modern data management principles.
 This paper explores the history, application, strengths and limitations in the Five Safes. It discusses the different variations on the framework over time, as well as recent suggestions for deepening or extending the framework.
 Finally we discuss the framework’s relationship to the emerging preference for principles-based regulation and design, showing how there is a concordance between the two which may lead to a new consensus on good data governance design models.

Principle-Based Regulation in Indonesia: in Response to Digital Age Toward Financial Services

After the advent of digital technology, today's financial services have grown in importance. Part of the innovation disruption is the digitization of technology at the start of the industrial era 4.0. In the financial services industry, where access to the financial industry needs to move quickly, sophisticated, and useful to satisfy people's demands, innovation cannot wait for tomorrow. The regulation requirement for financial services inspired by the digital era must move fast to keep up with the times, even though Indonesian legislation must go through a lengthy bureaucratic procedure. In this case, law reform in the financial services sector is needed to respond to digital developments. This research is normative juridical research with the statute, conceptual, and comparative approaches. This study aims to apply the application of principle-based regulations to legal reform in the financial services sector in response to the digital era. This issue has been discussed in the United Kingdom since the financial crisis and implemented along with the rule-based regulations. In Indonesia, this issue has been implemented in institutional-level regulations, for example, Bank Indonesia Regulations in Payment System. However, efforts should be made to adopt these principles into all arrangements related to the financial services sector. This is because the regulations that are still valid in Indonesia are dominated by a rules-based system of regulations.

Principles-based risk regulatory reforms and management control practices: a field study

PurposeGovernment reforms have seen shifts from rules-based to principles-based risk regulatory governance. This paper examines the effects of principles-based risk regulatory reforms on public sector risk management (RM) and management control practices in public sector organizations (PSOs).Design/methodology/approachThe principles-based regulation focuses on providing autonomy to PSOs while maintaining control over their actions without direct intervention. This resonates with Foucault's notion of how modern forms of governments operate. The research is informed by Foucault's concept of governmentality. The authors conducted a qualitative field study of an Australian PSO, gathering and analysing data from interviews, focus groups, and archival documents.FindingsThe findings show the capillary modes by which principles-based risk regulatory regime penetrates and works with management control practices in pursuit of regulatory goals within the PSO the authors studied. In addition, the authors find that the principles-based approach (focusing on autonomy) and rules-based approach (focusing on control) are not opposites in kind and effect but rather, autonomy should be understood as a central pillar of control. Furthermore, the findings show how cultural controls and formal controls are not in conflict but are interconnected in RM practices, with cultural controls providing control architecture for RM and formal control translating the control architecture into routines. Finally, the study provides insights into how enterprise risk management (ERM) provides capabilities for and routinizes RM practices in a PSO and the management control systems (MCS) that enabled this to occur.Originality/valueThe paper provides novel insights into how MCS are infiltrated, mobilized and deployed to enact principles-based risk regulatory reforms. These insights are useful for regulators, practitioners and researchers.

Flexible regulation for dynamic products? The case of applying principles-based regulation to medical products using artificial intelligence

ABSTRACT Emerging technologies including artificial intelligence (AI) enable novel products to have dynamic and even self-modifying designs, challenging approval-based products regulation. This article uses a proposed framework by the US Food and Drug Administration (FDA) to explore how flexible regulatory tools, specifically principles-based regulation, could be used to manage ‘dynamic’ products. It examines the appropriateness of principles-based approaches for managing the complexity and fragmentation found in the setting of dynamic products in terms of regulatory capacity and accountability, balancing flexibility and predictability, and the role of third parties. The article concludes that successfully deploying principles-based regulation for dynamic products will require taking serious lessons from the global financial crisis on managing complexity and fragmentation while placing equity at the centre of the framework.

