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Banks, brokerage houses, and insurance agencies are all governed by financial regulators. They safeguard you from financial dangers and theft. However, they must be weighed against the need for capitalism to function effectively. Democrats call for more controls as a matter of strategy. Republicans are known for favoring deregulation. When we are talking about the financial market, it should also be taken into account that the market is very vast and diverse. There are many different activities and billions of dollars circulated daily and ensuring fair and transparent activities are very important, this is why the operating of financial regulators is important for not only the market protection but also for the clients.
In This Post:
Why the Financial Regulation Is Important
To say specifically, what does the regulation mean for the client, it is the protection of them from financial fraud. This includes unethical activities, credit cards, and financial products. This is why the oversight of the government is important in the financial sector and making the regulators operate in the country is so important.
When we are talking about government involvement, sometimes there are skeptical attitudes towards it as many people perceive the government involvement to be restrictive and hinders the development of new industries. However, we can say that works vice versa. Any vital industries can benefit from government assistance in getting started. The electricity and cable industry are two examples. Companies would not invest in high-cost projects if policymakers did not protect them. Regulations in other markets may help safeguard small and emerging businesses. Proper regulations will encourage creativity, competitiveness, and a wider range of options for consumers.
Regulators of the Financial Industry
There are three major regulators that operate in the financial industry.
The first one is the financial market and The Securities and Exchange Commission (SEC) is in charge of financial laws in the United States. It is responsible for upholding stock exchange standards, reviewing corporate disclosure conditions, and supervising the Securities Investor Protection Corporation. There are also many other financial regulators for the stock market or forex and the countries have their own regulators. For example, the UK has the Financial Conduct Authority, Europe has the European regulator bodies and they are specific for each and every one of them, CySEC in Cyprus and SIBA regulated Forex Brokers in Seychelles. All of them have their own requirements for the companies and brokerage firms to get the license but all of them are created and operating to protect the customers from the possible scams of money laundering. When the client knows that the brokerage firm has the license from the regulator, this means that the capital, services, performance of the company were checked and give them a feeling of being secured.
The second one is Banking. The main purpose of the bank regulators is divided into four parts. First, they operate to examine the safety and soundness of the certain bank, secondly, it is their obligation to find out detailed information about the capital that the bank is holding. Thirdly, it ensures the deposits that are made by the new clients or clients, generally. Last but not least, they have the obligation to summarize possible threats for not only certain banks but also the entire banking system.
Let’s take the example of the Federal Deposit Insurance Corporation, which represents a large portion of all banks in the United States. More than 5,000 banks are examined and supervised by them. When a bank collapses, the FDIC arranges for the selling of the bank to another bank and the relocation of depositors to the new bank. Savings, checking, and other bank accounts are all covered by the FDIC. the service that is provided by them is called to be an observer but the organizer as well.
There is also the third body that ensures client protection, the Consumer Service. This is a special department, for example, in the US it is a part of the Treasury Department. It helps the clients to check if the banks are overcharging them for credit cards, debit cards, and loans.
Summing It Up
Finally, to sum up, we can boldly say that the financial industry is very diverse and consists of many different aspects. While something unregulated might sound alluring and a financial market that is not controlled might sound more profitable but it actually works vice versa. The regulators are created for the financial market because they are directly connected to the funds and capital and there are more risks of unauthorized manipulations.
When you ask the clients what they prefer, they will definitely say that the regulation and the contact with the regulated company makes them feel secured and less stressed out by being involved either in the stock market or foreign exchange market. The regulators make the companies provide them with the proper report about their funds and experience and after receiving the license they are able to continue the services. It is also working at the advantages of the companies because they have a competitive and fair environment for the operating and clients will more likely be willing to contact them.