Financial regulation measures are a series of laws designed to protect both the general population and organizations. Their main task is to protect investments and users of the financial system from various frauds (Amadeo, 2021). The legislation addresses three main areas in need of protection: banks, financial markets, and ordinary consumers. Such state support allows stopping too risky operations that threaten the market. These laws address all the main points that can lead to an unfavorable situation for investments and investors. Regulations require disclosure of important financial information, set rules for the exchange of markets, and deter companies from becoming monopolies (“The laws that govern,” n.d.). In addition, some laws in this area help the market in difficult situations by changing the conditions depending on the environment. Thus, these regulations are the state way to ensure market security by various methods: from direct bans to soft recommendations.
Although most of the regulatory government measures are designed to support and protect the market, they can sometimes be dangerous and contrary to ethics. This happens when government measures start to have too much influence and infiltrate the free market (Amadeo, 2021). Instead of letting the market adjust prices most efficiently, the state creates additional difficulties for companies. This situation has been repeatedly observed in the past and exists in the modern world. The very concept of active state intervention in the economy is contrary to capitalism. However, when the government, for example, forces banks to associate closely with Treasury bonds, as it did in 2013, such actions also become contrary to market ethics (Amadeo, 2021). The problem, in this case, is that the ruling structures, using the existing power, can implement their interests through regulations. Therefore, such measures to influence the market are unethical, contrary to capitalism, and reduce the efficiency of the market, decreasing its flexibility or creating vulnerabilities.
References
Amadeo, K. (2021). Financial regulations: What do they accomplish? The Balance. Web.
The laws that govern the securities industry. (n.d.). Investor.gov. Web.