Professor John Coffee is one of the most insightful and imaginative scholars of modern corporate finance, and I am delighted that he has turned his fertile mind to the study of enforcement in securities regulation. On the view that extension is the sincerest form of flattery, I am especially pleased to see that Professor Coffee has found my own earlier work on regulatory intensity as a useful starting point for aspects of his analysis.

When I first identified the striking differences in regulatory intensity across jurisdictions, I had hoped that others would do just what Professor Coffee has attempted in his article: refine my preliminary data and develop a better theoretical understanding of the significance of variations of regulatory intensity for the quality of financial markets. Professor Coffee has made progress on both fronts. His article introduces new data on formal enforcement actions and budgets in the United Kingdom, Germany, and Australia—and makes a compelling argument that the high level of enforcement activity in the United States explains, in part, why foreign issuers have been attracted to U.S. public capital markets in recent years and why some classes of foreign issuers still are. This second point has important policy implications for the ongoing debate over the competitiveness of U.S. financial regulation, as it suggests that a relaxation of U.S. regulatory standards and a retreat from the SEC’s traditional emphasis on enforcement may in the long run actually reduce this country’s ability to compete for foreign listings and capital market dominance. The uniqueness of U.S. enforcement efforts that Professor Coffee identifies also raises potentially serious questions about the wisdom of recent proposals to accept foreign regulatory regimes as systems of substitute compliance for U.S. oversight of foreign exchanges and securities firms.