Why No One Talks About Regulation Anymore
There are both positive and negative results of regulating the financial markets. Stock market investors prefer regulation of the industry for a number of reasons. For example, regulation prohibits rogue activities such as insider trading, which can leave investors with huge losses. In some countries, regulation work is left to a single body. In other cases, multiple players may regulate the same industry players. Regardless of the bodies in charge, regulation has its benefits and downsides.
Rules Are Different Across the Globe
Every country has regulatory bodies that set up specific rules that have to be followed by participants in the financial sector. The responsibilities and powers of the regulatory bodies vary depending on the countries where they operate in.
Some countries have a single regulator that is in charge of the whole securities industry. Participants in the financial sectors of these countries have to engage with the regulators body in different ways. Trading securities, banking and insurance are some of the financial sectors that the bodies may be in charge of. 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. Investors will not be confused on where to look for guidance in any they may want. Apart from this, making one contact can address all your financial needs at the time.
Having a single regulator eliminates any gray areas or cracks in terms of enforcement. Any issues that player in the securities or other areas of the financial markets may have are easy to address.
Working with Different Regulators
In some countries, the financial industry is divided into subsectors which are then regulated by different bodies. 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 bodies may be in charge of regulating other subsectors such as futures trading, stock market, and so on.
There are also advantages and disadvantages of having multiple regulators in an industry. One of the benefits of having multiple regulators is that participants in the financial markets can get specialized help. If there was only a single regulator in the country, providing specialized help would be nearly impossible. Apart from this, having multiple regulators encourages cooperation since none of the players has unlimited power.
The above is an overview of the pros and cons of single and multiple regulators.