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Alternatives to self regulation. - Coggle Diagram

- - - - purpose of regulation
        
        Financial market intergity
        
        Market integrity regulation aims to promote confidence in the efficiency and fairness of markets. It seeks to ensure that markets are sound, orderly and transparent. Financial market prices can be sensitive to information, and this raises the potential for misuse of information. For this reason, regulators around the world impose specific disclosure requirements (such as prospectus rules) and conduct rules (such as prohibitions on insider trading) on financial market participants. The complexity of financial products and markets, their intrinsic risks  including those due to limited information  and the detailed knowledge required to deliver efficient regulation in this area argue strongly for continued specialised regulatory arrangements.
        
        Cost effectiveness is one of the most difficult issues for regulatory cultures to come to terms with. Any form of regulation involves a natural tension between effectiveness and efficiency. Regulation can be made totally effective by simply prohibiting all actions potentially incompatible with the regulatory objective. But, by inhibiting productive activities along with the anti-social, such an approach is likely to be highly inefficient.
        
        The underlying legislative framework must be effective, including by fostering compliance through enforcement in cases where participants do not abide by the rules. However, a cost-effective regulatory system also requires:
        
        ÿ a presumption in favour of minimal regulation unless a higher level of intervention is justified
        
        Consumer Protection
        
        Consumer protection refers to the forms of regulation aimed at ensuring that retail consumers have adequate information, are treated fairly and have adequate avenues for redress. There are close links and no clear dividing line between consumer protection and market integrity regulation in retail markets since both use the same regulatory tools, namely disclosure and conduct rules. For example, prospectus requirements can promote both consumer protection and confidence in the efficiency and fairness of retail financial markets.
      - Preventative strats
- - - - When is governmemt regulation the best form of regulation
        
        • the problem is high risk, of high impact or significance, for example, a major public health and safety issue; • the community requires the certainty provided by legal sanctions; • universal application is required (or at least where the coverage of an entire industry sector or more than one industry sector is judged as necessary); • there is a systemic compliance problem with a history of intractable disputes and repeated or flagrant breaches of fair trading principles, and no possibility of effective sanctions being applied; and • existing industry bodies lack adequate coverage of industry participants, are inadequately resourced or do not have a strong regulatory commitment.
    - - PREPARING A RIS 67 While it can have a number of advantages when compared with other forms of regulation, there are also several important disadvantages associated with its use. The main advantages relate to its certainty and effectiveness because of the availability of legal sanctions. The potential drawbacks include that it may be standardised and inflexible; take significant time to make or amend; not be suitable for influencing the quality of complex services; be perceived to be difficult to understand (affecting compliance); have higher government budgetary costs and compliance costs (where it does not reflect accepted commercial practices); and provide poor access for those without means to pursue their legal rights (because of justice system costs and delays). For more information about the strengths and weaknesses of explicit government regulation, refer to appendix A.
      - This type of regulation has three main characteristics: it attempts to change the behaviour of groups or individuals by detailing how regulated entities should act; it generally relies on government inspectors and/or monitoring to detect non-compliance; and it imposes punitive sanctions, such as fines, if the regulations are not complied with. This approach establishes clear and standardised rules and can be successful in addressing well-defined and stable problems. Explicit government regulation is often considered to offer more certainty, including industry-wide coverage, and greater effectiveness compared with other forms of regulation because of the availability of legal sanctions. It is often preferred by regulators, particularly in dealing with high-impact, high-risk public issues. In some circumstances, compliance costs might be lower for legislation because of greater certainty.
- - - - An efficient regulatory system is essential to a well functioning society and economy and depends on having effective processes and institutions for making and administering regulation in all its forms. Following the Report of the Taskforce on Reducing Regulatory Burdens on Business, the Australian Government has enhanced the regulatory framework to improve the analysis applied to regulatory proposals and hence the quality of regulation.
        
        Determining whether regulation meets the dual goals of ‘effectiveness’ and ‘efficiency’ requires a structured approach to policy development that systematically evaluates costs and benefits.
        
        There a three imment modes of regulation employed by poicy makers, Direct govenrment regulation, quasi regulation, co regulation and self regulation