Information Intermediaries
John H. Armour, Dan Awrey, Paul Davies, Luca Enriques, Jeffrey N. Gordon, Colin Mayer, Jennifer Payne · 2016
Abstract Before they execute their trading strategies, virtually all informed traders in securities markets have to acquire at least some information from intermediaries that specialize in conveying and/or processing it, ie information intermediaries. Under this heading, this chapter refers to a variety of information providers and processors performing very different functions within the financial market. It reviews key issues relating to the production, processing, and distribution of information in capital markets, before turning to the specific roles played by five different types of information intermediaries: underwriters, analysts, credit rating agencies, auditors, and lawyers. It then examines the regulation of these groups in the context of the range of regulatory techniques utilized in this area: disclosure, rules designed to ameliorate the problem of conflicts of interest, regulatory oversight, qualification requirements, intermediaries’ liability for damages incurred by investors, and other techniques designed to increase the intermediary’s incentive to maintain its reputation.