Objectives and forms of government regulation of the financial market


The real market economy is characterized by economic freedom, mobility of resources, free access to information, and competition. However, in market relations, including the finance market, there are always areas where free competition mechanism fails, and there is a need for government regulation of the relationship. This applies, above all, the regulation of monetary relations, the organization of money, securities. Objective absolute necessity of state intervention in an external process - FX turnover, international transactions in securities.

A market economy requires constant ongoing state antitrust and anti-inflation policy. The major areas of economic activity, the regulatory function of the state is the development, adoption and implementation of the organization of the financial, economic and banking laws.

Given the global principles and standards of the stock market should provide an effective mechanism for the circulation of securities, the right conditions for investment and promote economic development. The stock market is not possible without such actors as investors - individuals and entities who have spare cash and want to invest in securities for certain income.

Free money also attracted con artists who use them to master the long-established schemes and new opportunities provided by the stock market. Under the fraud in the stock market is the acquisition of another property (the acquisition of title to property) or damage to property of the Stock market fraud or breach of trust.

Known financial fraud schemes that are used in the new environment in the creation and development of the stock market. This, in particular, involve (extortion) money citizens and investors misleading representations on the basis of the rapid enrichment. Examples of fraud include:

• classic scheme "Ponzi scheme" - making a profit at the expense of new customers. Such operations are often disguised as "promising" investment proposals;

• diagram safe investment - investment offers a low-risk and high income. Typically, it offers non-existent, but very popular (and sometimes exotic) projects: investments in marketable securities of banks, telecommunications companies, and investment in the field of precious metals, coconut plantations, etc. In these commercials risk deliberately distorted by comparison with something safe, such as a bank deposit. If the proposed investment in securities, they generally do not exist (unregistered appropriate authority);

• imposition of information - making a profit from the sale of securities, the demand for which was formed through the dissemination of false information. In such schemes, investors are invited to urgently buy a stock, market value of which will soon be growing. This scheme is used with little-known securities, which may be registered in the prescribed manner.

Characteristic of entrepreneurs using the scheme described above, are: the calculation that can pay dividends or income from the amounts received from new investors, the issuer or of the absence or lack of real services which make a profit, promises (guarantees) favorably and quickly return the deposited amount.

Detection and termination of such business entities as a result of the possible control and supervision regulatory authorities. In particular, the phase of the (registration) of a business entity must pay attention to the possibility of identifying those founders, providing seed capital, confirmation of its submission, the corresponding registration of the securities issue.

At the stage of the analysis is an important element of advertising companies, the implementation of public awareness of the financial and economic activities, the study of sources of income, licenses and compliance with the object and purpose of the enterprise, providing information with reference to reliable sources for investment objects. At the stage of the reorganization or winding up of the analysis shall be reason for termination of activities required by law to inform the parties and the public, payment, availability declared.

Legal regulation of the financial market of Ukraine is ordering interaction and protecting the interests of its members by establishing certain rules, criteria, and standards regarding the relations on financial resources.

State-legal regulation of the financial market in Ukraine is a set of state bodies that make up the system state of regulation in this area. Between these bodies there is a certain hierarchy and branch division. In the current system of state-legal regulation of the financial market of Ukraine includes, in particular, the following: a legislative body - the Verkhovna Rada of Ukraine, bodies of central executive power - the President of Ukraine, the Cabinet of Ministers, Ministry of Finance, Ministry of Economy of Ukraine and others. In addition to the important role played by the institutions of the system, which are not the legislative or executive authority that is accountable to the Parliament, for example, the National Bank of Ukraine, etc., as well as local governments, mainly local government administration (their competence include the registration of legal persons or registration of foreign investments, etc.) and the judicial authority, including the commercial courts.