The sandbox approach to FinTech regulation: a case study of China

Finance has become increasingly enabled by innovations and technologies after the global financial crisis, calling for profound reforms regarding the regulatory regime. Regulation has lifted requirements to deal with systemic risk in the post-crisis era, but being slow to address the rise of FinTech activities. Such a mismatch requires more accommodative regulatory treatments, bringing about the sandbox among others. As far as Mainland China is concerned, it has been very active in applying technologies to finance, but its regulators and policy makers have struggled to manage market dynamics. This article is aimed to explore how to balance between ongoing regulatory reforms and a sharp rise of FinTech activities via the sandbox approach in China. As an innovative regulatory tool, the sandbox is a safe space set to test innovation activities without harming consumers’ interests and fair competition. Since 2015, a growing number of sandboxes have been introduced to both developed and developing countries. This article selects some of them to make a comparative study. As presented by such cases, convergences co-exist with divergences, and the key elements can be summarized accordingly. The sandbox has been further examined as a form of principles-based regulation, alongside risk-based approach. It is not the only option or best practice to boost innovations, but it is beneficial as long as to get it designed carefully. Then this article reviews newly-established sandboxes in China by drawing insights from the comparative study, proposing a “to-reform” list to Chinese reformers. As the conclusion, it highlights that the sandbox, carrying critical limitations, might face extra challenges in China.

Flexible Regulation for Dynamic Products? The Case of Applying Principles-Based Regulation to Medical Products Using Artificial Intelligence

Emerging technologies including artificial intelligence (AI) enable novel products to have dynamic and even self-modifying designs, challenging approval-based products regulation. This article uses a proposed framework by the US Food and Drug Administration (FDA) to explore how flexible regulatory tools, specifically principles-based regulation, could be used to manage ‘dynamic’ products. It examines the appropriateness of principles-based approaches for managing the complexity and fragmentation found in the setting of dynamic products in terms of regulatory capacity and accountability, balancing flexibility and predictability, and the role of third parties. The article concludes that successfully deploying principles-based regulation for dynamic products will require taking serious lessons from the global financial crisis on managing complexity and fragmentation while placing equity at the centre of the framework.

The Impact of a Principles-Based Approach to Director Gender Diversity Policy

We study the impact of a principles-based (i.e., comply or explain) approach to female representation on corporate boards. In contrast to the existing evidence on mandatory diversity regulation, we find that those firms most likely to be affected by this principles-based regulation exhibit positive abnormal returns around its announcement. Moreover, relative to control firms, they exhibit a 30% increase in the fraction of female directors over the longer term. We find that compliance with the gender diversity policy increases over time and that the main determinants of non-compliance are economic frictions related to the supply of qualified female directors.

Training for professional judgment in accounting education

The global convergence process towards International Financial Reporting Standards supported by multilateral agencies such as the World Bank poses a challenge to accounting education’s ability to make judgments and estimates, due to the emphasis placed on general new principles-based regulation instead of detailed rules. The international literature has highlighted this aspect amply, while in Colombia, it remains incipient. This paper aims to analyze the approach to professional judgment and critical thinking in the educational proposals of high-quality Public Accounting programs in Colombia as a factor contributing to the formation of such judgment in the accountant. This paper provides empirical evidence based on a qualitative-documentary methodology, which analyzes the Educational Projects provided by accredited universities. Among the most relevant findings is the lack of an explicit statement about pedagogical strategies to materialize a professional judgment that some of the universities analyzed mentioned succinctly.

Prioritising business model innovation: What needs to change in the United Kingdom energy system to grow low carbon entrepreneurship?

‘What needs to change in the United Kingdom energy system, to allow low carbon business models to thrive?’ Earlier work by the authors has reported that up to £21bn of new financial value could be available to electricity utilities by 2050, in a low-carbon UK power sector. This represents up to 30% of future electricity markets. To capture new value, electricity utility business models need to evolve. This research used an elite ‘decision theatre’ method, in the UK, USA, and Europe, to decide on the most important changes required to the energy system to enable new [low-carbon] utility business models to thrive. The results show that there is substantial agreement on the five requirements for change, these are: (1) Clear national heat and electric transport strategies; (2) Commitment to sufficient carbon prices; (3) Simpler, principles-based regulation across the energy value chain; (4) Accessible markets for flexibility and other energy services; and (5) Managing consumers’ exposure to risk. These were the changes that participants considered most important to foster low-carbon utility business model innovation. This work suggests focusing on business model innovation as opposed to technological innovation could accelerate decarbonisation, and extends the use of the Decision Theatre method in social science energy research.

