Two public/private divides revisited

A central feature of securities markets in the United States is the public/private divide. In fact, federal law creates two different public/private divides—one for companies and another for investment funds. While Congress created both divides in the space of a single decade, it could not have imagined how they might come to influence each other. In 1940, when federal fund regulation was created, individuals directly held the vast majority of stock, and investment funds held only a trivial percentage. Eighty years later, public companies are primarily owned by registered investment funds, and most highly valued private companies are owned by private investment funds. As a result, fund regulation and securities regulation have become functional substitutes (and complements) in ways they never were before. More generally, these two public/private divides now interact with each other in pervasive, profound, and sometimes peculiar ways. Professor Rauterberg explores how these two divides interact and questions whether the current structure is socially optimal.

• Gabriel Rauterberg
• Securities markets
• financial regulation
• federal fund regulation
• investment funds
• securities regulation