Culture Wars: Rate Manipulation, Institutional Corruption, and the Lost Underpinnings of Market Conduct Regulation

The investigations into the manipulation of the London Interbank Offered Rate (Libor) have raised significant questions about how conflicts of interest are managed for both regulated entities, contributing in benchmarks, and their regulators. An alternative framework is under consideration, coordinated by an International Organization of Securities Commissions taskforce, which builds on a review commissioned by the British Government. This paper argues that the approach is predestined to fail, precisely because it ignores the lessons of history. In revisiting the initial framing for market conduct regulation, the paper illuminates the lost normative underpinnings of the disclosure paradigm. By exploring the shadows of the past, it provides an essential guide for how to fix the legitimacy crisis engendered by the Libor scandal.