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Classifications of Regulations and Regulators

Classifications of Regulations and Regulators

The regulators in the market can broadly be classified into those governed by legislative bodies and those produced by the market voluntarily. Let’s look at the types of regulators and their corresponding types of regulations.

Types of Regulators and Regulations

1. Government Agencies

Government-based regulators can be established departments and agencies or sets of independent regulators controlled by the government. Government regulators have a legal authority to approve and implement the regulations within their jurisdiction.

Government agencies are always backed by the courts, which help interpret regulations and rules. Courts expound on the allowed regulatory practice aside from administering punishment in case of any violations.

Classification of Government Regulations

The regulations supported by the government can be categorized into:

  • Statutes: Laws approved by legislative institutions such as the parliament.
  • Administrative regulations or laws: They are the rules passed by government agencies or other regulators.
  • Judicial law: Exposition of the courts on the existing regulations.

2. Independent Regulators

Independent regulators make rules based on their authority and goals (objectives). The authority of the independent regulators often comes from their recognition and the power given to them by a legislative statute or a government department or agency. However, they remain non-governmental institutions.

The contrast between the independent regulators and the government regulators is that the latter does not receive any funding from the government and their decision-making autonomy is limited. The advantage of an autonomous regulation is that they are resistant to political control and pressure and therefore, they can achieve their aims with little hindrance.

3. Self-regulatory Bodies

Self-regulatory institutions are the private organizations that represent and control their members. Just like the independent regulators, they are insulated from political influence and pressures. However, they face pressure from their members.

Self-regulatory bodies obtain their power from their constituent members who agree to operate as per an organization’s rules and standards and their implementation. However, the authority of these organizations is not attached to the rule of law. Instead, it has the power to expel the members who breach the regulations. Moreover, the self-regulatory organizations set the required minimum standards by putting up conditions for membership.

Question

Which one of the following is least likely to be a feature of self-regulatory organizations?

  1. They are independent regulators.
  2. They are mandated to carry out government policies.
  3. They represent and regulate their members.

Solution

The correct answer is B.

Self-regulating bodies do not carry out government policies but are somewhat independent of the government and resistant to political influences and pressures.

Reading 8: Economics of Regulation

LOS 8 (d) Describe classifications of regulations and regulators.

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