CHP 3: Regulation

Question 1

List the main functions of the regulator

Answer 1

SERVICE

Setting sanctions
Enforcing regulations
Reviewing and influencing government policy
Vetting and registering firms and individuals
Investigating breaches
Checking management and conduct of providers
Educating consumers and the public

Question 2

What actions can the regulator take to reduce asymmetries of information?

Answer 2

SPIDER CC

Selling practices regulated
Price controls imposed
Insider trading prevented
Disclosure of understandable information
Educating consumers
Restricting knowledge to publicly available

Consumer cooling off period
Chinese walls established

Question 3

What are the aims of regulation?

Answer 3

GRIP

Give confidence in the system
Reduce crime
Inefficiencies in market corrected
Protect consumers

Question 4

What are the direct and indirect costs of regulation

Answer 4

Direct
- Cost of administration
- Cost of compliance from firms being regulated

Indirect (C PAIR)
-Competition reduced
-Professionalism undermined
-Alteration of consumer behaviour
-Innovation reduced
-Reduction in market efficiencies to protect consumers