From naive to sophisticated networked regulation

Risks and opportunities in the private exercise of regulatory functions

Abstract

[Purpose] The purpose of this article is to identify risks of regulatory failures in a model based on the theory of networked regulation. The article presents guidelines for disciplining the private exercise of public functions of regulatory activity.

[Methodology/approach/design] This article describes the main features of John Braithwaite's theory of networked regulation, highlighting private participation in regulatory activity. The article will relate the theory to the experience of the United States in the regulation of the securities market. The article will seek to identify both the regulatory failures associated with the private exercise of public functions and the responses given by the United States to the failures observed.

[Findings] The article concludes that the private exercise of public functions presents significant risks of inadequacies, notably due to the potential conflict of interest. It also concludes that it is possible to deal with these risks through appropriate normative parameters.

[Practical implications] It is expected that the results found would serve as guidelines for the design of the normative framework necessary for the adoption of nodal governance in our country.