Sub­ject of the Re­search
Des­pite the glob­al­iz­a­tion of fin­an­cial mar­kets and the pro­cesses of uni­fic­a­tion in fin­an­cial reg­u­la­tion across the globe there are many ele­ments in the struc­ture, or­gan­iz­a­tion and reg­u­la­tion of fin­an­cial mar­kets that show a re­mark­able per­sever­ance against uni­fic­a­tion. When it comes to reg­u­la­tion and en­force­ment, these dif­fer­ences ap­pear not only in the “law in the books” (dens­ity of reg­u­la­tion; scope of crim­in­al­iz­a­tion of the breaches of fin­an­cial reg­u­la­tion; pro­ced­ur­al powers of en­force­ment en­tit­ies, etc.), but also in the “law in ac­tion” (en­force­ment in­tens­ity; al­loc­a­tion of re­sources with­in reg­u­lat­ory and en­force­ment agen­cies; ex­er­cise of pro­sec­utori­al dis­cre­tion, etc.). It was one of the ba­sic as­sump­tions of the re­search pro­ject that these dif­fer­ences can be ex­plained by com­plex in­ter­re­la­tions between the struc­ture and func­tion­ing of na­tion­al fin­an­cial mar­kets, the na­tion­al reg­u­lat­ory frame­work and en­force­ment pro­cesses as well as the broad­er con­text of their leg­al, eco­nom­ic and polit­ic­al en­vir­on­ment.

There is a con­sid­er­able body of lit­er­at­ure in eco­nom­ics on the re­la­tion­ship of leg­al tra­di­tions, fin­an­cial reg­u­la­tion and the de­vel­op­ment of fin­an­cial mar­kets. There were also ef­forts to de­vel­op a meth­od­o­logy for the com­par­at­ive ana­lys­is of en­force­ment in­tens­ity. Yet pre­vi­ous stud­ies mostly con­cen­trated on the ef­fect of reg­u­la­tion and en­force­ment on cap­it­al mar­kets (such as growth in mar­ket cap­it­al­iz­a­tion in gen­er­al, or the cost of equity cap­it­al), and viewed en­force­ment, be it private, civil or crim­in­al, as a ho­mo­gen­ous vari­able.

In this re­search, the fo­cus lied more on the scope of crim­in­al­iz­a­tion of the breaches of fin­an­cial reg­u­la­tion, and on the re­la­tion­ship of civil and crim­in­al en­force­ment. The ba­sic re­search ques­tion of this study was the fol­low­ing: what ac­counts for the dif­fer­ences in the scope of crim­in­al­iz­a­tion of the breaches of se­cur­it­ies reg­u­la­tion, and for the dif­fer­ences in en­force­ment in­tens­ity?
Our hy­po­thes­is is that these dif­fer­ences are the res­ult of the in­ter­play of at least three factors:

  1. the polit­ic­al and eco­nom­ic en­vir­on­ment of fin­an­cial reg­u­la­tion as a whole;
  2. the status of crim­in­al law and the re­la­tion­ship between civil/ad­min­is­trat­ive and crim­in­al en­force­ment;
  3. in­sti­tu­tion­al and or­gan­iz­a­tion­al prac­tices, re­cruit­ment pro­cesses, at­ti­tudes of of­fi­cials in reg­u­lat­ory au­thor­it­ies and law en­force­ment agen­cies.

In our re­search pro­ject we have se­lec­ted in­sider trad­ing as a case study. Se­lect­ing a set, well-defined and re­l­at­ively autonom­ous (in terms of in­ter­con­nec­ted­ness with oth­er parts of se­cur­it­ies laws) ele­ment of reg­u­la­tion will en­able us to cut “ver­tic­ally” through all levels of ana­lys­is.

Pro­ject Su­per­vi­sion

Prof. Dr. Dr. hc. Hans-Jörg Al­brecht
Prof. Dr. Ro­land Hefendehl