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The Competing Paradigms Of Securities Regulation, James J. Park

Duke Law Journal

Although the securities industry is primarily regulated by specific rules, it is also governed by general principles. When conduct violates a rule, the regulatory response is obvious-enforce the rule. The issue is more difficult when conduct does not violate a rule but violates a principle. A regulator can excuse the conduct on the ground that the law is unclear and prohibit the conduct going forward through rulemaking. Or, the regulator can punish the conduct through what I call a "principles-based" enforcement action. Since 2002, there has been a surge of principles-based enforcement actions, provoking criticism that regulators are engaging in …