New Regulations Will Level Playing Field for Stock Investors
New regulations will level the playing field for stock investors.
The stock market hates regulation. Many of its participants are hard-line free market advocates and believe regulation stifles innovation and adds extra costs to operations.
Thanks to years of little new in the rules governing the markets, a number of products and services are offered consumers that didn’t exist a decade ago.
For many, this has been a revolution and, for the most part, a good thing for the market.
Unfortunately, some took advantage of a laissez faire regulatory environment of the financial services industry and created products, services and partnerships that proved irresponsible.
The financial meltdown of 2007-09 can be directly tied to a financial services industry that was only concerned with generating as much profit as possible without regard to potential risk.
When the illusion of success disappeared, the financial collapse took down the global economy, casting millions out of work and out of their homes.
Yes, some of the consumers who willingly participated in this bogus economy are paying their rightful price, but many more innocents are paying too.
It is clear that our economy, not to mention the global economy, can no longer afford to be caught off guard by a financial crisis of this magnitude.
One of the repercussions of this crisis will be a financial services industry that is more tightly regulated, both in terms of the products it can offer and greater levels of transparency.
How does this benefit the stock investor?
A stronger regulatory environment that demands more transparency will mean investors will have a better picture of what the true risks are for an investment product.
Greater transparency will mean investors can make better decisions based on a more confident picture of the risks and rewards associated with an investment.
Will more regulation add to the cost of investing? Probably, but the benefits will outweigh the costs.
The stock market will not return to its robust former self until investors have confidence they are not going to be suckered into a legal scheme to enrich financial professionals.
