Regulations are rules enforced by regulators with the primary objectives of ensuring orderly capital markets and protecting investors from unfair and illegal business practices. Regulations come from several sources. The major regulatory changes are most often the result of legislation coming from Congress. The regulators are involved in the deliberations but they do not act alone. However regulators do have authority to issue regulations as well as long as they are in the context of existing law. Regulatory Compliance is to be in conformance with relevant regulations. Breach of these regulations can carry fines, result in loss of reputation and the revocation of the right to be employed in the securities industry, and ultimately lead to the loss of business, civil penalties etc.
All firms providing financial services are governed by regulations but the number of regulations governing them and the extent of control, disclosures etc is dictated by main business/activities of the firm. Regulation can be geography specific i.e. Any Investment bank operating in European Union has to comply by MiFID; Client specific i.e. Suitability of a client to invest in a particular asset class; industry specific i.e. BASEL II which is applicable to all Bank holding companies etc. The list of regulations is huge and so is the list of regulatory fines and legal cases against firms and individuals for non-compliance.
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