Regulation can lead to mixed results in the financial markets. 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 jurisdictions, regulation may be carried out by multiple bodies. Regardless of the bodies in charge, regulation has its benefits and downsides.
Rules Are Different Across the Globe
All countries around the world have rules that govern participation in their financial industry. The main difference among the bodies is the extent to which they are involved in the financial industry.
In some countries, all matters related to the financial sector have been assigned to a single regulatory firm. Participants in the financial sectors of these countries have to engage with the regulators body in different ways. 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. All the rules related to the financial sector of the country may be made by the regulatory body.
There are various advantages of having a single regulatory body. For investors, operating in the financial markets becomes easier when there is only a single regulator to deal with. 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
In some countries, the financial industry is divided into subsectors which are then regulated by different bodies. For instance, the state may be the one regulating the insurance sector. However, the central government may take on the task of regulating the banking sector. 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. 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.
If you want to start trading in securities, you should know about the regulators bodies in your jurisdiction.