1998 Fiscal Year Final Research Report Summary
Some reflections upon the regulation of broker's investment recommendation from the perspective of cognitive limitations of investors.
| Project/Area Number |
08620032
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Civil law
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| Research Institution | KYOTO UNIVERSITY |
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Principal Investigator |
KAWAHARA Noboru Kyoto University, Graduate School of Law Professor, 大学院・法学研究科, 教授 (60204749)
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| Project Period (FY) |
1996 – 1998
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| Keywords | suitability / derivative / regulation of broker / self responsibility / institutional investor / cognitive ; imitation |
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| Research Abstract |
After the burst of bubble we have confronted a lot of cases in which customers complain of brokers arguing that their abusive recommendations of investments caused disasters. Courts resolving these disputes must then decide whether the broker withheld information about the risk, or whether the customer knew about the risk and simply made a bad decision. The extent to which it is reasonable for the investor to repose this trust in a broker is the crux. When recommending an investment, the broker must balance the sales pitch with disclosure of those risk factors that are material in light of what the broker understands about the customer's needs and objectives. Customer protection will be maximized by a standard requiring a broker to disclose all significant risk factors going to the suitability and soundness of the recommended investment in a way that captures the attention of the competent investors. J offer the answers to those problems from the perspective of cognitive limitations of investors. I strongly argue against the neo-classical statement that securities regulation have long worked largely from the simplifying assumption of the rational actor.
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