Module 7.1: Economics of Regulation Flashcards
Regulations are needed in the presence of
informational frictions
externalities
weak competition
social objectives.
Explain the purposes of regulating commerce
Government regulations provide an essential framework to facilitate business decision-making.
Explain the purposes of regulating financial markets.
protect investors
create confidence in the markets
enhance capital formation
Regulation of Security Markets
Disclosure requirements
mitigating agency problems.
protecting small (retail) investors
Prudential supervision
monitoring and regulation of financial institutions
Antitrust Regulation
promote domestic competition by monitoring and restricting activities that reduce or distort competition.
statutes
laws made by legislative bodies
administrative regulations
rules issued by government agencies or other bodies authorized by the government
judicial law
findings of the court
Regulators can be
government agencies or independent regulators.
Independent regulators
given recognition by government agencies and have power to make rules and enforce them
Self-regulatory bodies (SRBs)
private organizations that represent as well as regulate their members
self-regulating organizations (SROs)
SRBS that are given government recognition and authority
regulatory capture theory
a regulatory body will, at some point in time, be influenced or even possibly controlled by the industry that is being regulated.
regulatory competition
Regulatory differences between jurisdictions
