How to Protect Investors: Lessons from the EC and the UK by Niamh Moloney
| Published date | 01 November 2010 |
| DOI | http://doi.org/10.1111/j.1468-2230.2010.00832_2.x |
| Date | 01 November 2010 |
| Author | Iain MacNeil |
Niamh Moloney, How to Protect Investors: Lessons from the EC and the UK,
Cambridge: Cambridge University Press, 2010, 500 pp, hb d125.00.
The objective of this book is succinctly captured by its title and subsequently
expanded so as to encompass three central questions: ¢rst, who is the retail inves-
tor?; second, why should that investor be protected?; and third, how should that
protection be designed? At its simplest level, the answer to the ¢rst question is that
the retail investor is thepr ivate as opposedto the institutional or professional inves-
tor, however these terms maybe de¢ ned in di¡erent legal and regulatory regimes.
The centrality of the question to the book, however, is revealed by the tripartite
characterisation adopted by Moloney, which is subsequentlyused as a lens through
which to approach the often complex regulatory material with which the book
engages.Thus, the retail investor is characterised ¢rst as having the capacity to be
‘empowered’, implying that she can be relied uponto make rational decisions when
provided with relevant information; ‘irrational and uninformed’, implying that a
paternalistic regulatoryapproach may be required; or ‘trusting’,implying that retail
investors trust the structure of the ¢nancial system and the capacity of ¢nancial
institutions to treat their customers fairly. Each characterisation o¡ers a distinctive
approach tothe framing of legal and regulatory rules applicable to investment, and
Moloney’s approach is based on the premise that no single characterisation can
hope to encompass the wide range of personal attributes, product designs, market
structures and advisory relationships that are encompassed by the term ‘retail
investment’.Thus, the central focus of the book is to identify the extent to which
each characterisation is appropriate and from that vantage point to map out the
direction in which ‘investor protection’should develop.
Although the title suggests a broad focus on the retail market, the main focus is
in fact narroweras the book is not directly concerned with banking,i nsurance and
pension-related services.That is quite a substantial omission since Moloney notes
that pension products and unit-linked life assurance together represent nearlyhalf
of EU total householdsavings, while bank deposits represent another ¢fth. Invest-
ment funds, which are the main focus of the book, represent a smaller category
than any of these. However, the ostensibly narrow focus is overcome in several
ways. One is that Moloney engages in sustained analysis of issue s that are common
to all forms of retail investment: the characterisation of investors, just mentioned,
being an obvious example. Second, there is a clear focus throughout the book on
the issue of ‘horizontal regulation’across retail investment products. Third,the dis -
cussion of policy formation and regulation across the UK and EU, as well as fre-
quent reference to other national systems, draws attention to a range of di¡erent
issues and solutions.Thus, the overall impression that emerges is of a wide-ranging
study of retail investment encompassing a case-study on investment funds.
In approaching the question of why the retail investor should be protected, Molo-
ney largely goes through the motions in citing the traditional justi¢cations based on
market failure analysis linked to information asymmetries. The reason soon becomes
clear as she moves on to argue that the majorcatalyst for the development of modern
investor protection regimes around the world is the promotion of market-based sav-
ings (22) and that this recasting of the role of investor protection requires it to be
understood as ‘a quasi-marketing strategy’ (51). From that perspective, regulatory
Reviews
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r2010The Author.The Modern Law Review r2010The Modern Law Review Limited.
(2010) 73(6) 1076^1092
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