Iain MacNeil

The Trajectory of Regulatory Reform in the UK in the Wake of the Financial Crisis

There has been much talk about regulatory reform around the world in the wake of the financial crisis but relatively little action. As a major international financial centre, the UK is very much at the heart of the debate and has a particular interest in the ultimate outcome. The financial crisis has exposed the weaknesses of ‘light touch’ regulation and ‘principles-based’ regulation, which characterised the UK system in the pre-crisis phase. Changes to the institutional structure of regulation recently announced by the new coalition government, combined with changes to regulatory style, are likely to have far-reaching consequences for the practice and intensity of regulation in the UK. This article reviews and assesses recent and proposed regulatory changes and considers the relationship between corporate governance and regulation. It evaluates the impact on the UK system of initiatives undertaken at international and EC levels as well as various interests and incentives within the UK that are likely to be influential in shaping the regulatory regime in years to come.

Company Law Rules: An Assessment from the Perspective of Incomplete Contract Theory

This article examines company law from the perspective of the structure of its rules rather than their content. It uses incomplete contract theory as the basis of an investigation into the role of freedom of contract in writing a companys constitution, and the relative merits of using mandatory and default rules to govern the organisation and actions of a company. The case for freedom of contract is considered from both a theoretical and an empirical perspective. Using the development of pre-emption rights in the United Kingdom and United States, it is shown that categorisation of rules into the mandatory and default categories is problematic. It is also argued that, despite the considerable academic effort which has been devoted to demonstrating the efficiency of default rules, there remain significant problems in formulating such rules.

Uncertainty in Commercial Law

A. INTRODUCTION B. THE MEANING OF LEGAL CERTAINTY (1) Predictability and consistency (2) Rules, principles and standards (3) Certainty and rule types (4) Certainty and vagueness of definition (5) Certainty and efficiency C. PROXIES FOR LEGAL UNCERTAINTY D. RESPONSES TO UNCERTAINTY (1) Eliminating or reducing uncertainty through contract terms (2) Allocating or transferring risk arising from legal uncertainty through contract terms (3) Creative compliance (4) Clearance, guidance and legal opinions E. THE PERSISTENCE OF UNCERTAINTY F. THREE EXAMPLES OF PERSISTENT UNCERTAINTY (1) The nineteenth century law on corporate personality and limited liability (2) The duty of disclosure in insurance (3) Material breach in contract law G. CONCLUSIONS

The lawyers’ perceptions on overseas incorporated companies listed in Hong Kong

The phenomenon of the majority of the companies listed in Hong Kong (HK) but incorporated overseas (OLCs) has caused a widespread concern among investors from all over the world as well as the policy makers in HK, the United Kingdom and China. However, no empirical study has attempted to find out why these OLCs did not incorporate in HK. This study aims to investigate this issue. We conducted a survey with a sample of HK lawyers advising OLCs. The results suggest that the main attractions for OLCs to list in HK were the absence of exchange control and its sound legal system. The main objective for these OLCs to list in HK was to raise capital. It is also found that the subjects considered the overall contribution of OLCs towards the success of the HK stock market as more important than the contribution of the Hong Kong Stock Exchange to the success of OLCs. Further, the respondents, on average, seemed to be marginally satisfied with the existing HK laws and regulations governing OLCs. Simplicity in these laws and regulations and the reasonable listing requirements were identified as the two most satisfying areas, whereas transparency was singled out as the most unsatisfying area. The implications of these results are discussed in this paper.

Editors’ introduction: the risks and regulatory perimeter for shadow banking

‘Shadow banking’ refers to a range of activities that have bank-like character, that is, credit intermediation, liquidity and maturity transformation, and that are undertaken outside the regulated banking system.1 This can mean activities carried out by non-bank entities that mimic bank-like activities, but can also refer to activities carried out by banks and other regulated firms that do not always operate within the established fabric of regulation they are subject to. Although such activities may be seen as a form of financial innovation, the relationship between innovation and regulatory arbitrage remains uneasy. The former is often viewed more positively than the latter, although it is clear from history that the former has often driven the latter (for example, the emergence of the Eurobond market). The Financial Stability Board (FSB) has provided leadership in developing international surveys of shadow banking activity around the world2 and policy thinking to govern these areas. In 2013,3 the FSB set out in a policy document the need to consider how shadow banking activity affects financial stability, but its focus was inevitably on known areas whose risks have played out in the global financial crisis of 2007–09.4 The spotlight on these areas has nevertheless led to regulatory reforms in many parts of the world, discussions of which are canvassed in this volume, but issues remain outstanding in relation to the effectiveness and scope of reforms. The work of the FSB has been important in underpinning the relevance of financial stability considerations for defining the regulatory perimeter. Since financial stability is a public good, that outcome cannot be expected to evolve from market-based activities. However, the FSB’s arguments are not always unchallenged and it continues to face an uphill task persuading regulators around the world to (a) adopt reform measures that substantively move away from market-based governance, for example, in implementing

Consumer dispute resolution in the UK financial sector: the experience of the Financial Ombudsman Service

This article analyses the operation of the Financial Ombudsman Service (FOS) in the UK, focusing on decision- making and the implications for consumers and authorised firms. It explains the manner in which the statutory “fair and reasonable” basis for FOS decisions has developed and examines the implications for legal certainty. It also considers the implications for the FOS of the move by the Financial Services Authority to more-principles-based regulation and “wider-implications” cases.