Financial regulation

Short description: Rules or restrictions for financial institutions

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Assets

* Bond
* Commodity
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* Money
* Over-the-counter
* Private equity
* Real estate
* Spot
* Stock

Participants

* Investor
* institutional
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Locations

* Financial centres
* Offshore financial centres
* Conduit and Sink OFCs

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* Bond
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* Collateralised debt obligation
* Credit default swap
* Time deposit (certificate of deposit)
* Credit line
* Deposit
* Derivative
* Futures contract
* Indemnity
* Insurance
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* Loan
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* Option (call
* exotic
* put)}}
* performance bonds
* Repurchase agreement
* Stock
* Security
* Syndicated loan
* Synthetic CDO

Part of a series on financial services

Banking

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* Universal
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Lists of banks

Accounts · Cards

|  Accounts

* Christmas club
* Deposit
* Money-market
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Transaction (checking / current)
Cards

* ATM
* Credit
* Debit

Funds transfer

* Electronic
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* Automated clearing house
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Terms

* Automated teller machine
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* Loan
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* Bank secrecy
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* Private banking

Related topics

Financial market (participants)

* Corporate finance
* Personal finance
* Public finance
* Financial law
* Financial regulation
* List of banks

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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.[1]

## Contents

* 1 History
* 2 Aims of regulation
* 3 Structure of supervision
* 3.1 Securities market regulation
* 3.2 Supervision of banks and financial services providers
* 4 Financial supervisory authorities
* 5 See also
* 6 References
* 7 Further reading
* 8 External links

## History

Financial regulation has ancient roots, often evolving in response to economic crises or the need to standardize commerce. The Code of Hammurabi (c. 1700 BCE) contained standards for lending and the regulation of interest.[2] In the Roman Empire, banking was expanded beyond temples into private and state roles. This lead to the creation of distinct financial institutions subject to administrative oversight.[3] During the medieval period, financial regulation in Europe was heavily influenced by religious restrictions on usury (the charging of interest), which shaped the development of early merchant banks in Italy.[4]

In the early modern period, the Dutch were the pioneers in financial regulation.[5] 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:[6]

* 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.[7] There are various setups and combinations in place for the financial regulatory structure around the globe.[8][9]

### Securities market regulation

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.[10][11]

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.[12][13][14][15]

Asset management supervision or investment acts ensures the frictionless operation of those vehicles.[16]

### Supervision of banks and financial services providers

Main article: Finance: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.[17][18]

## Financial supervisory authorities

## See also

* Bank regulation
* Finance
* Financial economics § Financial markets
* Financial ethics
* Financial regulation in India
* Financial repression
* Global financial system
* Group of Thirty
* Insurance law
* International Organization of Securities Commissions
* International Centre for Financial Regulation
* LabEx ReFi - European Laboratory on Financial Regulation
* Macroprudential regulation
* Microprudential regulation
* Regulatory capture
* Regulatory economics
* Securities commission
* Commodity market § Regulation of commodity markets
* Virtual currency law in the United States

