Federal securities regulation in the United States purports to take a distinctly non-paternalistic approach to the securities markets. The securities laws utilize disclosure, rather than heavy-handed substantive rules, to regulate securities transactions. Instead of flatly and paternalistically prohibiting certain transactions that might harm investors, disclosure rules require that investors receive material information so that they can decide for themselves whether to participate in risky transactions. The disclosure approach supports the free market and respects the autonomy of investors to make their own investment decisions. Although the federal securities regime appears to reflect an anti-paternalistic philosophy of regulation, the reality is that the securities laws have always contained significant elements of paternalism, and over the last eighty years, have become increasingly protectionist and paternalistic. Numerous modern securities rules prevent investors from taking on more risk than the government believes is good for them. As the securities markets grow increasingly more complex, it is critical to question whether greater levels of paternalism in the law are warranted. In recent years, there has been much debate over how much regulation in the securities markets is too much. While some commentators call for a stronger regulatory hand to protect investors, others want to reduce regulation of potentially profitable investor activity. Few, however, engage in the broader discussion of the philosophical validity of paternalistic government intervention in investors' lives and the securities markets. The idea that securities regulation is, can, and should be paternalistic is an important, but insufficiently theorized, aspect of securities law. This Article seeks to fill a gap in the literature by providing a closer analysis of the goals, validity, and drawbacks of paternalism in the law generally and in the securities markets in particular. It draws on inter-disciplinary materials to analyze the rationales for and resistance to paternalism. To the extent we believe some measure of legal paternalism is warranted, the Article recommends a substantive, tailored approach to developing and implementing paternalistic securities rules. Such rules must be supported by careful case-by-case analysis, not only to evaluate their efficiency, but also to understand their effect on individual autonomy, welfare, and the public good
