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What Happens When a Financial Service Provider Has Multiple Regulatory Authorities

There are a number of governmental agencies in order to regulate financial markets and companies. These agencies each have a particular range of responsibilities and obligations that allow them to act separately while they function to reach similar aims.

While the regulatory imbalance between authorities and financial businesses continues, experts state that governments acknowledge the value of the sector and are attempting to keep a balance between both parties.

financial service provider regulations

The experts’ views differ on the success and even on the necessity for some of these entities, which were all created with special purposes and will probably still be demanded in the future. Depending on the country, this duty may belong to the ministries and other state organizations. 

For instance, for countries with a developed economy, like the United States, there are several organizations for this purpose.

The regulation of the financial system aims, on the one hand, to protect citizens, with rules that place limits on bank interest rates and other similar controls, but at the same time, these rules at the global level seek to avoid a financial collapse at the macro level. which is disastrous for the world, as we saw in 2008.

This is the reason why the economic indicators of international organizations that serve as an endorsement or measurement of the performance of world financial actors are so powerful so that we all have an objective vision of the operation and performance of great economic powers whose success or failure usually affect an entire country.

The Methods of Financial Regulation

There are four methods of financial supervision currently applied across the world. These include functional regulation, institutional or regulation by silos, twin peaks regulation and single or unified regulation. 

The decision of a specific regulatory structure depends on various circumstances, some of which may be individual to a particular country. Each regulator has its own infrastructure, culture and means of doing business. They will have different methods and mechanisms. Some may have global standards accreditation while others may not.

Examples of Multiple Regulatory Authorities

In the United States, financial service providers are mostly governed by a pair of state commissions. They both have the same purposes: guaranteeing that traders have the correct information to make choices and preventing fraud and abuse.

Derivatives markets have their private governing bodies, however, they correspond to the form and bureaucracy of regulation of the equity and bond markets. Organizations may not have familiar titles, but their roles will be similar. 

For example, the deriv broker review shows that the company is regulated by four multiple financial regulators from different jurisdictions. 

If we discuss Kenya’s example, the country currently accepts a dual model, where different sectors are governed by different regulators. For example, the insurance sector is regulated by Insurance Regulatory Authority, the banking sector and capital markets are monitored by the Central Bank of Kenya and the societies sector is supervised by Sacco Societies Regulatory Authority. 

The same goes for Germany - different financial service providers are regulated by different organizational units.
In India, there are several agencies committed to the duty of supervision and administration of financial market members. 

The Necessity for Regulatory Authorities

Both financial service providers and investors need flexible and reliable markets to operate. Besides, recent regulation attempts after the financial crisis are intended for improving the failures of deregulation. However, it is important to carry on searching for the right regulations.

Despite being relatively new, the financial industry is progressing fast enough that someday it might settle how people collect, trade and spend their money. This suggestion arises, while the world, from Kenya to Germany, is estimating what kind of protection the financial service industry requires.

When the financial industry is all developed, customers will require measures, which will protect them from misleading, abusing their personal details or losing their money.