Backstop Ambiguity: A Proposal for Balancing Specificity and Ambiguity in Financial Regulation

Abstract

The Securities and Exchange Commission (SEC) has been very busy for the last few years. In the wake of the 2007-2008 financial crisis, the agency scaled up enforcement efforts by increasing the number of individual enforcement actions, requesting that Congress authorize larger civil penalties than are currently permitted, and securing some of the largest settlements in the agency's history. The specific transactions targeted by the SEC are feared to be part of a broader trend in the financial industry toward behavior that prioritizes profit over integrity, potentially imperiling individual market actors and overall economic stability.