3 pages question 6 and 7 Case Assignment 1 | American Food Suppliers
U.S. Regulatory Environment Who are the regulators? How do they regulate? Self-Regulation as a Guiding Regulatory Philosophy
Federal /State/ Local
Professor Miriam F. Weismann
U.S. Constitution
Establishes a “federalist” system of government (with authority divided between the federal and state governments)
Allocates power among the three federal branches of government (legislative, executive, and judicial)
Establishes a system of “checks and balances”
The Supremacy Clause (Article V of the United States Constitution)
Provides that federal law is the “supreme law” of the United States
Any state or local law that directly conflicts with federal law is void
Preemption Doctrine---when Congress “preempts the field” of regulation, any state regulation of that field is void, even in the absence of a conflict with the federal law.
Hierarchy of Laws
U.S. Constitution
Federal Law
Treaty
Executive Order/Executive Agreement
State Law
The Commerce Clause ---Authority for Federal Regulation of Business
The primary source of authority for federal regulation of business
States that the U.S. Congress has the power to “regulate Commerce with foreign Nations, and among the several States…”
Simultaneously empowers the federal government and restricts the power of state governments
State Regulation of Business
The “dormant” commerce clause:
The states may regulate commerce unless such regulation places an undue burden on interstate commerce
Nine Characteristics of A Regulatory System
GAO Report
History and Development of U.S. Regulatory System
“Reactive Legislative Model”
GAO Report
Regulatory Oversight: More or less regulation?
How to achieve credible regulatory oversight that provides meaningful control of the nations’ financial infrastructure and at the same time preserves self-regulation, innovation and growth in the marketplace?
What is credible regulatory oversight?
A function of whether the agency is doing the job that it is authorized by law to do!
Credible supervision is not credible oversight. Supervision may not uncover fraud and abuse because:
Lack of congressional authorization
External policy decisions
Market innovation outpaces regulatory control
Concealment impedes oversight
Current Regulatory Oversight Model
Hybrid of government and private sector governance
Concept of Functionality
Regulatory “Expectation” Gap
Cannot create economic policy through regulation
The Model of Business Self-Regulation
The SEC
Statement of the SEC in 2000: pre-Enron
“Self-regulation has been a cornerstone in the securities industry since the very beginning. Indeed, the fundamental principle of self-discipline predates the securities laws. At its most basic level, self-regulation is the manner in which all firms self-police their own activities to ensure that they are meeting all fiduciary and other duties to their clients.”
Self-Regulation Model
Paradigm of Self-Regulation: 1933 Securities Act and 1934 Securities and Exchange Act
Centerpiece of the corporate behavioral model of regulatory enforcement of publicly traded companies.
Regulations establish baseline ethical and legal normative standards, left to corporate discretion to implement in conformity with institutional systems of checks and balances.
Benefits of self-regulation
Standard of restraint most compatible with free market economy.
Rational choice theory: two key assumptions
First, corporations will achieve regulatory compliance through an internal system of checks and balances which can be relied upon by the regulators.
Second, the least intrusion by regulators into internal corporate affairs provides the most efficient and effective means of corporate governance and internal control practices.
Disadvantages of self-regulation
Behavioral Influences: competition and pressures from the marketplace
SRO conflict of interest: need to self-protect
“shotgun behind the door” because of breakdowns in self-policing