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Q: In the above article, Ariel Yehezkel argues that the migration of Israeli Corporations to US stock exchanges is attributable to the difference between the US and Israeli Capital markets Law, and that law really matters. Do you agree with Ariel Yehezkel? Why does law matter?
Introduction:
Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions. Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use. Generally, this market trades mostly in long-term securities.
The capital market efficiency is usually determined by how well the regulatory measures are defined since for there to be a proper functioning capital markets there has to be factors such as integrity and transparency as well as accountability. The law has been known to be the best institution to provide a mechanism that ensures the factors are well enhanced as well as promoted.
Why the law matters
The significance of protecting the proper functioning of markets has long been recognized and the law is deemed to be a proper tool to achieve this. The importance of protection of protecting the markets as opposed to the individuals within it has also been recognized and legislative intervention is justified.
It is important to highlight the extent to which the law has been considered to be of great importance in many jurisdictions in that capital markets are regulated at two levels, namely; Self-regulation by self-regulatory organizations e.g. Nairobi Stock Exchange, LST, NYSE, ASKB, ICPAK etc. as well as direct regulation otherwise referred to as public regulation by the state bodies e.g. The Capital Markets Authority, FSE UK, Financial Exchange Commission etc. In most cases regulation has