Lessons from the credit crisis: a subtle shift in the long reach for top executives

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As the extended aftermath of the 2007–08 subprime mortgage and global financial crisis continues to unfold, financial markets regulators have been criticised by members of the punditry for missed opportunities to charge senior executives.

There are many sound reasons for this purported lapse in regulatory assertiveness. For offences that often require proof of fraudulent intent or severe recklessness, senior executives tend to be removed from the reporting chain and information flow that surround decisions made about highly technical accounting rules or valuation judgments.

Also, the approval processes for significant business practices or transactions involve the participation of professional advisers, such as outside accountants and law firms, which may negate any attempt to show that executives intended to mislead counterparties or investors…

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