Securities Intermediaries in the Internet Age and the Traditional Principal-Agent Model of Regulation: Some Observations From the EU’s Markets in the Financial Instruments Directive

Abstract

The regulation of securities intermediaries such as brokers and broker-dealers has hitherto been based onagency issues arising out of the client-intermediary relationship. This paper argues that, even in the Internetage where the interaction between clients and intermediaries take place over the Internet, the agency rationalefor regulation remains. However, the modalities of client-intermediary interaction take on certaincharacteristics that may affect the substantive regulation. As such, this paper examines the EU’s recentlyenacted Markets in Financial Instruments Directive to discern to what extent the Directive addresses newmodalities in client-intermediary interactions over the Internet