Financial services regulator independence : a comparative analysis of legal and technical implementation

Abstract

Given the size and impact in many economies of the Financial Services sector, the issue of its operational independence is of great importance. This study examines the various aspects, from mainly legal and practical approaches, that are an integral part of the ongoing debate about the independence of bodies that function as regulators of the sector. It covers issues such as the number of regulators that exist in various jurisdictions, the interplay between such regulators, and to what extent different setups affect regulatory independence. The thesis clearly shows that elements impinging on regulatory independence are indeed several. They include, inter alia, the methods of appointments of regulators, limitations regarding terms of office (including security of tenure), salaries, ability to appoint employees, and above all operational independence. Of paramount importance too is the issue of financing of regulatory bodies, i.e. mainly the two sources of fees and/or state budget contributions. This thesis also discusses the important facet of regulatory capture by market operators, and has also managed to time into the text some discussion of elements from recent (2018) changes to the MFSA Act, which have impacted internal structures in Malta, the MFSA’s budget, the registry of companies, and the “revolving role” facet when former officers of regulatory bodies move to other parts of the financial services industry.