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 instance, proper regulation protects the investors from losing their money due to rogue practices. In some cases, regulation may be applied and executed by one firm to a particular area of the financial market. In other cases, multiple players may regulate the same industry players. Any type of regulation has its pros and cons.
Countries Follow Different Rules
Every country has regulatory bodies that set up specific rules that have to be followed by participants in the financial sector. The regulatory bodies have various powers and responsibilities in the markets they are in charge of.
Some countries have a single regulator that is in charge of the whole securities industry. Therefore, investors that want to participate in the financial sector have to deal with the regulator in one way or another. Examples of the areas that a regulators body may be in charge of include insurance, banking and trading securities. 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, 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. Getting guidance on different issues becomes easier for both players and investors. 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. 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 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. On the other hand, the banking industry may be regulated by the central government. Other sectors of the financial markets, such as securities and futures trading, may be regulated by other bodies.
There are also advantages and disadvantages of having multiple regulators in an industry. For instance, when there are multiple regulators in the industry, players and investors are likely to 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.
The above are the advantages and disadvantages of having both single and multiple regulators in the financial sector.