Information Society Challenges to Financial Regulation

About

The development of the information society challenges financial regulation by disrupting settled regulatory distinctions on which it depends. Examples are distinctions between:

• Traditional news sources and regulated investment publications
• Professional market participants and non-professionals
• Sophisticated and unsophisticated market participants
• Exchanges and non-exchange financial markets

This raises the question of how to decide whether these traditional distinctions are based on an implicit understanding of technological conditions, or on other factors independent of the state of technology. Regulatory distinctions based on implicit understandings of technological conditions should be questioned when the technology changes. Where rules are based on factors other than the state of technology they should be reviewed to ensure that technological change does not disrupt their application.