Rethinking Regulation for the Digital Environment

The question of how best to regulate for violent, deceptive or otherwise harmful only content is one which is vexing governments around the globe. A number of legal interventions in Australia, France, Germany and the United States seek to attribute liability to intermediaries for content they host or stream. These laws have proven to be highly controversial and are generally criticised as having a chilling effect. Entering this debate the UK government has proposed via the Online Harms White Paper a duty of care for internet platforms and hosts. This paper argues that a better approach is to harness the flexibility and responsiveness of principles-based regulation. This will allow regulators to respond to new challenges without overburdening intermediaries, risking chilling effects.

Blockchain Technology and Financial Regulation: A Risk-Based Approach to the Regulation of ICOs

This paper compares Initial Public Offerings (IPOs) and equity crowdfunding with Initial Coin Offerings (ICOs) and explores the corresponding risks and limitations of these different fundraising practices, with a view to analysing the extent to which the latter should be subject to the same regulatory framework as the former. After assessing the underlying principles and current regulatory framework for IPOs and equity crowdfunding, with a focus on Europe and the US, we investigate the possibility of applying existing financial regulations to ICOs. Drawing from the notion of “functional equivalence”, we contend that many ICOs share a sufficient number of similarities with traditional IPOs and equity crowdfunding, to be regulated in a similar manner. However, given the various attempts by token issuers to escape from the scope of securities laws by assigning a different function to their ICOs tokens, we argue that principle-based regulation based on an in-depth risk-analysis could be an effective way of addressing the regulation of ICOs, thereby moving from “functional equivalence” to “risk equivalence”. Finally, we explore the use of blockchain technology as a regulatory technology, incorporating specific rules and constraints into the technological fabric of an ICO, in order to ensure compliance with the fundamental principles of financial regulation.

Positive Net Neutrality: Zero-Rating and the Material Reduction of Consumer Choice

Zero-rating is a permitted class of ‘positive’ net neutrality violations under the European Union’s ‘Net Neutrality’ Regulation. Conversely, ‘negative’ net neutrality violations, normally associated with the blocking and throttling of content that threatens an Internet Service Provider’s business model, are strictly prohibited. With the European Commission set for a public consultation on zero-rating, and The Body of European Regulators for Electronic Communications set to issue updated guidelines on the practice, the paper assesses the present state of zero-rating in Europe, focusing on differentiation cases to assess what types of positive net neutrality violations could result in a “material reduction on consumer choice” for mobile consumers. As zero-rating is generally limited to mobile subscriptions that include data caps, the Office of Economic Development has warned regulators to be vigilant against practices that could result in users constantly monitoring their data usage or limiting access to non-zero-rated services. The practice of ‘zero-rating’ in Europe poses a unique challenge to regulatory authorities keen to protect the principle of net neutrality. While consumers perceive free access to certain content, applications and programs as beneficial, zero-rating also contravenes the general aims of the Regulation: that Internet traffic is managed by Internet Service Providers in a non-discriminatory manner and that consumer choice is protected. While the practice might be seen to benefit consumers, zero-rating can also affect the number of providers entering the market and compromise the Regulation’s aim to “guarantee the continued functioning of the internet ecosystem as an engine of innovation”. The paper examines the state of zero-rating services, with specific emphasis on positive net neutrality violations across the European Union. We examine from both a normative perspective and by analysing rulings from National Regulatory Agencies empowered with supervision and enforcement duties by the ‘Net Neutrality’ Regulation. Drawing on behavioural economics and cognitive psychology literature, the paper suggests too much choice in zero-rating services can actually lead to less than optimal decision-making by consumers. Rational theory posits that more choice is good for consumers; yet, in reality, more choice can actually result in a less-informed decisions, inadvertently empowering more recognizable Content and Application Providers at the expense of lesser-known ones. From our critique of the rulings, we conclude with an overview or what amounts to permitted/prohibited zero-rating practices in the European Union and argue that a hybrid regulatory response – involving market- and principle-based regulation is needed alongside command-and-control rules to ensure zero-rating services do not amount to a material reduction in consumer choice.

Mandatory Data Breach Notification and Hacking the Smart Home: A Legal Response to Cybersecurity?

