The website is designed as a portal that collates and evaluates regulatory agendas, charts the responses from industry and provides independent analysis. The research has been partially funded through two major Australian Research Council Linkage Grants, which we gratefully acknowledge. The industry partners are FINSIA ('The Limits of Disclosure: Private Rights, Public Duties and the Search for Accountable Governance') and Ernst & Young and the Office of the Legal Services Commissioner, NSW ('The Future of Financial Regulation: Embedding Integrity Through Design'). 

We encourage practitioners, academics and policymakers to engage with the Centre through attendance at workshops and seminars, downloading the multi-media resources and providing commentary for potential upload onto the site across each dimension of what we term the CEDAR approach to regulatory evaluation.

CEDAR

The Centre for Law, Markets and Regulation has developed a framework to measure and evaluate corporate and regulatory performance across five key dimensions: Compliance, Ethics, Deterrence, Accountability and Risk (CEDAR). It aims to assess the extent to which corporate and regulatory reforms result in substantive compliance, warranted commitment to ethical standards, effective deterrence, enhanced accountability and reduced risk.

The out working of the Global Financial Crisis has been accompanied by a broad range of regulatory interventions mandated by the G20, coordinated by the Joint Forum and facilitated through myriad working groups within the Basel Committee, IOSCO and IAIS. It is unclear, however, to what extent this will lead to convergence in regulatory form and substance or facilitate arbitrage. Implementation carries real risks that national systems will develop systems that may preserve, in the short-term, competitiveness but do little to reduce the transmission of contagion. In the United States, for example, the sheer volume of submissions to regulatory authorities opposing the Volcker Rule restricting proprietary trading within the regulated banking sector indicates that battles over implementation will be hotly contested as the country moves towards a November election. Equally political instability in Greece and uncertainty associated with the upcoming French presidential election, coupled with opposition in the City of London to the planned introduction of a financial transaction tax, suggest the dynamics of regulatory reform in Europe remains exceptionally fluid.

The sheer scale and complexity of the regulatory agenda necessitates comprehensive and independent mapping that assess the impact within and across the prudential and market conduct regulatory arenas. It also necessitates that corporate entities take a holistic approach to risk management. It is in this context that the CEDAR framework has the potential to prove so valuable. The aim is develop a diagnostic and evaluative tool with global applicability for both regulators and risk management professionals.
 

COMPLIANCE

The Global financial Crisis saw risk identification and mitigation strategies fail at all levels. In part this can be traced to defective internal control systems; in part to flawed incentives. If success is predicated on short-term performance, as measured by share price, then the capacity to challenge executive strategy is weakened. Non-executive directors proved unwilling or unable to hold executives to account. Institutional shareholders failed to exercise (albeit limited) ownership rights. External gatekeepers, including lawyers and auditors, were seen to be ineffective or complicit. Neither rules nor principles-based approaches to regulatory governance proved responsive enough. The compliance program of research explores the reasons for past failure. It assesses the extent to which the reform agenda addresses mechanistic approaches to compliance. 

ETHICS

Much of what occurred in the Global Crisis was, in the exquisite phrasing of the eminent socio-legal scholar Professor Doreen McBarnet, ‘perfectly legal.’ There is common agreement among policymakers and practitioners that the crisis demonstrated an ethical failure. The ethics program of research explores the reasons for this and how it can be addressed. It evaluates the purpose and efficacy of codes of conduct at both corporate and professional level. It assesses the extent to which regulatory agencies can embed higher standards of ethics through the use of pro-active strategies. This is, in turn, linked to the interaction with compliance and risk management systems. The aim is to adopt a holistic approach to business integrity. 

DETERRENCE

When taking enforcement action, regulatory agencies need to balance the effect of conviction with the political costs associated with bringing complex and uncertain cases to trial. The Financial Services Authority in the United Kingdom, for example, declined to prosecute executives from Royal Bank of Scotland, the biggest bank failure in British history. In the United States, prosecutors have engaged in a range of creative enforcement strategies that circumvent the necessity of going to trial. These measures often take the form of negotiated consent orders or, more problematically, deferred or non-prosecution agreements. Influential judges have questioned this strategy, arguing that it risks privileging the façade of enforcement. This program of research charts the efficacy of public approaches and explores the utility of expanding private enforcement.

ACCOUNTABILITY

In the aftermath of crisis regulatory theory and practice has often moved progressively through solutions based on the practical and normative advantages of ‘governance,’ ‘responsibility,’ ‘integrity,’ and ‘accountability.’ At heart, therefore, effective accountability is a design question at corporate, professional and regulatory levels. Accountability can only be guaranteed if disputes over interpretation can be resolved in a manner that is proportionate, targeted, and, ultimately, conducive to the building of warranted trust in the operation of the financial services sector. The program of research explores the concept of accountability at both theoretical and practical levels. It assesses the impact of the Global Financial Crisis on both corporate governance and regulatory design.

RISK

The speed with which the Global Financial Crisis metastasized across regulatory systems highlights the deficiencies of addressing risk through deployment of rules or principles alone. Credible reofrm necessitates a greater understanding of how rules and principles are interpreted within specific communities of practice. This offers the opportunity to build organically from principles of self-regulation but embed them within a much more clearly defined conception of business integrity. The program of research explores the interaction between material, reputation and regulatory risk at the level of the firm, specific sectors and threats each pose to the stability of the system as a whole at national, regional and global levels.