Regulation can lead to mixed results in the financial markets. There are various reasons why players in the financial sector love regulation. For example, regulation protects them from losing their money when engaging in the financial markets. Sometimes, one firm may be in charge of regulation of the whole financial industry in a country. In other cases, multiple players may regulate the same industry players. Any type of regulation has its pros and cons.
Regulation Varies Across the World
All countries around the world have rules that govern participation in their financial industry. 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. All the rules related to the financial sector of the country may be made by the regulatory body.
There are a number of benefits of having the financial sector being regulated by a single 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. Investors will not be confused on where to look for guidance in any they may want. Finally, investors can have all their concerns addressed in one go when they contact the regulator.
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.
Multiple Regulators in a Market
In some jurisdictions, different regulators are tasked with ensuring the smooth operation of different subsectors of the financial industry. For example, regulation of the insurance sector may be done at a state level. When it comes to banking, you may find that the central government is the one in charge of the regulations. 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. One of the benefits of having multiple regulators is that participants in the financial markets can get specialized help. This help would not be easily provided if there was only one regulator in the county. Apart from this, having multiple regulators encourages cooperation since none of the players has unlimited power.
If you want to start trading in securities, you should know about the regulators bodies in your jurisdiction.