## References

1. ↑ Joanna Benjamin 'Financial Law' Oxford University Press
2. ↑ "The Code of Hammurabi". Yale Law School Lillian Goldman Law Library. https://avalon.law.yale.edu/ancient/hamframe.asp.
3. ↑ "The Evolution of Banking: From Temples to Digital Platforms". Investopedia. https://www.investopedia.com/articles/07/banking.asp.
4. ↑ Ferguson, Niall (2008). The Ascent of Money: A Financial History of the World. Penguin Books. ISBN 978-0143116172.
5. ↑ Clement, Piet; James, Harold; Van der Wee, Herman (eds.): Financial Innovation, Regulation and Crises in History. (Routledge, 2014. xiii + 176 pp. ISBN 9781848935044)
6. ↑ UK FSA statutory objectives, 2016-04-20, http://www.fsa.gov.uk/about/aims/statutory, retrieved 2012-08-21
7. ↑ De Caria, Riccardo (2011-09-23), What is Financial Regulation Trying to Achieve?, Riccardo De Caria
8. ↑ Luxembourg CSSF structure and organisation, http://www.cssf.lu/nc/en/about-the-cssf/structure-organisation/
9. ↑ German BAFin supervision organisation, http://www.bafin.de/EN/Supervision/supervision_node.html
10. ↑ Suisse finma stock exchange supervision, http://www.finma.ch/e/finma/taetigkeiten/gb-maerkte/Pages/boersenaufsicht.aspx
11. ↑ German BAFin stock exchange supervision, http://www.bafin.de/EN/Supervision/StockExchangesMarkets/stockexchangesmarkets_node.html
12. ↑ Finland FSA supervion of listed companies, http://www.finanssivalvonta.fi/en/Supervision/Market_supervision/Disclosure/Pages/Default.aspx, retrieved 2012-08-05
13. ↑ Saudi Arabia market supervision, http://www.cma.org.sa/En/AboutCMA/CMA_Department/Pages/Market_Supervision.aspx, retrieved 2012-08-05
14. ↑ Smith, J.; Johnson, P. (2023). "Navigating the regulatory landscape: Security requirements for financial institutions". Journal of Financial Compliance 12 (3): 45–67.
15. ↑ Borsa Italiana listed stock supervision, http://www.borsaitaliana.it/azioni/documenti/informativa-societaria/informativasocietaria.en.htm
16. ↑ US SEC Division of Investment Management, https://www.sec.gov/divisions/investment.shtml
17. ↑ Reserve Bank of India, Department of Banking Supervision, http://www.rbi.org.in/scripts/AboutUsDisplay.aspx?pg=DeptOfBS.htm
18. ↑ Luxembourg CSSF Supervision of Banks, http://www.cssf.lu/en/about-the-cssf/structure-organisation/supervision-of-banks/, retrieved 2012-08-05

## Further reading

* Virág Blazsek, Banking Bailout Law: A Comparative Study of the United States, United Kingdom and the European Union (Routledge, 2020), ISBN 978-0-367-41033-9
* Labonte, Marc. (2017). Who Regulates Whom? An Overview of the U.S. Financial Regulatory Framework. Washington, D.C.: Congressional Research Service.
* Reinhart, Carmen; Rogoff, Rogoff (2009), This Time is Different: Eight Centuries of Financial Folly, 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

* Securities Lawyer's Deskbook from the University of Cincinnati College of Law
* Ana Carvajal, Jennifer Elliott: IMF Study Points to Gaps in Securities Market Regulation
* IOSCO: Objectives and Principles of Securities Regulation (PDF-Datei 67 Seiten)

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Financial markets

Types of markets|

* Primary market
* Secondary market
* Third market
* Fourth market

Types of stocks|

* Common stock
* Golden share
* Preferred stock
* Restricted stock
* Tracking stock

Share capital|

* Authorised capital
* Issued shares
* Shares outstanding
* Treasury stock

Participants|

* Broker-dealer
* Day trader
* Floor broker
* Floor trader
* Investor
* Market maker
* Proprietary trader
* Quantitative analyst
* Financial law
* Regulator
* Stock trader

Exchanges|

* Electronic communication network
* List of stock exchanges
* Trading hours
* Multilateral trading facility
* Over-the-counter

Stock valuation|

* Alpha
* Arbitrage pricing theory
* Beta
* Bid–ask spread
* Book value
* Capital asset pricing model
* Capital market line
* Dividend discount model
* Dividend yield
* Earnings per share
* Earnings yield
* Net asset value
* Security characteristic line
* Security market line
* T-model

Trading theories
and strategies|

* Algorithmic trading
* Buy and hold
* Contrarian investing
* Day trading
* Dollar cost averaging
* Efficient-market hypothesis
* Fundamental analysis
* Growth stock
* Market timing
* Modern portfolio theory
* Momentum investing
* Mosaic theory
* Pairs trade
* Post-modern portfolio theory
* Random walk hypothesis
* Sector rotation
* Style investing
* Swing trading
* Technical analysis
* Trend following
* Value averaging
* Value investing

Related terms|

* Block trade
* Cross listing
* Dark pool
* Dividend
* Dual-listed company
* DuPont analysis
* Efficient frontier
* Flight-to-quality
* Government bond
* Haircut
* Initial public offering
* Long
* Margin
* Market anomaly
* Market capitalization
* Market depth
* Market manipulation
* Market trend
* Mean reversion
* Momentum
* Open outcry
* Position
* Public float
* Public offering
* Rally
* Returns-based style analysis
* Reverse stock split
* Share repurchase
* Short selling
* Slippage
* Speculation
* Stock dilution
* Stock exchange
* Stock market index
* Stock split
* Trade
* Uptick rule
* Volatility
* Voting interest
* Yield

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