The Essential Laws of Finances Explained

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What you Should Know About Financial Markets Regulation

When the financial markets are regulated, the results can be both positive and negative. There are various reasons why players in the financial sector love regulation. For example, regulation prohibits rogue activities such as insider trading, which can leave investors with huge losses. Sometimes, one firm may be in charge of regulation of the whole financial industry in a country. In other jurisdictions, regulation may be carried out by multiple bodies. Regulation has various advantages and disadvantages.

Countries Follow Different Rules
In every country around the world, there are regulatory bodies that are in charge of coming up and implementing policies related to the securities market. The regulatory bodies have various powers and responsibilities in the markets they are in charge of.

In some countries, all matters related to the financial sector have been assigned to a single regulatory firm. In these countries, players in the financial sector have to engage with the regulator in one way or another. Examples of the areas that a regulators body may be in charge of include insurance, banking and trading securities. The same body may make the rules in all these types of financial activities.

There are various advantages of having a single regulatory body. For example, players in the financial industry as well as investors will operate easily when they only have to comply with the regulations of a single body. Both players and investors can easily get the guidance they need regarding specific issues related to the financial sector. Finally, when one makes contact with the regulatory body, all their problems could be solved at one go.

Having a single regulator eliminates any gray areas or cracks in terms of enforcement. Participants in the securities and other areas of the financial market can be sure that all their concerns would be addressed by the regulator.

Working with Different Regulators
In some jurisdictions, different regulators are tasked with ensuring the smooth operation of different subsectors of the financial industry. For instance, the state may be the one regulating the insurance sector. On the other hand, the banking industry may be regulated by the central government. Other bodies may be in charge of regulating other subsectors such as futures trading, stock market, and so on.

You should also know the benefits and drawbacks of having more than one regulator in an industry. For example, with many regulators handling different activities in the financial sector, players can be sure of getting specialized help. If there was only a single regulator in the country, providing specialized help would be nearly impossible. Moreover, since none of the agencies have unlimited powers, they are bound to cooperate with each other.

The above is an overview of the pros and cons of single and multiple regulators.

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