The renewed death of contract? Post-crisis financial product conduct reforms

Abstract

Post-crisis financial re-regulation in place or underway in Hong Kong and elsewhere includes restrictions on forms of contracting and new rules governing business and financial product conduct. Measures of this kind may dampen activity but do little to protect investors or other users, nor mitigate against future instability. They resemble a swing towards state incursion on contracting of a kind regularly identified by legal scholars. To the extent that the state wishes to protect the interests of retail investors or speculative users of complex financial instruments there may be more merit in requiring “intelligent disclosure” specific to each class of instrument, and extending the doctrine of unconscionability to include financial instruments, as in certain circumstances in Australia. Outright contractual bans are an unreasonable and costly extension of state policy, the underlying purpose of which is to divert popular attention from regulatory failure, while highly prescriptive point of sale rules may make it less likely for legitimate complaints of mis-selling to succeed.