Do we really need a ‘perfectly reasonable investor’ within MAR?
Do we really need a ‘perfectly reasonable investor’ within MAR?
StatusVoR
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Authors
Rycerski, Adrian
Monograph
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Date
2023-09-11
Publisher
Journal title
Capital Markets Law Journal
Issue
4
Volume
18
Pages
Pages
534–555
ISSN
1750-7219
1750-7227
1750-7227
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Weblink
Access date
2023-11-10
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Abstract EN
The importance of the issue of the interrelationship between economic and legal sciences, which is particularly evident in the area of financial market law, is steadily increasing.1 Where the law is supposed to secure the proper functioning of market mechanisms, it should consider various factors and economic phenomena. The development of behavioural finance, the diversity of investors and investment techniques (methods) and the ever-increasing market share of non-professional investors even necessitate a re-evaluation of the relevance of the normative concept of a reasonable investor as used in the Market Abuse Regulation (MAR)2 from the perspective of the objectives of that regulation, taking into account economic considerations; MAR is intended to safeguard the proper functioning of market mechanisms, including informational efficiency, allocative efficiency and non-discriminatory, fair participation of investors in the market. In light of these objectives, how should we interpret the concept of a reasonable investor, which, together with the other considerations, contributes to the definition of inside information? Do we really need perfectly reasonable investors within MAR? Could a reasonable investor be someone taking advantage of the unreasonable behaviour of other capital market participants? Considering the lack of a universally binding definition of rationality in economic sciences, the varying terminological approaches to speculation depending on the type of financial instruments,3 or the need to combat abuses in the context of different investment approaches, the thesis that a reasonable investor within MAR can be a speculator is not surprising at all. Meanwhile, the issues discussed in this article, despite the passage of time, continue to elicit strong emotions and provoke divergent opinions. For instance, the MAR Review report4 highlights opinions that advocate the need for clarification of the current legal status by consolidating the approach according to which ‘(…) the significant effect on the price should be considered as a mid and long-term effect rather than a short-term speculative effect (…)’ and ‘(…) reasonable investors should be understood as rational investors that assess information generally with a view on the (long-term) fundamental value of a financial instrument’. Additionally, it suggests that a reasonable investor could take into account the irrational behaviours of other investors.
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