Research Paper Number

76/2014

View the research paper on SSRN here.

Document Type

Article

Publication Date

2014

Keywords

Fiduciary; Financial Sector Reform; Governance; Intergenerational Equity; Institutional Investors; Pension Funds; Prudent Person Standard

Abstract

Informational asymmetries, misaligned incentives, and artificially elongated chains of intermediation have created a disconnect between the financial sector and the “real economy” that is detrimental to the public interest. Courts and regulators are increasingly intervening to break the cycle. We argue that fiduciary law offers a conceptual framework both for understanding and responding to this trend, and that the financial sector, rather than waiting for this trend to develop and reacting to new rules in a piecemeal way, should be proactive and try to shape the way in which this trend develops. We describe some elements of what such an approach might look like, and consider how regulators and political institutions can encourage financial institutions to adopt this approach, and in so doing support a broader transition to a more sustainable economy.

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