Regulation can lead to mixed results in the financial markets. Investors love regulation for a number of reasons. For example, regulation protects them from losing their money when engaging in the financial markets. In some cases, regulation may be applied and executed by one firm to a particular area of the financial market. Some countries also allow multiple bodies to regulate various sectors of the financial market. Regardless of the bodies in charge, regulation has its benefits and downsides.
Regulation Varies Across the World
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 responsibilities and powers of the regulatory bodies vary depending on the countries where they operate in.
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. For example, the regulators may be in charge of issues related to trading securities, getting an insurance policy, opening a bank account and so on. The body may make all the rules related to all financial transaction aspects of the country.
There are a number of benefits of having the financial sector being regulated by a single body. For example, investors would find it easy to operate when they only have to deal with a single regulatory body. Both players and investors can easily get the guidance they need regarding specific issues related to the financial sector. Finally, investors can have all their concerns addressed in one go when they contact the regulator.
Enforcement of various rules is easier when a country only has a single regulator. The regulator can also easily address all the concerns that player in the securities or other financial markets may have.
Working with Different Regulators
Some countries have divided their financial industry into subsectors and tasked various bodies with the regulatory processes. For example, regulation of the insurance sector may be done at a state level. However, the central government may take on the task of regulating the banking sector. Other sectors of the financial markets, such as securities and futures trading, may be regulated by other bodies.
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. This help would not be easily provided if there was only one regulator in the county. Moreover, since none of the agencies have unlimited powers, they are bound to cooperate with each other.
The above are the advantages and disadvantages of having both single and multiple regulators in the financial sector.
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