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The Challenge of Enforcement in Securities Markets

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  • Ana Carvajal
  • Jennifer A. Elliott
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    Abstract

    Weaknesses in the enforcement of regulation have been targeted by the G-20 as a priority concern for reform. But enforcement efforts in securities markets have proven difficult and uneven. The recent scandal in the United States, wherein a Ponzi scheme orchestrated by Bernard Madoff went undetected by the U.S. authorities for more than two decades, has once again highlighted the importance of effective enforcement of securities regulation, as well as the challenges that securities regulators around the world face in implementing credible enforcement programs. While in many instances it is individuals who bear the losses, we show that noncompliance with securities law can have serious system-wide impact and that the credibility of the system as a whole rests on the existence of effective discipline-the probability of real consequences for failure to obey the law. This paper explores the elements of enforcement, why it is so challenging, why it is important, and whether its effects can be measured. Through an analysis of the data gathered in the World Bank/IMF Financial Sector Assessment Program (FSAP), the paper examines how enforcement is being carried out around the world and draws conclusions regarding how countries are meeting the challenge of effective enforcement.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/168.

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    Length: 37
    Date of creation: 01 Aug 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/168

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    Related research

    Keywords: Financial institutions; Financial stability; Financial systems; Governance; International cooperation; Securities legislation; court; securities regulation; court order; securities regulators; courts; law enforcement; securities law; criminal sanctions; securities markets; court system; iosco principles; criminal authorities; insider trading; criminal justice; legal authority; criminal enforcement; market manipulation; criminal justice system; legal frameworks; enforcement powers; internal controls; market participants; compliance program; administrative law; financial crimes; civil law; share information; criminal proceedings; false information; judiciary; securities firms; market transparency; regulatory frameworks; accounting standards; civil courts; foreign regulators; foreign counterparts; criminal cases; judicial system; criminal prosecution; financial sector supervision; pyramid schemes; bankruptcy court; criminal investigation; administrative sanctions; risk management; regulatory authority; investor confidence; reporting requirements; administrative ? sanctions; court decisions; federal court; secrecy provisions; foreign jurisdictions; dissuasive sanctions; class actions; shell companies; financial privacy; public prosecutors; court process; legal counsel; licensing requirements; criminal offences; federal courts; financial regulations; attorneys general; regulatory authorities; civil court; criminal charges; financial regulation;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Christopher J. Jarvis, 1999. "The Rise and Fall of the Pyramid Schemes in Albania," IMF Working Papers 99/98, International Monetary Fund.
    2. Narayanan, Supreena, 2004. "Financial Market Regulation-Security Scams In India with historical evidence and the role of corporate governance," MPRA Paper 4438, University Library of Munich, Germany.
    3. Jennifer A. Elliott & Ana Carvajal, 2007. "Strengths and Weaknesses in Securities Market Regulation," IMF Working Papers 07/259, International Monetary Fund.
    4. Jackson, Howell E. & Roe, Mark J., 2009. "Public and private enforcement of securities laws: Resource-based evidence," Journal of Financial Economics, Elsevier, vol. 93(2), pages 207-238, August.
    5. Daouk, Hazem & Lee, Charles M.C. & Ng, David T.C., 2005. "Capital Market Governance: How Do Security Laws Affect Market Performance?," Working Papers 127078, Cornell University, Department of Applied Economics and Management.
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