Does Regulatory Jurisdiction Affect the Quality of Investment-Adviser Regulation? | Zendy

Ben Charoenwong | Zendy; Alan Kwan | Zendy; Tarik Umar | Zendy

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Does Regulatory Jurisdiction Affect the Quality of Investment-Adviser Regulation?

Author(s) -

Ben Charoenwong,

Alan Kwan,

Tarik Umar

Publication year - 2019

Publication title -

american economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 16.936

H-Index - 297

eISSN - 1944-7981

pISSN - 0002-8282

DOI - 10.1257/aer.20180412

Subject(s) - fiduciary , jurisdiction , investment (military) , competition (biology) , business , regulatory authority , investment banking , state (computer science) , economics , quality (philosophy) , regulatory state , accounting , finance , corporate governance , law , political science , public administration , ecology , philosophy , duty , algorithm , epistemology , politics , computer science , biology

The Dodd-Frank Act shifted regulatory jurisdiction over “ midsize” investment advisers from the SEC to state-securities regulators. Client complaints against midsize advisers increased relative to those continuing under SEC oversight by 30 to 40 percent of the unconditional probability. Complaints increasingly cited fiduciary violations and rose more where state regulators had fewer resources. Advisers responding more to weaker oversight had past complaints, were located farther from regulators, faced less competition, had more conflicts of interest, and served primarily less-sophisticated clients. Our results inform optimal regulatory design in markets with informational asymmetries and search frictions. (JEL G24, G28, K22, L51, L84)

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