In order to assess the effectiveness of regulation, the two broad models and their implications must be discussed. The specific issue of adverse publicity will be explored; this is pertinent to financial regulation because of its effect on confidence. From this discussion the strategy in the UK can be identified and compared to that of the US and international initiatives. Using these comparisons and the relevant theory behind the approaches it will be argued a balance of the two approaches is required to create the optimum regulatory environment. Models of Regulation Scholz identifies the two distinctive enforcement strategies, firstly the ‘deterrence-based’ or strategy [seeking] compliance through the maximal detection and sanctioning “rule orientated of violations of legal the or strategy [which] rule.” Secondly ‘compliance-based’ “cooperative emphasizes flexible or selective enforcement that takes into consideration the particular circumstances of In deciding upon a strategy to employ, the mentality an observed violation.” of the regulated must be considered. Ayres and Braithwaite consider Justice Holmes adoption of the deterrence model, Holmes argued the law should be tailored towards 'bad men' as they would try to evade it, 'good men' need not be considered as they will still conform. Singh identifies the deterrence method as the appropriate approach to what Kagan and Scholz describe as the only interested in profits, these people will weight up the ‘amoral calculator’, possible benefits against the likelihood of getting caught. In pursuing a deterrence-based approach the regulator will hope to make the probability of detection, and resultant consequence too high a risk to take. proposal would be an example of the Ferguson’s deterrence-based approach; he advocates exemplary punishments to instil fear in others. He identifies can be likened to the in that they will “greedy people”, who ‘amoral calculator’
In order to assess the effectiveness of regulation, the two broad models and their implications must be discussed. The specific issue of adverse publicity will be explored; this is pertinent to financial regulation because of its effect on confidence. From this discussion the strategy in the UK can be identified and compared to that of the US and international initiatives. Using these comparisons and the relevant theory behind the approaches it will be argued a balance of the two approaches is required to create the optimum regulatory environment. Models of Regulation Scholz identifies the two distinctive enforcement strategies, firstly the ‘deterrence-based’ or “rule orientated strategy [seeking] compliance through the maximal detection and sanctioning of violations of legal rule.” Secondly the ‘compliance-based’ or “cooperative strategy [which] emphasizes flexible or selective enforcement that takes into consideration the particular circumstances of an observed violation.” In deciding upon a strategy to employ, the mentality of the regulated must be considered. Ayres and Braithwaite consider Justice Holmes adoption of the deterrence model, Holmes argued the law should be tailored towards 'bad men' as they would try to evade it, 'good men' need not be considered as they will still conform. Singh identifies the deterrence method as the appropriate approach to what Kagan and Scholz describe as the ‘amoral calculator’, only interested in profits, these people will weight up the possible benefits against the likelihood of getting caught. In pursuing a deterrence-based approach the regulator will hope to make the probability of detection, and resultant consequence too high a risk to take. Ferguson’s proposal would be an example of the deterrence-based approach; he advocates exemplary punishments to instil fear in others. He identifies “greedy people”, who can be likened to the ‘amoral calculator’ in that they will