The need for integrity when people trade is what necessitates the setting up of rules and regulations. Banks, the stock exchange, lending institutions and any other person in the financial sector must take these regulations seriously. The regulations have been set up mainly with the client of financial institutions at heart. The rules, however, do not focus on the clients only but they also ensure that the environment in which these securities institutions trade in is improved for better performance. In most countries and states, the government single handedly oversees these regulations implementation. There are some other places, however, that you will find that the implementation of these regulations is left to a non-governmental organization.
It is, however, very important for any client that is engaging in any financial activities that involve securities to understand the working of these regulations. Normally, there are three things that the financial and securities regulations should do for the clients. As a client, you may want to know what these regulations really cover or how they enable business to be done well. Below are the three main objectives of having financial and securities regulations.
A company or an individual can have many possession but what stands out as the most important is money. For this reason, you have to have some trust in the financial institution you invest money as shares or make deposits to. Strict measures have been put in place though the regulations to ensure that there is trust in the banks or securities institutions by the clients. This means that for a bank or an institution trading in shares or securities, it must have passed several integrity tests. The other objective of financial and securities regulations is to ensure that the market is stable. Finance and securities institutions are like any other business and may be forced to close down suddenly. During such times, the clients and the economy of the state could be destabilized. One should, however, not be worried as the regulations cover for such. Every institution is monitored in its operations and any new development must be reported beforehand. If the new move is likely to alter the smooth running of the other institutions or the entire sector, it is not allowed. This way, the sector is kept stable.
The last and very important objective of the financial and securities regulations is to ensure that the client is at all times safe. Several factors may lead to the client being unsafe. Low interest being given on a client’s savings or getting an excessively high interest rate on a loan cold be examples. Finance institutions have been limited to certain boundaries which they cannot go beyond by these institutions.