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Dodd-Frank, Fiduciary Duties, and the Entangled Political Economy of Federalism and Agency Rule-Making

In: Entangled Political Economy

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  • Moin A. Yahya

Abstract

Making law in America is not a simple task. It can be legislated by Congress, enforced by the executive, interpreted by the courts, and augmented by a massive body of rules created by administrative agencies such as the Securities and Exchange Commission (SEC). The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) (Dodd-Frank was passed) with an eye to preventing future financial crises. Four years later, many details of Dodd-Frank have yet to be finalized as the SEC is still in the process of developing the regulations that the legislation required them to create. Even once the regulations are finalized by the SEC, the regulations will be challenged by various parties in the courts. The regulations will be either upheld or rejected. Those that are upheld will then face numerous challenges when applied in specific cases, while those rejected will have to be redone all over again. The process of developing these regulations is cumbersome and attracts many of the special interests that were present in the legislative phase of Dodd-Frank and who will also be present in the litigation phases of testing Dodd-Frank in the courts. This paper focuses on the requirement that investment advisors and broker-dealers be deemed as owing fiduciary duties to their clients as a case study for the entangled political economy theory. The paper shows how the development of a simple rule such as whether these fiduciary duties should be owed or not requires years of back and forth between the legislative, executive, administrative, and judicial branches.

Suggested Citation

  • Moin A. Yahya, 2014. "Dodd-Frank, Fiduciary Duties, and the Entangled Political Economy of Federalism and Agency Rule-Making," Advances in Austrian Economics, in: Entangled Political Economy, volume 18, pages 111-138, Emerald Group Publishing Limited.
  • Handle: RePEc:eme:aaeczz:s1529-213420140000018006
    DOI: 10.1108/S1529-213420140000018006
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    References listed on IDEAS

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    More about this item

    Keywords

    Dodd-Frank; entangled political economy; law and jurisprudence; fiduciary duties of investment advisors and broker-dealers; rule-making; G11; G18; K22; P48;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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