In the past countries found it desirable to organize their regulatory system around specialist agencies that had separate responsibility for insurance, banking, and securities. However, in the recent times preference seems to have shifted from the distinct regulatory agencies toward unified regulatory agencies. This has been informed by the change that has been witnessed in the United State and United Kingdom financial services industry. Today unlike in the past firm in this industry are generally fewer but larger, and providing comparably more varied services that they used to in the past, something that has been attributed to globalization. Despite these and other changes in the international regulatory framework, it is ironical that the regulatory structure and system tasked with overseeing the US financial service industry has not.  Today, just as two or three years ago, separate and specialized agencies still watch over distinct functions - insurance, banking, futures, and securities - and while certain regulators are tasked with overseeing complex organizations at holding company level, they normally depend on functional regulators for required information concerning the goings-on of subsidiaries.

In the United States, which was similar to the UK before the latter embarked on consolidation of its regulatory agencies, securities and banking sectors are regulated in two levels, namely; federal and state level. For the banking sectors, banking activities are mainly regulated by Federal Reserve Bank, while securities activities are under the careful eye of the Securities Exchange Commission (SEC).  Futures on the other had are primarily regulated by the Commodity and Futures, Trading Commission (CFTC). Both securities and futures exchanges and dealers are also under the oversight of self-regulatory organizations operating under the jurisdictions of either SEC or CFTC. There are also state regulators who offer oversight of insurance, securities, and banking.             

It is incumbent upon any country to have a financial service sector that is effective and efficient, this is because such a financial service sectors goes along way in promoting economic growth of a country through the optimal allocation of financial capital. However the achievement of effectiveness and efficient not only in financial service sector but any other sector might involve various approaches. That is the reason when authorities in countries like the United Kingdom, Australia, Netherlands, and France are consolidating their regulatory systems while others like the United States are still insisting on sticking to their hold structure. Various reasons might be advanced to explain that disconnect.

Thought described as "functional" the US regulatory system can also be described as "complex". "Functional" because the financial service or product is regulated in regard to their functions, irrespective of who participate in the service delivery or provide the provision of those products. "Complex" because of the complexity that is involve in situation where firms are engaged in the offering of several financial services or products.  This complexity of firms together with the services and product that they are involved in has brought a new round of risk (credit risk, liquidity risk, market risk, reputational risk, legal risk, insurance/actuarial risk, and operational risk) in the industry.

Unlike in the UK and Australia where regulatory consolidation has been successfully undertaken, the multiplicity of regulatory agencies that characterize US financial regulatory system are best known for duplicating and overlapping one another's functions, something that has brought about undesirable consequences. They have also been found to engage from time to time in jurisdictional disputes that no doubt have had the effect of distracting them from their primary mandate. It is under this backdrop that reformers have been seeking to eliminate or mitigate when they call for the consolidation of the regulatory agencies. In realization of the need to make the regulatory framework more effective and efficient, countries have embarked on a number of initiative that they hope will improve their regulating function in the financial service industry. In this regard we have the European Union Financial Service Action Plan and the Basel Accord, both have of which have been found to have an immense effect on the firms and regulators in the United States.   

Generally, all regulatory systems are designed to protect investors thereby assisting in building their confidence in the market; to ensure that markets are not only fair but also efficient and transparent; to decrease systemic risk; to protect the financial service business from misconduct (like money laundering) by some consumers; and to maintain confidence in the entire financial system.  Addressing the communication imbalance that at time exists between consumers on one side and financial service businesses on the other has also been an important objective of regulation in almost all jurisdictions.     

