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Concept
Financial regulation
Summary
Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the stability and integrity of the financial system. This may be handled by either a government or non-government organization. Financial regulation has also influenced the structure of banking sectors by increasing the variety of financial products available. Financial regulation forms one of three legal categories which constitutes the content of financial law, the other two being market practices and case law.
In the early modern period, the Dutch were the pioneers in financial regulation. The first recorded ban (regulation) on short selling was enacted by the Dutch authorities as early as 1610.
The objectives of financial regulators are usually:
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
Acts empower organizations, government or non-government, to monitor activities and enforce actions. There are various setups and combinations in place for the financial regulatory structure around the globe.
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.
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.
Official source
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