Legal Protection in Retail Financial Markets

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Oxford Journals Contact Us My Basket My Account Review of Corporate Finance Studies About This Journal Contact This Journal Subscriptions View Current Issue (Volume 2 Issue 1 March 2013) Archive Search Oxford Journals EconomicsSocial Sciences Review of Corporate Finance Studies Volume 1 Issue 1 Pp. 68-108. Legal Protection in Retail Financial Markets Bruce Ian Carlin

University of California, Los Angeles Simon Gervais

Duke University Send correspondence to Bruce Ian Carlin, Anderson School of Management, University of California, Los Angeles, 110 Westwood Plaza Suite C413, Los Angeles, CA 90095; telephone: (310) 825-7246. E-mail: bruce.carlin{at}anderson.ucla.edu; or to Simon Gervais, Fuqua School of Business, Duke University, 100 Fuqua Drive, Durham, NC 27708-0120; telephone: (919) 660-7683. E-mail: sgervais{at}duke.edu. Abstract We model a retail financial institution that outsources its advice services to an intermediary, making the two parties jointly responsible for consumers' experience with the products. In this context, courts that enforce state-contingent legal rules are necessary in order to avoid market breakdowns. To maximize social welfare, the government implements a system of penalties that depends on product characteristics and on the firm's relative ability to control quality. This legal system emphasizes reliable advice over transaction pace. Furthermore, the implicit team structure of the firm and its intermediary prevents self-regulation from achieving the same social efficiency. (JEL G18, G28, D11, D18, L51, K20)

© The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com. « Previous | Next Article » Table of Contents This Article Review of Corporate Finance Studies (2012) 1 (1): 68-108. doi: 10.1093/rcfs/cfs003 First published online: July 26, 2012 » Abstract Full Text (HTML) Full Text (PDF) All Versions of this Article: cfs003v1 1/1/68 most recent Classifications Articles Services Alert me when cited Alert me if corrected Find similar articles Similar articles in Web of Science Add to my archive Download citation Request Permissions Citing Articles Load citing article information Citing articles via CrossRef Citing articles via Scopus Citing articles via Web of Science Citing articles via Google Scholar Google Scholar Articles by Carlin, B. I. Articles by Gervais, S. Search for related content Related Content Load related web page information Share Email this article CiteULike Delicious Facebook Google+ Mendeley Twitter What's this?

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