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Every time regulatory system succeeds in controlling market malpractices like insider trading, money laundering, unlawful and illegal disclosures, it advances in reap and bounds towards its objective of building consumer and investor confidence in the respective market. Investors on the other hand will always prefer investing in markets that are well regulated through a number of well-known and tested tools such as clear and unambiguous codes of conducts and the Chinese wall among others. Coupled with efficient regulation of disclosure in information, these tools can go along way in creating a more transparent, efficient, and far market. As for systemic risk mitigation or elimination, the Chinese wall has been able to fight contagion every time sections of the market have collapsed. The US government enforcement of legal rules has also assisted immensely in promoting and maintaining consumer and investors confidence in the market. The strictness in this enforcement stems from the realization that rules that are not backed by strict enforcement are more or less like teeth-less tiger. In instilling a sense of fairness in the market the Unites States has strived to increase consumer protection through a number of regulatory actions.    

While the United States has rebuffed all attempts to have it consolidate its regulatory system, the united Kingdom and a host of other countries have gone ahead to have their financial regulatory structures, mainly in response to the changes in the industry. In spite of the absence of fundamental change in the entire US financial regulatory structure, there have been a number of changes that has mainly focused in their regulatory approaches. It all started in the 1980s, when bank regulators decided to cooperate in order to infuse efficiency and effectiveness in their supervision by focusing more on areas that they considered to be of much risk. Afterward we saw SEC, most probably in response to changes that had been effected to European Union requirements, issuing rules to guide the consolidation of a number of securities firms operating internationally on a voluntary basis. Regulators have also upped their efforts towards pleading with the government to effect changes that will see a degree of consolidation in the financial services regulation.

In this regard they have used both national and international forum as their platform. Through to their efforts a number of changes have been effected toward that direction. One such change is the Gramm-Leach-Bliley Act (GLBA), which indirectly recognized blurred line that separate the sectors like banking, insurance, and securities among other. This recognition is better seen from the way it codified regulatory decisions that had previously been made to deal with the sectors separately. What this recognition by GLBA has done is to enlarge the type and the number of competitors facing individual firms, both internationally and also domestically. This therefore means that similar happenings (consolidation) abroad could not only affect the competitive position of the financial services institutions in the United States but also the ability of regulators to achieve their respective objectives. Before this statute there was the amendment of the 1933 Home Owner's Loan Acts that subjected companies controlling or owning a saving association to OTC (over the counter) supervision. In this regime majority of the thrift holding companies were created as 'exempt' and allowed to operate various activities like insurance, securities and a number of other non-financial activities. This was to be expanded by the GLBA. Some of the change that GLBA make to that piece of legislation was curtailment of the exempt status to those that met the combination of the following conditions; the organization had to a thrift holding company on the date of passing of that statute (4th may 1999), or transformed to one under a pending application in OTC on or before that particular date. Because of that GLBA can be said to have redefined the exempt thrift requirement on a holding company.

However the Market Reform Act of 1990 marked the real beginning of SEC supervisory activities resigned to assessing the soundness and the safety of securities activities at either holding or consolidated company level. It also permitted SEC to gather information from broker-dealers who were registered concerning activities and also financial condition of their respective holding company and material unregulated associate. Effort toward merging SEC and CFTC and consolidation of banking regulators which has been proposed by a good number of players in the industry is a step in the way to go. Another step toward the creation of a federal insurance regulator in place of self-regulatory institution structure for securities and futures is another positive step which is consistent with the world trend toward consolidation of financial services regulatory system.       

This does not however mean that the United States regulatory structure has not worked, it has to some level, otherwise the government would have responded to the call of consolidation much earlier. Both the strength and the vitality that has come to define the US financial structure are a further testimony that it has not complete failed. However some stakeholders have questioned the rationale of keeping an old and fragmented system in the face of all the changes that have been witnessed in the financial services sectors within and out of the United States. They strongly belief that with the complexity and the size of today's financial firms, majority of which have consolidated in order to better manage their risk, requires a unified body that cut across all the individual financial services sectors - insurance, banking, futures, and securities.

I also belief that besides a certain degree of consolidation right people, policies, procedures, and policies are also needed for the system perform to the optimum. 

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