Portable Reciprocity : Rethinking the International Reach of Securities Regulation

This paper argues that regulators should embrace international regulatory competition. Specifically, it advocates the adoption of a regime termed quot;portable reciprocity.quot; Under such a regime, a firm would be able to issue its securities under the laws of any country and, regardless of what country is chosen, the securities then could be traded in every country. Thus, for example, an American company could choose to have Japanese law apply to its transactions on the New York Stock Exchange. As long as investors are informed of the regime that applies to the securities, they will be able to discount the price accordingly. In addition to increasing capital mobility, adopting such a regime would lead to a variety of securities regimes for firms to choose from and, in making their choice, firms would signal valuable information about their issue, allowing more accurate pricing by the market