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 instance, proper regulation protects the investors from losing their money due to rogue practices. 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. Regardless of the bodies in charge, regulation has its benefits and downsides.
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 jurisdictions, a single regulatory body is in charge of all matters related to the financial industry. In these countries, players in the financial sector have to engage with the regulator in one way or another. 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.
Having a single regulatory body in charge of the financial sector has its advantages. 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, 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. Participants in the securities and other areas of the financial market can be sure that all their concerns would be addressed by the regulator.
Multiple Regulators in a Market
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. On the other hand, the banking industry may be regulated by the central government. There may also be other regulatory agencies in charge of sectors such as securities, futures trade and so on.
Multiple regulators in a market also have their pros and cons. 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. Moreover, since none of the agencies have unlimited powers, they are bound to cooperate with each other.
If you want to start trading in securities, you should know about the regulators bodies in your jurisdiction.