Finishing the Race to the Bottom: An Argument for the Harmonization and Centralization of International Securities Law


Eric C. Chaffee


One of the central causes of the recent global financial crisis is the under regulation of the global securities markets. This under regulation is the result of competition among governments throughout the world to provide securities regulation regimes that place minimal requirements on entities wishing to issue securities to attract investment in their national markets. As the current crisis evidences, this race to the bottom, as it might be termed, has created under regulation throughout the world.

This article advocates for the harmonization and centralization of international securities regulation as a means of preventing future financial crises. Ideally, the world should adopt the same approach that the United States adopted in the wake of the stock market crash of 1929 and pursue a path of harmonization and centralization in international securities law. Nations throughout the world should harmonize their systems of securities regulation to allow for the existence of a centralized global securities regulator, and then, the nations should work together to bring into existence such a regulator. The regulator should have robust monitoring, regulatory, and enforcement powers and should set a baseline of securities regulation from which nations could choose to upwardly depart, if they desire. Such a model based on harmonization would have a variety of benefits, including helping to stabilize the emerging global securities market, assisting market participants, and helping the United States in maintaining its dominance as a securities regulator. Although such a model does have some drawbacks, these drawbacks are far outweighed by the benefits that harmonization and centralization afford.

A slow evolutionary process will be required to allow a harmonized and centralized system of international securities regulation to emerge because nations remain unwilling to shed their nationalistic and protectionist tendencies relating to securities regulation. With that said, global capital markets have emerged, and a model of international securities regulation based on harmonization and centralization is the best mechanism to regulate it.


Financial Crisis, Gobalization, International Law, International Regulation, Markets, SEC, Securities Exchange Commission, Securities, Securities Law, Securities Regulation

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40 Seton Hall Law Review 1581 (2010)


COinS Eric C. Chaffee Faculty Bio