Virtually none of these bodies of state legal regulation does not provide ordering relations solely on the financial market of Ukraine. They regulate all or some aspects of the interaction in this market, and streamline the relations in this sphere of the economy, along with the other spheres. For example, the registration of the share issue, and corporate bonds are governed by laws that are taken by the Supreme Rada of Ukraine, and the orders of the Ministry of Finance of Ukraine; granting permits for brokering commercial banks regulated by a joint document of the National Bank of Ukraine and the Ministry of Finance of Ukraine, foreign exchange regulation of securities is carried out according acts of the Cabinet of Ministers of Ukraine and the National Bank of Ukraine on the movement of securities across the border subject to the general document of the National Bank of Ukraine and the State Customs Committee of Ukraine relations transformation of state enterprises into joint stock companies are governed by the laws of the Verkhovna Rada of Ukraine, Decrees of the President of Ukraine, regulations of the State Property Fund etc.

Feature state-legal regulation is that it is carried out by public bodies and is largely based on the application of the principle of subordination and coercion. In most countries there are special bodies of central executive power, which collectively referred to as the Securities Commission. Some of the functions that are usually performed by such commissions, in Ukraine by the State Commission on Securities and Stock Market of Ukraine.

Keep in mind that the current domestic market is concerned about the financial sector. Now we are talking about new approaches to the management of this segment of the economy.

This problem should be viewed from the point of view of domestic features, because in Ukraine already developed a certain system of functioning of the market, are state agencies for its regulation. However, Parliament's adoption of the Law "On Financial Services and State Regulation of Financial Services" demonstrates a desire to transform the current development model. Given the above and prepared the initial draft of the Concept of regulation of financial services markets in Ukraine, which should be the basis on the basis of which we can talk about creating national model financial regulation. As noted in the introduction of the project concept, the effective supervision of the market of financial services is a key element of a strong economic environment in which the financial system plays a major role in the making of payments and reallocation of capital.

The purpose of public authorities for supervision of the financial market should be confident that financial institutions operate efficiently and safely, that they have sufficient capital and reserves to prevent risks arising from their business. Effective supervision of the financial market is an important tool, which, together with an effective macroeconomic policy is the foundation of financial stability in the country. Effective regulation of the market should ensure the implementation of public policy for the development of the financial sector. It must be, above all, a catalyst for economic growth, one of the factors for the realization of national interests. Government regulation and supervision of financial markets should help to make the financial sector in a strong financial intermediary.

Regulation and supervision of the financial sector in Ukraine should be based on international financial standards of principle. Among them: the Basic Principles for Effective Banking Supervision of the Basel Committee on Banking Regulations (BIS) Objectives and Principles of Securities Regulation (Report of the International Organization of Securities Commissions (IOSCO) Key principles of insurance activities (IAIS).

The three main objectives for the Regulation of Financial Services are: the protection of investors, ensuring that markets are fair, efficient and transparent, reducing systemic risk. These three objectives are closely related and in some ways the same. Many of the requirements that help to ensure a fair, efficient and transparent markets also provide investor protection and help to reduce systemic risk. Similarly, many of the activities that reduce systemic risk, provide for the protection of the investor.

The main features of effective regulation of financial markets promote sustainable economic growth, such. First, there should be no barriers to entry and exit from markets and financial systems. Second, the markets should be open to a wide range of participants who meet specified eligibility criteria. Third, developing its policy, regulatory authorities should consider the impact of compliance. Fourth, anyone who takes on the specific financial obligations, then they are subject to the same regulatory burden.

The draft Concept also reflected the principles relating to the regulator, self-regulatory guidelines, the principles of enforcement of regulation of financial services markets, the principles of cooperation in the regulation, the principles of the schemes and collective investment principles for market intermediaries.

Worldwide financial and stock markets are the most regulated segment of the economy. In the Ukraine, the financial market is not perfectly resolved. The focus of this process is to be done to protect the rights of investors. But in the Securities Commission are not enough resources to work through the issues of cooperation between investors and financial intermediaries outside the stock market.

The purpose of state regulation of financial markets in Ukraine is specified in Article 19 of the Law of Ukraine "On Financial Services and State Regulation of Financial Services."

The composition and distribution of functions between the regulators in the national stock markets of different countries vary considerably, mainly for historical reasons and because of the peculiarities of the national systems of law.



The organization of state regulation and supervision is carried out on the following principles.

1. Obligations of state regulation and supervision should be clear and objectively defined. An effective system of regulation and supervision should include a clear definition of the responsibilities and goals of each organ of state regulation and supervision.

