New “Special Study” of the Securities Market by Columbia Law and Business Schools

Columbia University Law and Business Schools announced that they will jointly carry out a new “Special Study” of the U.S. securities markets under a grant from the NASDAQ Educational Foundation.  The prior “Special Study” was published in 1963, and resulted in a number of significant changes in securities regulation, so there is some interest in Columbia’s announcement.  First will be papers by legal academics and economists.  Second, a plan of action will be drafted.  Finally, the plan will be implemented and a final report is to be presented by December 2020.  In a March 23 and 24 speeches at Columbia, Securities and Exchange Commission Acting Chair Michael Piwowar and Financial Industry Regulatory Authority (“FINRA”) President and CEO Robert Cook both said they welcomed the study.  Piwowar complained that Dodd-Frank was enacted without a study of the causes of the 2007/08 financial crisis, and said that the study would make good use of the pause in Dodd-Frank implementation.  Cook noted some of the benefits of the Self-Regulatory Organization model, like FINRA:  access to expertise, high standards of conduct, funding by regulated entities and creativity, and provision of practical tools and industry utilities such as, in the case of FINRA, BrokerCheck.  While there is room for improvement, he said, FINRA’s purported self-interest is tempered, among other things, by investor representation on the Board and advisory committees, SEC oversight and the fact that FINRA staff are subject to a Code of Conduct.