What are the Consequences of Financial Market Regulations ?
Financial market regulations are the rules, regulations set by the market regulators of the country or international regulatory bodies to streamline and have a level playing field for companies who are listed across the globe. These include companies in the industry like insurance, banking and finance, debt markets, pension and listed on the exchanges. Every country has regulators who manage and define rules and regulations for companies in these industries.
The regulations in the financial markets brings the following consequences:
a) Supervision of Stock Exchanges/or the companies in the industry: There are countries like India, USA etc which have multiple stock exchanges so to supervise them and keep a check and balance on its functionalities like the brokers are not misusing the information they have on clients, no insider trading, market manipulation through trading or information based etc. the regulations are necessary. The companies which are in the industry like insurance, debt, banking are regulated by their respective regulators
b) Supervise the companies listed on the exchange/or a part of the industry: There are various companies listed on the exchanges so for investors to have information on these companies these regulations play an important role like proper disclose of information, audited books of accounts to be submitted etc. So with this all the information that a company has needs to be disclosed which can have affect on the value of the stock.
c) Protect Retail investors: The type of investors who take the maximum loss because of some disruptions in the market are the retail investors so the regulations work to protect retail investors like properly educating and informing them about different products and services available in the financial market. They also give instructions to the companies to comply minimum regulatory requirements like banks need to maintain minimum capital, pension firms need to invest in some certain products etc.
d) Mediators to customers and companies: These regulators also serve as the mediators to the customers and the companies when there is a dispute they form committee to check and handle the grievances faced by the customers or the companies. As many times there are customers who are mis-sold the products or services so these regulators can play a part to help them solve the differences.
These are the consequences of the financial market regulation which is a positive thing for the financial sector as a whole.
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