2. Regulatory agencies and supervision should be independent in their actions and accountable in the exercise of their functions and powers. Each of these regulatory agencies and oversight must have operational independence and adequate resources.

3. Regulatory agencies and supervisors should have adequate powers, adequate resources, the ability to perform its functions and exercise the powers specifically authorized to consider the relevant financial institutions to the current legislation.

4. Need to clearly define what activities are allowed to carry out financial institutions, licensed and have been the object of observation.

The licensing authority must have the right to establish the necessary criteria and reject applications for licenses from the financial institutions that do not meet the standards. The licensing process must, at a minimum, include an assessment of the structure of ownership of a financial institution, the level of management, internal control, financial condition, including its capital base, and in cases where the owner or connected person of the financial institution is a foreign financial institution, the prior consent supervisory authority of the country of origin.

Body of state regulation and supervision should be able to:

• consider and reject any offer of transferable significant share of ownership or controlling interest of existing financial institutions;

• establish criteria for the regulation of large acquisitions or investments of financial institutions;

• establish criteria designed to avoid the creation of a separate division or branch of the financial institution undue risk to the entire financial activities of the organization or hampered efficient supervision of financial institutions;

• establish appropriate minimum capital adequacy of financial institutions to reduce the risks that are financial institutions, as well as define the components of capital, bearing in mind the ability of financial institutions to cover the losses.

Body of state regulation and supervision must have at its disposal to:

• collecting, evaluating and analyzing prudential reports and statistical information from financial institutions;

• Independent evaluation of observational information obtained by the external auditors.

An important element in the regulation and supervision is the ability of the state regulation and supervision to exercise its powers in relation to a group of financial institutions on a consolidated basis.

Regulatory agencies and oversight should apply clear and consistent regulatory and supervisory process. Acceptable legal framework necessary for the implementation of the regulation and supervision, including the license conditions and the procedure for issuing licenses to carry out the activities of financial institutions. Exercise of powers for regulation and supervision should be based on an assessment of policies, practices and procedures of financial institutions to provide loans and investment location, everyday management of credit and investment portfolios.

Regulatory agencies and supervisors should ensure that financial institutions have also used:

• policies, mechanisms and procedures for evaluating the quality of assets, adequacy of reserves for bad debt identified and general reserves for losses and loss

• management information system, allowing officials to identify the financial institution's risk concentrations within the credit and investment portfolios

• the necessary mechanisms and procedures in place to identify, monitor and control in the implementation of international lending and investment operations of the risk of insolvency and transfer risk, as well as provide the necessary reserves to cover the following risks:

• mechanisms and procedures by which to evaluate, monitor and effectively control market risks;

• a mechanism for risk management (including appropriate oversight by the owners and management of the financial institution) that allows you to identify, assess, monitor and control all other material risks and, where necessary, have available capital to cover those risks;

• internal control relevant to the nature and scope of their activities and should provide a clear procedure for the delegation of authority, responsibility and allocation of functions to bind the name of the financial institution, the payment of its funds and the reporting of its assets and liabilities;

• ensuring the preservation of its assets and liabilities;

• appropriate internal or external audit, and the rules provide validation for compliance with such types of controls;

• adequate policies, practices and procedures, including clear rules of the "know your customer" that ensure adherence to high ethical and professional standards, preventing the intentional or reckless use of financial institutions for criminal purposes;

• Financial accounting and reporting, which allows the body of state regulation and supervision to get reliable information about the financial condition of the financial institutions, the profitability of its operations and monitor publications on a regular basis financial statements that truly reflect its financial condition.

Regulatory agencies and supervisors should:

• have the authority to adopt, if necessary, specific requirements for capital to cover potential market risk;

• establish the potential limits, limiting exposure and loss;

• have an effective means of monitoring the provision of loans or investments or related affiliates and related measures - risk control and reduce the threat of their occurrence;

• Maintain regular contact with the management of the financial institution and a good understanding of the operations of the financial institution;

• develop specific forms and methods of supervision, in particular observations "on the spot" and distance supervision.