Equity Investments I
Reading 36. Market Organization and Structure
Learning Outcome Statements
l. describe objectives of market regulation.
CFA Curriculum, 2020, Volume 5
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Subject 9. Market Regulation
The objectives of market regulation are to:
- control fraud. Customers may not know how to protect themselves, since the financial markets are quite complex.
- control agency problems. Financial agents often have different goals from their customers. How to effectively measure the services they provide?
- promote fairness. For example, insider trading is prohibited in most markets as it offends basic notions of fairness.
- set mutually beneficial standards. Common financial standards allow investors to compare companies easily.
- prevent undercapitalized financial firms from exploiting their investors by making excessive risky investments. Regulators generally require that financial firms maintain minimum levels of capital to reduce the probability that these firms will fail and hurt their customers.
- ensure that long-term liabilities are funded. Insurance companies and pension funds need to maintain adequate reserves to ensure they can pay their liabilities when due.
User Contributed Comments 3You need to log in first to add your comment.
basically, the exact opposite of what large banks are doing today.
Oh snap. I didnt even read this reading but I'm gonna say it's complete.
Think I can infer what it's about from the last comment.
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