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Book part
Publication date: 17 October 2014

Moin A. Yahya

Making law in America is not a simple task. It can be legislated by Congress, enforced by the executive, interpreted by the courts, and augmented by a massive body of…

Abstract

Making law in America is not a simple task. It can be legislated by Congress, enforced by the executive, interpreted by the courts, and augmented by a massive body of rules created by administrative agencies such as the Securities and Exchange Commission (SEC). The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) (Dodd-Frank was passed) with an eye to preventing future financial crises. Four years later, many details of Dodd-Frank have yet to be finalized as the SEC is still in the process of developing the regulations that the legislation required them to create. Even once the regulations are finalized by the SEC, the regulations will be challenged by various parties in the courts. The regulations will be either upheld or rejected. Those that are upheld will then face numerous challenges when applied in specific cases, while those rejected will have to be redone all over again. The process of developing these regulations is cumbersome and attracts many of the special interests that were present in the legislative phase of Dodd-Frank and who will also be present in the litigation phases of testing Dodd-Frank in the courts. This paper focuses on the requirement that investment advisors and broker-dealers be deemed as owing fiduciary duties to their clients as a case study for the entangled political economy theory. The paper shows how the development of a simple rule such as whether these fiduciary duties should be owed or not requires years of back and forth between the legislative, executive, administrative, and judicial branches.

Article
Publication date: 18 October 2011

A. Joseph Warburton

The purpose of this paper is to explore whether fiduciary duties impact the behavior of firm insiders. Trust law imposes stricter fiduciary obligations on insiders than

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Abstract

Purpose

The purpose of this paper is to explore whether fiduciary duties impact the behavior of firm insiders. Trust law imposes stricter fiduciary obligations on insiders than corporate law does. This paper seeks to examine whether the difference in fiduciary duties impacts agency conflict, performance, and/or risk taking.

Design/methodology/approach

The paper takes an empirical approach to answering the question by comparing mutual funds organized as trusts and as corporations. The existence of these two types of organizations within the same industry offers a unique laboratory for the study of the effects of fiduciary duties.

Findings

Mutual funds organized in trust form charge significantly lower fees and take on less risk than equivalent mutual funds organized in corporate form. Evidence also suggests that the trusts tend to under‐perform their corporate counterparts, even after adjusting for differences in risk.

Originality/value

Much of the existing literature on firm governance and investor protection focuses on the corporation and, hence, takes organizational form as a given. By comparing trusts and corporations, this paper examines governance at a more fundamental level and exploits heterogeneity in corporate and trust fiduciary duties. The results have implications for corporate governance design, suggesting that heightened fiduciary duties can enhance investor protection by mitigating agency conflict and managerial risk taking, though at the possible cost of inferior risk‐adjusted performance.

Details

Corporate Governance: The international journal of business in society, vol. 11 no. 5
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 5 January 2015

Charles KN Lam and S.H. Goo

The purpose of this paper is to demonstrate how Confucianism can be applied in the areas that are now governed by company law in the common law system and how it can play…

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Abstract

Purpose

The purpose of this paper is to demonstrate how Confucianism can be applied in the areas that are now governed by company law in the common law system and how it can play a role in improving corporate governance. A gentleman in the context of Confucianism tends to be inclusive and broad-minded in embracing the interest of different stakeholders. In fact, he will balance the interests of shareholders and other stakeholders if there is any inherent conflict and try to achieve a win-win situation. Ultimately, he will run the company not just for profit-making but for social justice and commitment.

Design/methodology/approach

The authors examine the leading cases in Hong Kong and the United Kingdom about the law of fiduciary duty and the duty of care and its relationship with Confucianism. In this respect, we review the teachings of the traditional Confucian texts and use Confucianism to fill in the gap where common law rules cannot reach. In addition, we adopt a comparative study approach in examining the law of directors’ duties in Hong Kong, China and the United Kingdom.

Findings

It can be seen that the concept of fiduciary duty and duty of care is quite complicated and evolving and always subject to the interpretations of the court from time to time. For fiduciary duty, the term itself is quite conceptual and not immediately available to the general public. But loyalty in the context of Confucianism is a very lively and down-to-earth moral principle. Besides, fiduciary duty is imposed from outside, where directors had no choice but to accept. But loyalty in the context of Confucianism is something inherent and something from within. It is a moral principle that if you deeply understand the meaning of it, you will automatically accept it as a good virtue and your conduct will naturally be guided by such a principle. Confucianism can thereby be used to fill the gap where rules and regulations cannot reach. Confucian business ethics and common law rule should be complementary to each other in the development of a Chinese corporate governance system.

Originality/value

This paper is the first of its kind in discussing the relationship between the law of directors’ duties and Confucianism. It argues that Confucianism plays a crucial role in guiding the behavior of the directors and can supplement the abstract principles of directors’ duties in the context of a Chinese corporate governance system.