This paper will investigate whether the Australian legal and regulatory framework sufficiently addresses cybersecurity concerns particular to the smart home. Specifically, the paper will analyse the extent to which the introduction of the data breach notification scheme in Australia will apply to smart home device manufacturers regulated by the federal Privacy Act 1988 (Cth) regarding device breaches. By examining Australian Privacy Principle 11 and the introduction of mandatory data breach notification, the paper aims to determine whether the Australian privacy model of Principles-Based Regulation is capable of providing a market-based solution to cybersecurity concerns in the smart home.

The Enforcement of Financial Market Crimes in Canada and the United Kingdom

This piece undertakes a comparative analysis of the enforcement of financial market crimes in Canada and the United Kingdom. In both jurisdictions, financial market crimes have low enforcement rates for a multiplicity of reasons common to both jurisdictions. First, financial market crimes appear to be a relatively low priority for law enforcement officials who are required to devote increasing resources to violent crimes. Second, law enforcement infrastructure lacks financial resources which undermines the investigation and prosecution of financial market crime and fraud cases. Third, technology has allowed new types of fraud to develop, with insufficient human and financial resources to deal with them. Fourth, past treatment of financial market criminals as pillars of the community who have merely had a fall from grace has weakened public perceptions of the harm caused by these crimes. Despite the existence of agencies and regulators specially designated to address these issues, there seems to be no formal and effective strategy in either jurisdiction to tackle the problem of financial market enforcement. The problems with enforcement are not exclusively legal, and cannot be solved through legal reform alone. Nevertheless, reform to the law is essential in both jurisdictions. In particular, as this chapter argues, reforms should dedicate greater resources to financial market criminal enforcement, introduce principles-based regulation, and facilitate inter-agency coordination, as well as pursue other targeted regulatory reforms.

The Necessity of Introducing the Principle-based Regulation System to the Capital Market and Financial Services Act and Some Suggestions for Future Reform

The Necessity of Introducing the Principle-based Regulation System to the Capital Market and Financial Services Act and Some Suggestions for Future Reform

Neither Principles nor Rules: Making Corporate Governance Work in Sub-Saharan Africa

Corporate governance is often split between rule-based and principle-based approaches to regulation in different institutional contexts. This split is often informed by the types of institutional configurations, their strengths, and the complementarities within them. This approach to corporate governance regulation is mostly discussed in the context of developed economies and their regulatory demands. However, in developing and weak market economies, such as in Sub-Saharan Africa, there is no such explicit split and the debates on such contexts in the comparative corporate governance literature has been meagre. Nonetheless, there are sparks of good corporate governance practices in the region. Drawing from institutional theory and a case study of Nigeria – Africa’s largest economy – we explore the appropriateness or suitability of corporate governance regulatory frameworks in Sub-Saharan Africa. Our findings suggest that Nigeria needs an integrated system that combines elements of both rule-based and principle-based regulation, supported by a multi-stakeholder co-regulation strategy. This paper departs from the mainstream rule-based and principle-based categorisations by forging ahead new perspectives on corporate governance regulation, especially in weak market economies.

Principles-Based Regulation Blueprint for A New Approachh for the Internal Agricultural Market

The European agricultural sectors and the Common Agricultural Policy (CAP) face the triple challenge of productivity increase to meet increasing demands for food, fibre and energy, pressing public policy issues regarding public health and nutrition and the public good components of agricultural land use (emissions, soil protection, landscape, biodiversity, water, climate change), and adaptation to a changing institutional environment with liberalised markets and integrated transnational value chains. The current governance arrangements for the sector are criticised for their complexity, implementation gaps, inefficiency and ineffectiveness. This paper discusses whether a shift towards a different regulatory approach – principles-based regulation (PBR) in the form of the “new approach” – could offer an avenue for fundamental improvements. After reviewing the problems in the current CAP and explaining the broader “new approach” to regulation, we discuss its applicability to the internal agricultural market. We describe how a “new approach” to the internal agricultural market as application of PBR could look like and how PBR could be linked to the farm payments made under the CAP. We finally reflect on the necessary legal competence basis and on the potential of PBR to address the major challenges facing the European agricultural sector and the CAP.

원칙중심규제의 도입을 위한 출발점으로서 자본시장법 제37조의 개정 필요성

원칙중심규제의 도입을 위한 출발점으로서 자본시장법 제37조의 개정 필요성