J. Troy Beatty: Crisis Makes Investors Much More Cautious

Stefania CiocÎrlan

The ongoing international crisis has limited the manoeuvring space of the "bad boys" of the capital market and made it harder for them to fool other investors, as financial difficulties have made the latter much more cautious, J. Troy Beatty, Senior Counsel with the Office of International Affairs of the U.S. Securities Exchange Commission (SEC), told BURSA. He believes that it is particularly during a crisis that the role of the market regulators should come to attention.

Beatty further said that the answer to the question how much market regulators should regulate needs to consider the problems confronting any market, such as fraud or the loss of funds. In his view, the lack of regulatory control would encourage fraud and therefore cause investors to lose their money. Such situation would stimulate investors not to invest and thus have negative consequences on the market.

On the other hand excessive regulatory control could have a similar effect and drive companies off the market. Over-regulation could prompt companies not to become listed and remain outside the capital market. This, too, would be detrimental to the market, Beatty said. He believes that the current crisis has prompted regulators to wonder whether they need more authority and to question themselves whether regulations they have adopted are too expensive for the market without actually protecting investors. Regulators are also questioning themselves whether there is a segment that needs additional regulatory control. These would be the key dilemmas of the market regulators facing the ongoing crisis.

Beatty believes that the debate currently taking place on international markets on whether the regulators" authority should be increased is linked to the regulators need to better supervise certain segments of the market in order to attract both investors and issuers. However, markets differ in type and size, so regulators need to adapt their measures accordingly. Nevertheless, Beatty has noticed that many capital market regulators have taken similar steps to better communicate with the market. As an example, the SEC published online a list of measures take to respond to the crisis, which is an example of regulatory communication under such circumstances.

J. Troy Beatty"s opinions are his own and do not reflect the official stand of the Securities and Exchange Commission.