Article
Publication date: 1 December 2001

Dennis L. Payette

Examines the use and misuse of the term fiduciary responsibility as it applies to trustees and officers of the corporation in universities and colleges. Through research…

Abstract

Examines the use and misuse of the term fiduciary responsibility as it applies to trustees and officers of the corporation in universities and colleges. Through research on published applications of the term, reveals that the term is rarely defined yet frequently used as a justification for action or inaction by trustees and officers. Antagonists of decisions sometimes use the term as a rationalization for suggesting action or decisions that should be made by trustees or officers in higher education. Concludes with a proposed definition of fiduciary responsibility that could be useful for trustees and officers and others interested in the concept of fiduciary responsibility.

Details

Corporate Governance: The international journal of business in society, vol. 1 no. 4
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 3 May 2016

Jeffery E. Schaff and Michele L. Schaff

Explains the US Department of Labor’s newly proposed “Conflicts of Interest” rule and provides a critical analysis of its impact should it be adopted as proposed.

Abstract

Purpose

Explains the US Department of Labor’s newly proposed “Conflicts of Interest” rule and provides a critical analysis of its impact should it be adopted as proposed.

Design/methodology/approach

Explains the DOL’s proposed Conflict of Interest rule and discusses how it changes the current fiduciary standards of care under ERISA. The article then probes more deeply into the practical matters involved in implementing the rule, and into the realities of how it would impact fiduciary standards generally, investors, the financial services industry and securities arbitrations. Reactions to the proposed rule are then explained against the backdrop of the practical implications thereof.

Findings

This article concludes that the DOL’s proposed Conflict of Interest rule, albeit well-intended, is not reasonably designed to achieve its stated goal and would instead likely harm those whom it purports to help. Ironically, it also potentially waters down the existing high standards of current fiduciaries. The article supports the DOL’s goal of greater responsibility for financial service professionals and proffers an alternative solution that could achieve the desired result more effectively.

Originality/value

This article offers valuable insight on the realities of the proposed law and practical guidance on its implications to the investing public, the financial services industry and securities attorneys.

Details

Journal of Investment Compliance, vol. 17 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

Content available
Article
Publication date: 14 September 2010

Fran Wright

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Abstract

Details

International Journal of Law and Management, vol. 52 no. 5
Type: Research Article
ISSN: 1754-243X

Article
Publication date: 11 July 2016

Norman Mugarura

The paper aims to examine the circumstances in which directors who fail to perform their duties and responsibilities with due diligence can be sanctioned and to evaluate…

Abstract

Purpose

The paper aims to examine the circumstances in which directors who fail to perform their duties and responsibilities with due diligence can be sanctioned and to evaluate whether the recent changes for reform both in the UK and European Union (EU) are adequate to deter directors from misfeasance or to cure defects in the law. The purpose of this paper is to articulate regulatory regimes for disqualification of corporate directors and the proposed changes to tighten loose ends in this area of commercial law. This paper articulates the duties and responsibilities of Corporate Officer and the varied context in which they are manifested in the UK. Owing to the onerous nature of corporate directorship, directors cannot passively sit in boardrooms or on their committees, but they need to demonstrate that they are hands on to get things done as expected. The first part of the paper articulates the current regimes on director’s disqualification so that it is used as a basis to examine the efficacy of the proposed changes for reform both on this area in the UK and Europe. The second part of the paper examines the proposed reform for change both in UK and in Europe and their efficacy to plug in law and practice. This area of corporate law is increasingly regulated by a number of agencies to ensure that directors perform their duties and responsibilities with due diligence.

Design/methodology/approach

The paper is structured in two parts whereby the first part examines the framework for disqualification of corporate directors and related issues in the UK. The second part articulates recent changes in the law on director’s disqualification with a view to evaluate whether these changes are robust enough to enhance the position of shareholders to ensure the company is well-managed for their interests or whether overregulation is inimical to the company by hindering directors from executing their corporate responsibilities with a measure of discretion.

Findings

The findings reflect that regulatory reforms should be evolved and implemented to strike a balance in ensuring that regulatory regimes are implemented not to penalise corporate directors unnecessarily but also to ensure that rules are respected. The paper urges caution because overregulation can inhibit corporate director from taking necessary risks (to be more guarded) to secure their positions.

Research limitations/implications

The paper was written on the basis of secondary and primary data sources often also alluding to empirical cases studies. It would have been better to carry out structured interviews to corroborate some of the findings of the paper.

Practical implications

Corporate governance is an onerous task, and thus, it requires corporate officers to exercise due diligence in execution of their duties and responsibilities. Getting the issue of corporate governance wrong often has ramifications for the company and respective corporate officers. These ramifications include not least penalising individual directors by disqualification from holding corporate directorship or the company being wound up altogether.

