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Credit Default Swaps coupled with asset-backed financial products were heavily traded in the years preceding the Global Financial Crisis. Intended for sophisticated investors, Credit Default Swaps prima facie are in the nature of insurance contracts, although they operate outside the scope of the regulation governing insurance. This paper adopts a lexonomic approach to take an initiative to develop a regulatory framework for Credit Default Swaps in order to prevent a similar crisis. Inter alia, one solution is to regulate Credit Default Swaps together with insurable interest and an "excess" in order to minimize moral hazard. The objective behind the excess is to discourage negligent lending.

Despite criticism in the wake of the GFC, history shows that theory and curricula adapt to rectify any disconnects between theory, curricula, and practice. Finance theory unquestionably has antecedents in economics, accounting, legal theory, and psychology. Some theoretical developments-including the moral hazard consequences of limited liability-have yet to filter through to many texts and curricula, which also omit explanations of uncertainty; incomplete and (sub)optimal contracting; contagion; and behavioural finance. Student learning outcomes could be enhanced if universities, perhaps in a final year, cross-disciplinary "capstone" course, empowered students to understand the financial documentation evidencing sophisticated transactions; map relevant cash flows and wealth transfers; and recognise Ponzi schemes, the ethics of stakeholder wealth transfers, the conditions for contagion, and incentives for adverse selection and moral hazard in practice.

Purpose -The purpose of this paper is to investigate whether socially responsible investment (SRI) is less sensitive to market downturns than conventional investments; the legal implications for fund managers and trustees; and possible legislative reforms to allow conventional funds more scope to invest in SRI. Design/methodology/approach -The paper uses the market model to estimate betas over the past 15 years for SRI funds and conventional investment funds during economic downturns, as distinct from during more "normal" (non-recessionary) economic times. Findings -The beta risk of SRI, both in Australia and internationally, increases more than that of conventional investment during economic downturns. Traditional fund managers and trustees in Australia are therefore likely to breach their fiduciary duties if they go long -or remain long -in SRI funds during economic downturns, unless relevant legislation is reformed.Research limitations/implications -The methodology assumes that alpha and beta in the market model are constant. Second, it categorises the state of the market into "normal" economic conditions and downturns using dummy variables. More sophisticated techniques could be used in future research. Practical implications -The current law would prevent conventional funds from investing in SRI. If SRI is viewed as socially desirable, useful legislative reforms could include explicitly overriding the common law to allow conventional funds to invest in SRI; introducing a 150 percent tax deduction or investment allowance for SRI; and allowing SRI sub-funds to obtain deductible gift recipient status from the Australian Tax Office and other taxation authorities. Originality/value -The accurate assessment of risk in SRIs is an area which, despite its serious legal implications, is yet to be subjected to rigorous empirical investigation.

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