MEANING AND TYPES OF REGULATORY AGENCIES
Meaning: Regulatory agencies of financial institutions are agencies set up by the government to regulate the activities of financial markets such as money market, capital market, capital market and the stock exchange.
Financial regulation: is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. This may be handled by either a government or non – government organization. Financial regulation has also influenced the structure of banking sectors, by decreasing borrowing costs and increasing the variety of financial products available.
Aims of regulation
The objectives of financial regulators are usually:
- Market confidence: To maintain confidence in the financial system.
- Financial stability: Contributing to the protection and enhancement of stability of the financial system.
- Consumer protection: Securing the appropriate degree of protection for consumers.
- Reduction of financial crime: reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime.
Structure of supervision:
Acts empower organizations, government or non – government, to monitor activities and enforce actions. There are various setups and combinations in place for the financial regulatory structure around the globe.
Supervision of stock exchange: Exchange acts ensure that trading on the exchange is conducted in a proper manner. Most prominent the pricing process, execution and settlement of trades, direct and efficient trade monitoring.
Supervision of listed companies: Financial regulators ensure that listed companies and market participants comply with various regulations under the trading acts. The trading acts demand that listed companies publish regular financial reports, ad hoc notifications or director’s dealings. Whereas market participants are required to publish major shareholder notifications. The objective of monitoring compliance by listed companies with their disclosure requirements is to ensure that investors have access to essential and adequate information for making an informed assessment of listed companies and their securities.
Supervision of investment management:
Asset management supervision or investment acts ensures the frictionless operation of those vehicles.
Supervision of banks and financial services providers: Banking acts lays down rules for hanks which they have to observe when they are being established and when they are carrying >n their business. These rules are designed to prevent unwelcome developments that might disrupt the smooth functioning of the banking system. Thus ensuring a strong and efficient banking system.
The functions and significance are:
- To evaluate the performance of the capital market in relation to the economic growth in Nigeria;
- To examine the operations of the Nigerian capital market;
- To examine the rate at which new stocks are issued on the capital market.
- To make recommendations as to how the operations of the market could be improve to boost economic growth and development of Nigeria.
The major agencies established to regulate these financial markets are the central banks of Nigeria (CBN), the Nigerian Deposit Insurance Corporation ( ND1C ) and the Security and Exchange Commission (SEC).
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