Social implications

Corporation plays an important role in the society such as creating employment opportunities, markets for goods and services, generating revenues to governments and the list goes on. Therefore, the way they are managed has important implications for societies and governments.

Originality/value

Even though the paper was written on the basis of primary and secondary data sources, it was done in a distinctive manner to foster the objective for writing it.

Details

International Journal of Law and Management, vol. 58 no. 4
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 7 June 2021

Howard Chitimira

Insider trading is treated as a punishable offence in many jurisdictions and countries. In relation to this, various theories were developed to justify and enhance the…

Abstract

Purpose

Insider trading is treated as a punishable offence in many jurisdictions and countries. In relation to this, various theories were developed to justify and enhance the regulation of insider trading in such jurisdictions and countries. For instance, regulatory bodies and the relevant courts in jurisdictions such as the Commonwealth and the European Union as well as in countries such as the USA and the UK have to date developed and consistently applied theories such as the classical theory, misappropriation theory, fiduciary theory, unified theory and equal access theory in their quest to detect, prevent and combat insider trading activities. For the purposes of this article, the aforesaid theories are discussed so as to recommend possible measures that could be adopted by the policy makers to effectively curb insider trading activities in the Zimbabwean financial markets. It is against this background that some theoretical aspects of the insider trading regulation as adopted by the Zimbabwean policymakers, regulatory bodies and the relevant courts are scrutinised in this paper. This is done to, inter alia, investigate possible flaws and the rationale for such direct and indirect application of certain insider trading theorem in Zimbabwe. Thereafter, some recommendations in respect thereof are provided.

Design/methodology/approach

A qualitative research methodology is used in the entire paper.

Findings

It is hoped that the recommendations in the paper will be used by the relevant policymakers to enhance the curbing of insider trading in Zimbabwe.

Research limitations/implications

The paper does not use an empirical research.

Practical implications

It is hoped that the recommendations in this paper will be used by the relevant policymakers to enhance the curbing of insider trading in Zimbabwe.

Social implications

It is hoped that the recommendations in this paper will be used by the relevant policymakers to enhance the curbing of insider trading in Zimbabwe.

Originality/value

This paper is original research on the theoretical aspects of the regulation of insider trading in Zimbabwe.

Details

Journal of Financial Crime, vol. 29 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 30 January 2009

Stephen B. Young

The paper presents an overview of perspectives on corporate governance grounded in the Common Law legal traditions of the UK and the USA. It further discusses whether that…

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Abstract

Purpose

The paper presents an overview of perspectives on corporate governance grounded in the Common Law legal traditions of the UK and the USA. It further discusses whether that perspective is suitable for global application.

Design/methodology/approach

The paper presents personal observations on the operational dynamics of rules and practices of corporate governance as necessary functional supports for large scale financial capitalization of enterprise under conditions of modern industrialization.

Findings

The paper concludes that the US perspective on corporate governance is rationally related to objective requirements of financing enterprise and that, as capital markets become larger and more liquid around the world, the corporate governance regimes will, in the main, come to resemble the US model. Though cultural variations on the US pattern are compatible with the purposes of corporate governance to constrain abuse of power in private corporations.

Practical implications

The implication of this paper is for the implementation of corporate governance regimes in emerging market countries, i.e. that flexibility is permissible but a focus on transparency and accountability under all circumstances is required.

Originality/value

The contribution of the paper is to provide a framework for balancing the rules and practices of US corporate governance with the cultural styles and patterns of different national regulatory settings.

Details

International Journal of Law and Management, vol. 51 no. 1
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 10 September 2021

Anna Blachnio-Parzych and Alexander de Castro

The purpose of this study is a comparison of anti-insider trading regulations in the European Union (EU) and in Brazil.

Abstract

Purpose

The purpose of this study is a comparison of anti-insider trading regulations in the European Union (EU) and in Brazil.

Design/methodology/approach

The subject of the comparison are three key elements that define the shape of the protection against insider trading, namely, the definition of inside information, the definition of insiders and the kinds of behaviours that are forbidden.

Findings

There are both differences and similarities between EU and Brazilian legislations on insider trading. The main discrepancies found in the three foci of the analysis seem to relate strongly to the different rationales for the prohibition of insider trading adopted in the two legal systems. In the EU, market egalitarianism and thus the parity of information, are the central concepts, whereas fiduciary duties originally constituted the point of reference in Brazil, although it has been losing importance over time owing to subsequent changes in the legislation. In sum, while anti-insider trading regulations in the EU have a well-defined identity, in Brazil their policy basis seems to be in the process of redefinition.

Originality/value

As of the time of submission of this study no published academic works dedicated substantially to a comparison of the anti-insider trading legislation of the EU and Brazil could be found.

Details

Journal of Financial Crime, vol. 28 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

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