Research Paper Number



Aviv Pichhadze

Document Type


Publication Date



capital markets; corporate governance; institutional investors; ownership; Regulation; risk


I adopt a novel approach vis-à-vis systemic risk in the capital markets and securities regulation in the US in light of the recent economic crisis. I show that regulators can introduce into the regulatory framework “regulatory systemic risk” – long-term imbalances introduced into the regulatory framework via regulatory initiatives premised on a distorted understanding of market realities – thereby reducing investor protection. This results mainly from failure to (i) take note of the general market trend towards the market oriented blockholder model and (ii) update the regulatory framework accordingly. The extent of the regulatory systemic risk is also discussed. From theoretical, practical and policy perspectives the analysis illustrates the need for regulators to be cognizant of long-term trends in the capital markets in the process of addressing lessons from the recent economic crisis in order to foster improved market efficiency, enhanced shareholder protection, and remove imbalances embedded in the current regulatory framework.