MIND THE GAP – INCREASING COMPLIANCE – BURDEN AND REGULATORY MISALIGNMENT

Since the dawn of the new constitutional supremacy, untold pieces of legislation have been promulgated. This led to an increase in legal and regulatory measures which increased the compliance burden, compliance risk and cost of businesses in South Africa, particularly in the financial sector. The objective of this note is to provide a snapshot of the increasing compliance burden on the financial sector between 1996 and 2011. It further highlights the incidence of misalignment among different pieces of legislationwith possible negative effects, using the Consumer Protection Act (68 of 2008) and the insurance industry as a case study. The author examines the generally accepted goals of good regulation and argues for an appropriate regulatory-assessment model that may alleviate the problem of misalignment and so prevent regulatory arbitrage.

A Risk Characterization of Regulatory Arbitrage in Financial Markets

This article analyses regulatory arbitrage in financial markets from a risk-based perspective. It assesses regulatory arbitrage in terms of the risk it may pose to the attainment of a regulatory objective, in this case financial stability. Its most distinct contribution to the literature is the application of the NOAEL approach—thus far mainly used in public health literature and regulatory toxicology—to the legal analysis and management of arbitrage risks. We propose several qualitative parameters relating to the likelihood of regulatory arbitrage and the negative impact if such arbitrage should occur. The article ultimately aims to help frame the ongoing debate about policy-making and the use of risk assessment methodologies to cope with regulatory arbitrage in financial markets.

ESMA as a Residual Lawmaker: The Political Economy and Constitutionality of ESMA’s Product Intervention Measures on Complex Financial Products

This article proposes that product intervention constitutes a form of residual lawmaking by ESMA that allows it to tackle aspects of investor protection not addressed by EU incomplete financial laws. Whilst product intervention may bring about certain advantages and may contribute to mitigating regulatory arbitrage problems, it constitutes a highly intrusive regulatory mechanism that raises important questions concerning: (a) ESMA’s rationale and motivations for its use; (b) its compliance with the EU constitutional framework; and (c) its adequacy for the regulation of complex financial products. This article addresses these questions through an analysis of the rationale and consequences of ESMA’s product intervention measures on binary options and contracts for differences of May 2018–July 2019, and of recent reforms of ESMA’s powers. It offers three main contributions to the existing literature. First, it contributes to the literature on administrative discretion and agencies’ rulemaking through an analysis of the political economy of ESMA’s deployment of product intervention powers and, also, of what this reveals about the relationships between ESMA and the EU Institutions, on the one side, and ESMA and National Competent Authorities, on the other. Second, it contributes to the literature on the constitutionality of EU agencies through an examination of the compliance of ESMA’s product intervention measures with EU constitutional law and requirements. Third, it examines whether product intervention constitutes an adequate mechanism to address problems pertaining to investor protection in complex financial products markets and, in doing so, it contributes to the scholarly discussion on complex financial products’ regulation.