The breadth of regulation of commerce necessitates the use of a framework that identifies potential areas of regulation. This framework can be referenced to identify specific areas of regulation, existing and anticipated, that may affect the entity of interest.

Special issues: recognition and protection of intellectual property, privacy protection, free trade vs. trade protection, antitrust laws, etc.

Regulating financial markets is important because of the consequences to society of failure in the financial system. The consequences include financial losses to specific parties (especially small investors), an overall loss of confidence, and disruption of commerce.

The focus of regulators in financial markets includes prudential supervision, financial stability, market integrity, and economic growth among others.

Practice Question 1

The majority of securities regulations focus on protecting:

A. small investors.
B. hedge funds.
C. venture capital funds.

Correct Answer: A

Practice Question 2

One focus of regulators is regulation and monitoring of the safety and soundness of financial institutions in order to promote financial stability, reduce system-wide risks, and protect customers of financial institutions. This is referred to as:

A. prudential supervision.
B. market integrity.
C. fairness.

Correct Answer: A

Practice Question 3

Regulation of natural monopolies usually involves controlling

I. product price or industry structure.
II. the production processes used by an industry.
III. health and safety conditions in an industry.

Correct Answer: I only