Does Regulatory Jurisdiction Affect the Quality of Investment-Adviser Regulation?
- (pp. 3681-3712)
Abstract
The Dodd-Frank Act shifted regulatory jurisdiction over "midsize" investment advisers from the SEC to state-securities regulators. Client complaints against midsize advisers increased relative to those continuing under SEC oversight by 30 to 40 percent of the unconditional probability. Complaints increasingly cited fiduciary violations and rose more where state regulators had fewer resources. Advisers responding more to weaker oversight had past complaints, were located farther from regulators, faced less competition, had more conflicts of interest, and served primarily less-sophisticated clients. Our results inform optimal regulatory design in markets with informational asymmetries and search frictions.Citation
Charoenwong, Ben, Alan Kwan, and Tarik Umar. 2019. "Does Regulatory Jurisdiction Affect the Quality of Investment-Adviser Regulation?" American Economic Review, 109 (10): 3681-3712. DOI: 10.1257/aer.20180412Additional Materials
JEL Classification
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
- G28 Financial Institutions and Services: Government Policy and Regulation
- K22 Business and Securities Law
- L51 Economics of Regulation
- L84 Personal, Professional, and Business Services