Chapter 12 - Economics of regulation. This chapter sescribe classifications of regulations and regulators, describe uses of self-regulation in financial markets, describe the economic rationale for regulatory intervention, describe regulatory interdependencies and their effects, describe tools of regulatory intervention in markets,. | Chapter 12 Economics of Regulation Presenter’s name Presenter’s title dd Month yyyy 1 1. Introduction Regulation is important because of its impact on individuals, businesses, and the economy. Regulation may be proactive or reactive. A challenge with financial regulation is managing systemic risk. Systemic risk is the risk of the failure of the financial system. Uncertainty regarding regulation is a risk that affects business decisions. Copyright © 2014 CFA Institute 2 2. Overview of regulation Regulations may be enacted by statutes (that is, laws); established by government agencies or other regulators, which are administrative laws and regulations; or interpretations of courts (that is, case law). Independent regulators get their authority from government bodies or agencies. Outside bodies may be referred to by regulatory authorities. Copyright © 2014 CFA Institute 3 LOS: Describe classifications of regulations and regulators. Pages 704–705 Regulations include statutes, . | Chapter 12 Economics of Regulation Presenter’s name Presenter’s title dd Month yyyy 1 1. Introduction Regulation is important because of its impact on individuals, businesses, and the economy. Regulation may be proactive or reactive. A challenge with financial regulation is managing systemic risk. Systemic risk is the risk of the failure of the financial system. Uncertainty regarding regulation is a risk that affects business decisions. Copyright © 2014 CFA Institute 2 2. Overview of regulation Regulations may be enacted by statutes (that is, laws); established by government agencies or other regulators, which are administrative laws and regulations; or interpretations of courts (that is, case law). Independent regulators get their authority from government bodies or agencies. Outside bodies may be referred to by regulatory authorities. Copyright © 2014 CFA Institute 3 LOS: Describe classifications of regulations and regulators. Pages 704–705 Regulations include statutes, administrative laws and regulations, and interpretations by courts. Notes to the presenter: Examples of outside bodies: the FASB (Financial Accounting Standards Board) and the IASB (International Accounting Standards Board) and their relation to the US SEC 3 Self-regulation in financial markets A self-regulating organization (SRO) is a nongovernmental entity that represents and regulates its members. Some independent regulators are SROs, which may have authority from a government body or from its members. SROs are similar to statutory bodies in some countries. The use of self-regulatory bodies varies among countries. SROs are not considered regulators unless they are given authority by a government body or agency. Copyright © 2014 CFA Institute 4 LOS: Describe uses of self-regulation in financial markets. Pages 705–706 Self-regulation in financial markets is intended to protect investors, instill confidence in the markets, and to enforce rules for members to ensure compliance with federal .
