4. Private Enforcement of COB

The chapter examines the interplay between private law and the statutory conduct of business regulation. The striking characteristic of the relationship between the UK’s private law and COB is dissonance in their requirements and causation assessments. The UK’s private law recognizes a contract as the most important basis for determining whether there was mis-behaviour. However, the COB mandatory requirements overrides the contract and are applied to financial institutions irrespective of what is in the contract. With respect to causality assessment between the financial institution’s misbehaviour and a consumer’s loss, private law requires tight tests to be passed but the regulator determines whether there is a fair and recognizable causality. Due to such dissonance in requirements and causation assessment, situations arise where COB determines certain acts of a financial institution to be subject to sanctions while private law does not accept that compensation is required. With such cases, it is difficult to say that there is harmonious interplay between private and public enforcement. The chapter also examines credit rating agency (‘CRA’) regulation which is one of the areas where statutory regulation and private law overlaps. In CRA regulation, unification of standards is not enough but also lessening the burden of proof is needed to improve the complementarity between the two institutions. In South Korea, because COB is adopted through legislation and so binds the court, the standards that apply to ‘mis-selling’ disputes are the same between private law and regulation. Regarding enforcement, the South Korean regulator’s enforcement approach focuses more on breaches of procedures than substance. But the court adopts the substance of regulation as the reference for its adjudications. It is deemed that private enforcement focusing on substance of regulation is complementing public enforcement which focuses on procedures.