Important legislation affecting investment banks and

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: rough investing in mutual or pension funds. Various laws protect investors against abuses such as insider trading, lack of disclosure, outright malfeasance, and breach of fiduciary responsibilities. Important legislation affecting investment banks and mutual funds includes the Securities Acts of 1933 and 1934 and the Investment Company Act of 1940. As with consumer protection legislation, compliance with these acts can impose a net regulatory burden on FIs. Entry Regulation The entry and activities of FIs are also regulated. Increasing or decreasing the cost of entry into a financial sector affects the profitability of firms already competing in that industry. Thus, the industries heavily protected against new entrants by high direct costs (e.g., through capital contribution) and high indirect costs (e.g., by restricting individuals who can establish FIs) of entry produce bigger profits for existing firms than those in which entry is relatively easy. In addition, regulations define the scope of permitted activities under a given charter. The broader the set of financial service activities permitted under a given charter, the more valuab...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online