Introduction
Financial regulation is the system where all organizations carrying out financial activities in a country or region are monitored by an independent body. Since there are many risks associated with self regulation, establishment of regulations ensures that organizations perform their duties according to a certain code of ethics and regulations. Many governments have introduced financial regulations after the occurrence of many scandals in the financial systems which have led to the collapse of large companies. Several financial crises have affected the global economies over the last two years and measures have been taken to avoid a repeat of the same by establishing adequate regulations. Since the great depression there have been many regulations established to ensure a sound financial system. This paper discuses the regulation of financial activities in several countries. Some examples of regulatory bodies that have been created will also be discussed. The need for regulations will be discussed and an example of the financial regulations will be provided. Sarbanes-Oxley Act will be discussed as one of the financial regulations which have been introduced in the financial systems.
Financial regulating bodies
Several bodies and institutions have been created to regulate the financial systems in the world. These institutions carry out their operations domestically but others have external jurisdictions. To regulate the financial systems in US, the Federal Reserve System (the Fed) was established in 1913. The Fed was established to act as a central bank of the US and to regulate the financial systems in the country. The structures of the Fed were later amended to accommodate and regulate the economic systems after the great depression. The great depression occurred in the 1930s and led to failure of many institutions (United States Government Accountability Office, pg. 2). The Financial Services Authority (FSA) is an independent financial regulatory body based in UK. FISA has been provided powers by the laws of UK (Financial services Act 1986). The institution reduced self regulation of the financial institutions in the United Kingdom especially after the increase in the number of scandals in the 1990s. IMF is an international body that regulates the financial activities to the member countries.
The need for financial regulations
New financial products have been introduced in the financial markets and there is need to establish new regulations to govern the changes. The increase in globalization has caused the emergence of new risks which require new regulations to manage them. Several companies have been involved in fraudulence activities leading to collapse of large public and private companies. There is a high rate of change in the conditions in the global market placed and the legal structures must be changed regularly to ensure all financial activities are well monitored (Eatwell, pg. 2).
The introduction of the financial regulations is done to restore the market confidence with the financial systems. When financial scandals happen, many investors lack confidence with the financial systems and they may fear investing in some companies. The introduction of the regulations assures the investors that their money will be safe and that they will not lose it due to fraudulent activities. The regulations are introduced with the aim of promoting public awareness. The government would like the public to be aware of the financial systems in the country. It is the interest of the government to ensure that the citizens are aware of the financial systems operating in the country. Since it is the role of the government to protect the consumers, the introduction of the regulations is one of the ways of achieving that. When there are financial crisis the consumers lose a lot. The government establishes the regulations to protect the interest of the consumers. The financial regulations are also introduced to reduce financial crimes. Criminals use financial systems to benefit from the weaknesses of the laws created to regulate the activities in the market. The financial regulations are reviewed and amended to accommodate changes in the economy and to remove any loopholes that may be used by criminals (Carvajal, Dodd, Moore, Nier, Tower and Zanforlin, pg 5).
The International Monetary Fund (IMF) was established to regulate the financial systems of banks and non-bank financial institutions. The organization is an international body that oversees the financial activities in the global markets. The IMF issues directives to government leaders of many countries about regulating their financial systems to ensure a sound economy is in operation. The banking sector has been monitored closely since it is a very sensitive financial system that can cause great losses if not properly controlled. There are many financial brisks which face the financial systems of many countries and strict measures have been introduced to safeguard the interests of the people. IMF issues guidelines towards establishment of the appropriate financial systems which will regulate the economies of member countries but does not dictate the implementation. However, the implementation of the guidelines is essential for the especially when a country is faced with financial crisis. Clear and stringent rules have been established by the members of the IMF to ensure all members adhere to the regulations. An effective framework for the compliance has been created to provide the leaders with guidelines of implementing appropriate strategies of financial regulation (Carvajal, Dodd, Moore, Nier, Tower and Zanforlin, pg 8).
The recent financial crisis which was caused by deregulation of the sub prime mortgage industry in the United States led to the massive default by many borrowers. This caused collapse of many large companies. The banking sector was the worst affected due to the default for the loans borrowed by the sub prime borrowers. The need for financial regulation has increased to protect the interest of all stakeholders involved in the financial systems of the global economies. After the collapse of many organizations due to poor financial regulations, high rates of unemployment have been encountered in the US economy, mortgage prices have reduced drastically and the rate of savings has reduced. Since the great depression of the 1930s the global economies had experienced good economic conditions until the occurrence of the financial crisis in the year 2007-2008. a few crisis have been experienced in between the two periods but these have had minimal impacts on the global economies. Several financial regulations have been established by different governments to ensure their economies operate appropriately. For example in US the Sarbanes-Oxley Act was introduced to regulate the fantail reporting through creation of efficient internal control systems in companies (Office of Economic Analysis, U.S., pg. 1).
Sarbanes-Oxley Act (SOX)
The Sarbanes-Oxley Act was introduced in 2002 to regulate the public companies. The laws were established to cater for the increasing scandals in many companies. Several companies had failed due to the poor systems of internal controls and there was need to introduce regulations to the management, auditors and accountants to ensure they create a good system of internal controls. Such companies as WorldCom, Enron, AIG and others had encountered financial scandals which involved the management, auditors and accountants. The SOX was established to ensure the management creates an effective system of internal controls about the financial reports issued by a company (Office of Economic Analysis, U.S., pg. 1).
Conclusion
Financial regulations are established to protect the interests of the various stakeholders involved in the activities of an organization. The global economies have faced economic meltdown caused by deregulation of the sub prime financial sector in US. The consequences of the deregulated have been experienced all over the world and this provides the need for the existence of appropriate regulations in all financial systems. Several laws have been established to regulate the financial activities of companies operating in the specific economic systems. The Fed and the FISA are some of the institutions which have been established to regulate the financial activities. The SOX Act was established in US to solve the problem of the scandals which had increased in US. IMF is involved in regulating the global financial systems. Government leaders should liaise with financial experts to ensure the appropriate regulations are in operation. Compliance with the regulations created by IMF should be made mandatory to ensure no ripple effects from poor financial systems by one country affects other countries. Member countries should be committed to achieve a good system of financial regulations.
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.