Roman Tomasic

The Financial Crisis and the Haphazard Pursuit of Financial Crime

The global financial crisis that began in late 2007 has signaled a turning point in the regulatory responses to financial crime around the world. The failure of light handed regulation and risk assessment by both industry and regulators made the operation of financial regulatory agencies almost untenable, often leading to calls for their replacement by more effective agencies. This paper assesses the nature of this regulatory challenge and discusses some cases that have emerged from the dark side of regulatory and enforcement policies in recent times. A culture of minimal regulation of financial markets has meant that many undesirable practices (such as insider trading, foreign corrupt practices, tax avoidance, money laundering and other frauds) were able to avoid detection until public outrage led to regulatory and prosecutorial agencies being prompted into action following the collapse of financial markets. The subsidence of this sense of public discomfort may however But, it would be unfortunate if the lessons of this crisis were not fully learnt.

The Sociology of Law

This article and bibliography is a trend report on the discipline of the Sociology of Law that criticically reviews some recent published literature in this field seen by the writer to be of interest. The paper is divided into five main parts and contains an extensive annotated bibliography. The five parts of the report deal with published research in the following areas: (i) Theoretical issues in the sociology of law; (ii) Lawyers and legal services; (iii) Courts and dispute processing; (iv) Policing and the Sociology of Criminal Law; and (v) Law-Making and Social Change.

Taxation law compliance and the role of professional tax advisers

Tax practitioners play a pivotal role in the Australian taxation system. Not only do they act as intermediaries between the Australian Taxation Office (ATO) and the majority of taxpayers, especially business taxpayers, but they also influence the ethical climate and level of compliance with taxation laws. This article discusses this role by reference to data derived from an empirical study of tax practitioners and tax officials from around Australia. The study sheds light on the nature of the compliance problem and the factors which affect the administration of Australian taxation law generally.

The Role of Trust in Maintaining the Resilience of Financial Markets

The recent Global Financial Crisis (GFC) threatened to bring world financial markets to a halt. It is now coming to light that in the run-up to, and at the height of, the GFC, investment banks and other participants in the financial markets acted unethically as well as imprudently. This article takes a closer look at this unethical behaviour and the way in which it constitutes a failure of trust. The article defines trust and outlines why it is important in the regulation of financial markets. It then looks at three examples of breakdowns or failures of trust in the run-up to the financial crisis. The article concludes by arguing that trust is important in commercial relationships at both the intra-firm level (the relations between the different constituents of the firm) and the inter-firm level (the relations between the firm and other firms).

The Failure of Corporate Governance and the Limits of Law: British Banks and the Global Financial Crisis

The Global Financial Crisis of 2007-2008 has demonstrated the fragility of prevailing corporate governance ideas and the weakness of legal means of minimizing risk and highlighting dangers in major banking corporations. Gatekeeper failure has undoubtedly been a significant contributor to this situation and suggests that efforts need to be made to strengthen the monitoring capacity of corporate gatekeepers and stakeholders. This paper looks closely at the factors that contributed to the failure of the British Bank, Northern Rock plc; like the collapse of Lehman Brothers in the USA, the failure of Northern Rock was a pivotal event in the UK during the crisis as it for the first time focused closer government and private sector attention on the poor risk models used by banks. This ultimately led to the passage of new Banking legislation in the UK and to the redrafting of the UK Code of Corporate Governance. Most importantly, the case has demonstrated the poor state of legal tools and remedies that were available to stakeholders such as shareholders, directors and government regulators charged with monitoring and controlling large financial institutions. Uncritical adherence to market based ideologies which see financial markets as self-correcting was also a major explanation for the failure of the UK to build stronger structures of financial regulation both within and outside the corporation.

Governance and the evaluation of corporate law and regulation in Australia

Examines different approaches to the challenge of Australian corporate law enforcement and governance, and discusses success in this area and how it might be determined. Describes barriers to measuring success of regulatory action, and debates what level of law enforcement is appropriate and cost‐effective. Concludes that a more broadly based approach to regulatory action and assessment is of prime importance.

From global convergence in china's enterprise bankruptcy law 2006 to divergent implementation: Corporate reorganisation in China

The enactment of Chinas Enterprise Bankruptcy Law in 2006 after debates spanning two decades was a milestone in the development of Chinas market-based economy. Bankruptcy laws have served as a key mechanism for market economies to adhere to their stated goals. One way of softening the harsh effects of insolvency is to develop a system of corporate reorganisation or rescue; China has also sought to move in this direction through its bankruptcy law reforms. However, the implementation of these laws has revived many of the older debates that undermined the law reform process. Paradoxically, although the Chinese economy has slowed considerably with the continued global financial crisis, there has been a very limited use of company reorganisation procedures and insolvency administrators in China. This demonstrates the limits to which external legal models will be effective in China and the complexity of the problems that remain to be resolved.

The prosecution of insider trading: Obstacles to enforcement:

Insider trading has been criminalised in Australia for over a decade. Yet there have been few prosecutions in respect of such conduct, and none of these have been successful. There is little doubt that insider trading in Australia is extensive and is to be found across many sectors of the securities industry. Despite this, the law has not proved to be an effective vehicle for the social control of insider trading or for the deterrence of such conduct. It seems that the criminal sanctions for insider trading have been largely symbolic in nature. This article explores the obstacles to enforcement of criminal laws in this area by reference to findings from a national empirical study funded by the Criminology Research Council. The study involved in-depth interviews with almost 100 key figures in the Australian securities industry (brokers, lawyers, merchant bankers etc) and of officials involved in its regulation (from the Corporate Affairs Commissions and the Australian Stock Exchange). Problems in detection, proof and punishment, in the nature and extent of regulatory resources devoted to this area and in the content of the law itself are identified and discussed.

The extent of insider trading in Australia: A socio-legal account*

This article reports findings from a national empirical study of insider trading in Australia. The study is based upon in-depth interviews conducted with almost one hundred key actors involved in the Australian securities industry. The interviews were conducted in Sydney, Melbourne, Perth and Canberra and involved stock exchange officials, brokers, merchant bankers, lawyers in large law firms, various other financial advisers and observers as well as national, state and territory corporate regulatory officials. Although it was not the intention of this study to seek to quantify the extent of insider trading, something which is probably not possible to achieve, it was found that as insider trading was seen by most observers to be commonplace in Australia, this was likely to be a good indicator of its extent. This research also found mat insider trading tended to be more prevalent in certain situations, such as in takeovers and in closely held corporations, and that it was more likely to occur amongst particular groups involved in the Australian securities industry.

Shareholder Activism and Litigation Against UK Banks - The Limits of Company Law and the Desperate Resort to Human Rights Claims?

In the wake of the Global Financial Crisis (GFC), banks in the UK and other parts of the world suffered significant financial losses. One of the findings of official inquiries into the GFC and its effects in the UK is that shareholders were remarkably docile during the height of the market euphoria. Shareholders made very little effort to constrain banks from taking more risky business strategies. In addition, shareholders have been slow to bring legal actions against directors of loss-making banks and financial institutions. This is despite the fact that company law provides a wide range of mechanisms for shareholder activism, such as the powers of shareholders to elect and dismiss directors, (through the General Meeting), and to bring legal actions against directors for breach of statutory and fiduciary duties. This suggests that company law is, in practice, something rather different from what it is claimed to be in theory. This chapter explores some of the reasons for this divergence and looks at ways of bridging this gap between company law in theory and in practice. In so doing it examines the use of human rights claims as a last resort where the more traditional company law principles have proved to be inadequate with regards to fostering shareholder activism.