This authoritative study of the investment management business focuses on the use of capital requirements for investment managers as a means of investor protection. Commissioned by the Investment Management Regulatory Organization and drawing on extensive discussions with investment managers, it provides a comprehensive account of how the investment management business is organized and identifies its inherent risks. The authors examine the cause and incidence of market failures as well as the dangers to investors through mismanagement and malpractice, and provide an extensive treatment of fraud, with a full listing of British fraud cases since the early 1970s. The report concludes with a summary of the risks faced by investors and recommendations for appropriate forms of protection; and, on the basis of existing regulatory structures in the United Kingdom and the United States, proposes an alternative structure in accordance with the authors' analysis.

Risk, Regulation, and Investor Protection: The Case of Investment Management

Business & Money

Mayer, Colin

Franks, Julian

Economics

Clarendon Press

Asset Management and Investor Protection: An International Analysis (Economics & Finance)

Asset management is a major industry playing an increasingly important role in economic activity around the world. Traditionally, it has been primarily associated with the 'stock market' economies of the UK and the USA, but as this book shows some of the most spectacular growth in activity of recent years has occurred in continental Europe. This has presented opportunities and challenges. New forms of financial instruments and institutions have emerged in countries that have traditionally relied on debt and non-market forms of intermediation. Competition has intensified and entry has occurred both within and across national markets. However, this growth has been accompanied by potential problems; will investors enjoy a wider range of products and services, they face more complex instruments and transactions. Therefore, the potential for failures, such as misdealing and fraud, may have increased. The natural response is to strengthen regulation, but there is a fine balance to be struck between in adequate and excessive regulation of asset managers. This is particularly complicated in the context of European capital markets. European countries have traditionally had very different financial systems and asset management businesses, therefore it is no surprise to discover that they have many different approaches to regulating asset managers. How should the European Commission respond to this diversity? Should it seek to create greater uniformity via common regulatory rules? The particular focus of this book is financial resource requirements. There is currently an active debate about the role which capital requirements should play in asset management, particularly in the European context. In order to address this issue, the authors argue that it is necessary to understand the nature of the asset management business in different countries and the risks that it faces. They therefore discuss how the asset management business operates; how it is organized; the nature and size of risks in the business, who bears them and ho they are financed; and what the alternative forms of investor protection are, together with their associated costs and benefits.

Correia da Silva, Luis

Oxford University Press

Scandals in financial institutions, weakness in the world economy, and volatility in financial markets bring to the fore front issues of regulation and consumer protection. This compartive survey of how investors are currently protected in a range of countries in Europe and the United States is set in an accessible and theoretical framework. It will be invaluable for academics and students involved in the analysis of financial markets and regulation as well as practitioners in financial institutions and regulatory authorities.

Investing

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