American financial markets have long been overwhelmed by a patchwork of obsolete rules, too complex and paternalistic. Meanwhile, the government’s failure to establish a regulatory regime for digital assets, associated with its aggressive persecution of industry, has smothered innovation. Unsurprisingly, the rest of the world jumped forward, leaving the United States behind.
Now, under the direction of President Trump, we are on the verge of historical change. His “greatest campaign to deregulate history” and “Revolution of common sense” offers us a rare chance to abolish artificial borders, to withdraw from obsolete philosophies and to rethink our approach to regulate financial markets and ecosystems of digital assets. Instead of creating and being bound by reactive regulations designed for past crises and technologies, we can design flexible and prospective frameworks that promote innovation.
While I envisage these executives, I remember the wisdom shared by the president of the Securities and Exchange Commission Harvey Pitt (2001-2003), A Lion of the Securities Bar, which proposed a simple but deep solution to improve the American stock markets: develop guiding principles so that our markets embody. President Pitt compared this to the ten commandments of God – clear principles to govern conduct with the industry responsible for meeting them.
Too often, regulators and market players are bogging into normative laws and lacking their central intention. While standards, standards and rules have their place, the “ten commandments” offered here provide a solid base for future executives. The key is to understand first the objective of federal laws on securities.
Basically, these laws govern transactions involving securities – whether actions of a company, loan promises or investment participations. When people contain their money to you, you owe them specific tasks. The securities laws are mainly a disclosure regime designed to guarantee fair and transparent exchanges that give investors the information they need to assess the risks and rewards of their investments.
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These laws emerged after the stock market crash of 1929, which was fueled by practices contrary to ethics such as initiate offense and manipulation of actions, and exacerbated by the information asymmetry between buyers and Title sellers. The Securities Act of 1933 and the EXCHANGE ACT SECURITIES of 1934 were promulgated to prevent these abuses and facilitate companies to obtain capital, to protect investors who invest their capital and to guarantee that the markets are fair and effective, while minimizing Charges on honest commercial activities.
Despite good intentions, these laws have become too complex, stifling and limiting the freedom of investors. To reinvent the regulation of financial markets, in particular in the light of emerging technologies and digital assets subject to securities laws, we must return to the principles that have shaped these laws – princements that promote equity while minimizing Charges on honest companies.
Based on the vision of President Pitt, I distilled the fundamental values of market players in the following ten commandments for a trustworthy market:
- You will disclose material information. Complete and equitable disclosure is the node of securities laws. Emitters must provide truthful, complete and not acceptable material information to investors so that they can make informed financial decisions. The concealment or deformation of critical information which has an impact on expectations to profit undermines the confidence and integrity of the market.
- You will not deceive or manipulate. Fraud and market manipulation distorts the real value of titles, harming investors and the market. The prevention of misleading practices ensures equity.
- You will not exchange on non -public material information. Initiated trading gives an unfair advantage to those who have access to confidential information. This guarantees fair playground for all market players.
- You will say the truth about your financial health. The financial statements must be accurate and transparent, reflecting the real financial situation of a company, so that investors can precisely assess the risks and make informed financial decisions.
- You will treat all investors as well. All investors must have equal access to material information and opportunities. This guarantees equity and prevents the advantages of initiates and discriminatory practices.
- You will reveal the risks involved. Investors must be informed of the risks associated with their investments so that they can make choices aligned on their financial objectives and their risk tolerance.
- You will act in accordance with your duties towards others. Market players who owe bonds of trust and responsibility, such as finance professionals and business directors, must act in the interest of their customers and shareholders, not for their own personal gain.
- You will strive to avoid conflicts of interest, but if some are inevitable, you will disclose them. Market players must avoid or minimize conflicts of interest, but if they are inevitable, conflicts must be disclosed. Transparency allows investors to make decisions with an understanding of potential biases and preserves confidence.
- You are insured of the fair and transparent markets. The markets must operate on the basis of real supply and demand, free from artificial distortions. This promotes confidence and equitable prices.
- You will do effective and ordered markets. The markets must work smoothly, with transparent prices and equal access to all participants. This promotes market stability and investor confidence.
By focusing on these basic principles, we can create adaptable regulatory frameworks that follow the pace of technological progress and avoid the constraints of obsolete laws. This is the time of a seismic change in financial regulations to an approach that anticipates markets and future innovations. We can build a financial system to the test of future that benefits everyone by ensuring clarity, equity and order while promoting innovation.
