Empowering investors: A market approach to securities regulation

in the debate on securities regulation, even those who consider the U.S. regime unnecessarily burdensome have, by urging preemption of state securities lawsuits, looked to federal law as the potential source of solutions. In this Article, Professor Romano advocates instead a market-oriented approach of competitive federalism that would expand the role of the states in regulating securities and would fundamentally reconceptualize the regulatory scheme. Under a system of competitive federalism far securities regulation, only one sovereign would have jurisdiction over all transactions in the securities of a corporation that involve the issuer or its agents and investors: the sovereign chosen by the issuer from among the federal government, the fifty states, the District of Columbia, or foreign nations. The aim of the proposal is to replicate for the securities setting the benefits produced by state competition for corporate charters-a responsive legal regime that has tended to maximize share value. As a competitive legal market supplants a monopolist federal agency in the fashioning of regulation, it will produce rules more aligned with the preferences of investors, whose decisions drive the capital market. Competitive federalism for U.S. securities regulation would also have important implications for international securities regulation. The jurisdictional principle applicable to domestic securities transactions would be equally applicable: Foreign issuers selling shares in the United States would be able to opt out of the federal securities laws and choose the law of another nation, such as their country of incorporation, or a U.S. state, to govern those U.S. transactions.