Financial Services Regulation and Liability of Corporations

Publication Date01 Mar 2000
AuthorCheong Ann Png
SubjectAccounting & finance
Journal of Financial Crime Vol. 8 No. 1 Analysis
Financial Services Regulation and Liability
of Corporations
Cheong Ann Png
The spectacular performance of the US financial
market in recent years, the financial crises in South-
East Asia and Russia and the collapse of one of the
most established merchant banks in the world are
landmark events in economic history that have
prompted concerns around the globe. The advent
of the information age and globalisation means that
the consequences of these events are felt more readily
and extensively than ever before. Sustainability of
financial growth and avoidance of future crises raise
questions with a common denominator good
governance. With one of the principal financial
centres in the world, it is trite to suggest that the
need for good governance in the UK cannot be
overstated. Protecting investors against abusive and
fraudulent practices in the financial services industry
has always assumed great importance.1 Since its
emergence as an international financial and trading
centre in the 13th century, the City of London has
consistently emphasised the values of market con-
fidence and integrity.2 In the Financial Services and
Markets Bill, which is currently being read in
Parliament, it is stated that its object is to maintain
confidence in the financial markets, to promote
public awareness and understanding, to secure an
appropriate degree of protection for consumers
through recognising the different degree of risks
involved in different transactions and the different
degrees of expertise and experience of different con-
sumers, and to reduce the extent to which financial
undertakings are used for the furtherance of financial
The need to maintain adequate and appropriate
regulation for the financial services industry is being
continually reiterated. Increasing access to infor-
mation as well as the speed at which information
may be accessed has reinforced the potential for
greater volatility in the markets. In addition, the pro-
liferation of electronic commerce lends an additional
dimension to the means by which transactions may
be undertaken. Trade in services and capital move-
ments transcend borders with considerable case and
raise the need for multilateral efforts in order to
ensure effective regulation and enforcement. In this
respect, it is important for the regulation of financial
services to be considered in the light of the develop-
ments in the context in which the services are
provided. National legislation needs to be in
harmony with regional and international concerns.
This is particularly applicable to financial institutions,
many of which operate as conglomerates with offices
in the various financial centres around the globe.
The object of this discussion is to examine the
enforcement of the underlying principles and policies
of financial services regulation against abusive and
fraudulent practices and to suggest that the contextual
approach under the principles of attribution estab-
lished by the Privy Council in Meridian Global
Funds Management Asia Ltd v Securities Commission5
is an invaluable tool in achieving these principles
and policies, especially in relation to larger and
more complex organisations.
One of the characteristics of legislative development
in England during the 19th and 20th centuries has
been the enormous growth in the number and
scope of regulation and the degree to which the gov-
ernment has sought to regulate areas of social and
economic activity through the establishment of regu-
latory agencies to secure compliance with policy
objectives. The proliferation of regulation and the
offences it introduced have led to the study of reg-
ulatory liability as a subject in itself as opposed to
civil and criminal liability.6 There is also the issue
of the dividing line between conventional crimes
which are regarded as mala in se and regulatory
offences which are regarded as mala prohibita,
though the difference may often be a matter of
degree and subject to policy and practical considera-
While the relationship between the state and its
social and economic infrastructure becomes increas-
ingly denominated with regulation, the definition
of regulation is not always clear and may mean differ-
ent things to different people. In general, it is synon-
ymous with the conscious ordering of activities,
Journal of Financial Crime
Vol. 8, No. 1, 2000, pp. 47–59
© Henry Stewart Publications
ISSN 0969-6458
Page 47

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