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Financial regulation

{{Short description|Rules or restrictions for financial institutions}}

{{Financial regulation}}

{{Finance sidebar |reg/stands}}

{{Banking |related}}

Financial regulation is a broad set of policies that apply to the financial sector in most jurisdictions, justified by two main features of finance: systemic risk, which implies that the failure of financial firms involves public interest considerations; and information asymmetry, which justifies curbs on freedom of contract in selected areas of financial services, particularly those that involve retail clients and/or principal–agent problems. An integral part of financial regulation is the supervision of designated financial firms and markets by specialized authorities such as securities commissions and bank supervisors.

In some jurisdictions, certain aspects of financial supervision are delegated to self-regulatory organizations. Financial regulation forms one of three legal categories which constitutes the content of financial law, the other two being market practices and case law.Joanna Benjamin 'Financial Law' Oxford University Press

History

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In the early modern period, the Dutch were the pioneers in financial regulation.Clement, Piet; James, Harold; Van der Wee, Herman (eds.): Financial Innovation, Regulation and Crises in History. (Routledge, 2014. xiii + 176 pp. {{ISBN|9781848935044}}) The first recorded ban (regulation) on short selling was enacted by the Dutch authorities as early as 1610.

Aims of regulation

The objectives of financial regulators are usually:{{citation |url=http://www.fsa.gov.uk/about/aims/statutory |title=UK FSA statutory objectives |date=2016-04-20 |access-date=2012-08-21 |archive-date=2017-07-07 |archive-url=https://web.archive.org/web/20170707113055/http://www.fsa.gov.uk/about/aims/statutory |url-status=dead }}

  • market confidence – to maintain confidence in the financial system
  • financial stability – contributing to the protection and enhancement of stability of the financial system
  • consumer protection – securing the appropriate degree of protection for consumers.
  • reduce financial crime
  • regulate foreign participation

Structure of supervision

Acts empower organizations, government or non-government, to monitor activities and enforce actions.{{citation |ssrn= 1994472 |title=What is Financial Regulation Trying to Achieve?, Riccardo De Caria|date=2011-09-23|last1=De Caria|first1=Riccardo}} There are various setups and combinations in place for the financial regulatory structure around the globe.{{citation |url= http://www.cssf.lu/nc/en/about-the-cssf/structure-organisation/|title=Luxembourg CSSF structure and organisation}}{{citation|url= http://www.bafin.de/EN/Supervision/supervision_node.html|title= German BAFin supervision organisation|url-status= dead|archive-url= https://web.archive.org/web/20120804111533/http://www.bafin.de/EN/Supervision/supervision_node.html|archive-date= 2012-08-04}}

=Securities market regulation=

{{Main|Securities commission}}

Exchange acts ensure that trading on the floor of exchanges is conducted in a proper manner. Most prominent the pricing process, execution and settlement of trades, direct and efficient trade monitoring.{{citation |url= http://www.finma.ch/e/finma/taetigkeiten/gb-maerkte/Pages/boersenaufsicht.aspx|title=Suisse finma stock exchange supervision}}{{citation|url= http://www.bafin.de/EN/Supervision/StockExchangesMarkets/stockexchangesmarkets_node.html|title= German BAFin stock exchange supervision|url-status= dead|archive-url= https://web.archive.org/web/20120722072922/http://www.bafin.de/EN/Supervision/StockExchangesMarkets/stockexchangesmarkets_node.html|archive-date= 2012-07-22}}

Financial regulators ensure that listed companies and market participants comply with various regulations under the trading acts. The trading acts demands that listed companies publish regular financial reports, ad hoc notifications or directors' dealings. Whereas market participants are required to publish major shareholder notifications. The objective of monitoring compliance by listed companies with their disclosure requirements is to ensure that investors have access to essential and adequate information for making an informed assessment of listed companies and their securities.{{citation|url= http://www.finanssivalvonta.fi/en/Supervision/Market_supervision/Disclosure/Pages/Default.aspx|title= Finland FSA supervion of listed companies|access-date= 2012-08-05|archive-url= https://web.archive.org/web/20121012035011/http://www.finanssivalvonta.fi/en/Supervision/Market_supervision/Disclosure/Pages/Default.aspx|archive-date= 2012-10-12|url-status= dead}}{{citation|url= http://www.cma.org.sa/En/AboutCMA/CMA_Department/Pages/Market_Supervision.aspx|title= Saudi Arabia market supervision|access-date= 2012-08-05|archive-url= https://web.archive.org/web/20130518194643/http://www.cma.org.sa/En/AboutCMA/CMA_Department/Pages/Market_Supervision.aspx|archive-date= 2013-05-18|url-status= dead}}{{citation|url= http://www.borsaitaliana.it/azioni/documenti/informativa-societaria/informativasocietaria.en.htm|title= Borsa Italiana listed stock supervision}}{{dead link|date=December 2017 |bot=InternetArchiveBot |fix-attempted=yes }}

Asset management supervision or investment acts ensures the frictionless operation of those vehicles.{{citation |url= https://www.sec.gov/divisions/investment.shtml|title=US SEC Division of Investment Management}}

=Supervision of banks and financial services providers=

{{Main|Bank regulation}}

Banking acts lay down rules for banks which they have to observe when they are being established and when they are carrying on their business. These rules are designed to prevent unwelcome developments that might disrupt the smooth functioning of the banking system. Thus ensuring a strong and efficient banking system.{{citation |url= http://www.rbi.org.in/scripts/AboutUsDisplay.aspx?pg=DeptOfBS.htm|title=Reserve Bank of India, Department of Banking Supervision}}{{citation|url= http://www.cssf.lu/en/about-the-cssf/structure-organisation/supervision-of-banks/|title= Luxembourg CSSF Supervision of Banks|access-date= 2012-08-05|archive-date= 2016-03-05|archive-url= https://web.archive.org/web/20160305033032/http://www.cssf.lu/en/about-the-cssf/structure-organisation/supervision-of-banks|url-status= dead}}

Financial regulatory authorities

{{Main|List of financial regulatory authorities by jurisdiction}}

See also

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References

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Further reading

  • Labonte, Marc. (2017). [https://fas.org/sgp/crs/misc/R44918.pdf Who Regulates Whom? An Overview of the U.S. Financial Regulatory Framework.] Washington, D.C.: Congressional Research Service. {{webarchive|url=https://web.archive.org/web/20171205205237/https://fas.org/sgp/crs/misc/R44918.pdf|date=2017-12-05}}
  • {{Citation |last1= Reinhart |first1= Carmen |author-link1= Carmen Reinhart |last2= Rogoff |first2= Rogoff |author-link2= Kenneth Rogoff |title= This Time is Different: Eight Centuries of Financial Folly |year= 2009 |publisher= Princeton U. Pr. |isbn= 978-0-691-15264-6}}
  • Simpson, D., Meeks, G., Klumpes, P., & Andrews, P. (2000). Some cost-benefit issues in financial regulation. London: Financial Services Authority.

External links

  • [https://web.archive.org/web/20041102085717/http://www.law.uc.edu/CCL/ Securities Lawyer's Deskbook] from the University of Cincinnati College of Law
  • [http://www.imf.org/external/pubs/ft/survey/so/2008/RES02408A.htm Ana Carvajal, Jennifer Elliott: IMF Study Points to Gaps in Securities Market Regulation]
  • [http://www.iosco.org/library/pubdocs/pdf/IOSCOPD82.pdf IOSCO: Objectives and Principles of Securities Regulation (PDF-Datei 67 Seiten)]

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Category:Financial law