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Objectives and Principles of Securities Regulation

The Legal Framework

Effective securities regulation depends upon an appropriate legal framework. The matters to be addressed in the domestic laws of a jurisdiction include:
  1. Company Law
    1. company formation
    2. duties of directors and officers
    3. regulation of takeover bids and other transactions intended to effect a change in control
    4. laws governing the issue and offer for sale of securities
    5. disclosure of information to security holders to enable informed voting decisions
    6. disclosure of material shareholdings
  2. Commercial Code / Contract Law
    1. private right of contract
    2. facilitation of securities lending and hypothecation
    3. property rights, including rights attaching to securities, and the rules governing the transfer of those rights
  3. Taxation Laws
    1. clarity and consistency, including, but not limited to, the treatment of investments and investment products

  4. Bankruptcy and Insolvency Laws
    1. rights of security holders on winding up
    2. rights of clients on insolvency of intermediary
    3. netting

  5. Competition Law
    1. prevention of anti-competitive practices
    2. prevention of unfair barriers to entry
    3. prevention of abuse of a market dominant position

  6. Banking Law

  7. Dispute resolution system
    1. a fair and efficient judicial system (including the alternative of arbitration or other alternative dispute resolution mechanisms)
    2. enforceability of court orders and arbitration awards, including foreign orders and awards

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