Cross-Country Securities Enforcement as An Example of Pro-Cyclical Regulation

The procyclicality hypothesis predicts that after a stock market downturn, regulatory initiatives and therefore investor protections increase. Unlike the relevant literature which focuses on new legislation, we focus on the enforcement of securities law. Our work is consistent with the idea of crisis-driven regulation as we show that following the global financial crisis, there was an increase in settlements, total payments and number of parties sanctioned, suggesting more enforcement activity. We are the first study to examine securities regulatory enforcement across countries including Canada, the United Kingdom and the United States and to conclude that there is cross-country support for the pro-cyclicality hypothesis