If a market is “free,” it means there are no rules or oversight. Imagine a soccer game with no rules...it might turn into a bloody, headbutting massacre. Er, wait...they can use their hands, because there are no rules.
A regulated market has some rules. Enforcement helps, or else everyone can just ignore the rules. Most often, we think of governments regulating markets, but industries and labor groups could also set rules. And with all of the shameless lobbying happening...wining and dining politicians...it’s really not a stretch to say that there are groups regulating the market through the government in the U.S. today.
What kind of rules? Any kind. Child labor laws are rules. Minimum wage is a rule. Not being a monopolistic bully is a rule. Consumer protections are rules...food and drug requirements, safety standards, environmental and social reparations, reserve requirements for banks...they’re all over the place. It can be easy to forget some things are rules because we're so used to them. The EPA, the SEC, the FDA, the DEA...all rule-setters.
Back in the day, wealthy people sitting pretty at the top of industries were the ones setting the rules for their own industries. But that was a long time ago.
Supporters of regulated markets think of it like sports games: market mechanisms are great, but only if everyone’s playing fairly. Like in soccer games: no hands, and no bloody headbutting. Fair enough. Opposers of regulated markets think some rules go too far, and dampen market mechanisms. Those who don’t want to follow the rules...like wanting to do illegal drugs, or sell them...will have to go to the black market. And who enforces things in the black market? Whoever has the most force...literally. That’s why black markets can be violent, specifically the very profitable drug trade.
Related or Semi-related Video
Finance: What are Exempt Securities and ...2 Views
Finance a la shmoop what are exempt securities and exempt transactions? well
the first thing that should strike you is that in both of these cases they are [Man on stage giving a speech]
no longer emp'd okay crickets eggs empt.. no okay all right we try you know no
extra charge here we try all right well a security is exempt from regulation if
it lives outside of or doesn't need to meet the various registration
requirements of the Securities Act of 1933 right like it's exempt from
regulation and remember that Act it was built to protect average joe's and
Josie's from farmland to urban land so that fast-talking city slickers didn't
get them to invest their hard-earned money in things that had no more value [Average Joe and Josie's money transfers to city slickers]
than "the blue sky above them" remember that judge said that on
the blue sky laws yeah it's that act well if you want to raise public money
from American investors in America well your security is by default not exempt
from regulation and you have to go through all the dance steps demanded by
the regulators to raise money here so what kind of security would live outside
of the 33 act? well something that is insured by the government our government
if it's insured by a Somalian warlord.com well then that doesn't count it's [Somalian soldiers appears]
not exempt well the quick list of normally exempt securities here we go
it's these government or government institutions banks or depository
institutions insurance companies authorized to do business in the state
railroads and public utility securities options or warrant and there for big
boys and girls only employee benefit plans equipment trust certificates and
nonprofit corporations like intentionally nonprofit ones not like
just bad companies who never make a real profit all right well the idea here
generally is that these securities are less of a risk for investors so the SEC
doesn't really have to get involved you can just invest in them and
you know things normally are boringly just fine all right well the same vibe [Man discussing securities]
applies to exempt transactions an exempt transaction is one that doesn't
have to meet all the registration requirements of the Uniform Securities
Act or the SEC and the idea here is that every transaction creates a whole lot of
paperwork and there are just some cases where all the hassle isn't needed as [Paper work stacks up on man's desk]
long as you're trading small amounts of stocks or doing small investments in
known entities that are generally considered legal well then your
transaction is considered exempt and then there's a whole lot less paperwork [Paperwork disappears and man jumps up]
which is a good thing and yeah that's worth celebrating
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