Financial services regulation law is the body of law that governs financial activities and transactions.
Banking, credit cards, futures, stock markets, and all other kinds of financial transactions are a part of financial services regulation law.
The purpose of the laws is to ensure a sound economy and fairness and transparency in individual financial transactions.
Laws exist at the federal and state levels to regulate how financial transactions occur.
What Is Financial Services Regulation Law?
Financial service regulation law is the collection of laws and regulations that govern how monetary transactions occur.
It is the body of laws overseeing savings, lending, investing, credit, and other kinds of financial activity.
Laws aim to keep the economy stable and provide equitable opportunities to participate in economic activity.
Financial services regulation law encompasses all of the laws and regulations that financial institutions must follow as they lend, manage, and exchange money and monetary commodities.
Sources of Financial Services Regulation Law
Financial services regulation laws are primarily federal laws.
However, all states have financial regulations that institutions must comply with concurrently.
The federal regulation system is less centralized in the United States than it is in other countries.
Financial services regulation attorneys need to understand the complex system of regulatory agencies at both the federal and state levels that may create rules that apply to their clients.
Jurisdictional issues, as well as issues surrounding federal preemption of state law, may all come into play for lawyers in the field.
What Institutions Are Subject to Financial Services Regulations and Laws?
All of the following institutions must comply with financial services regulation laws:
- Insurance companies
- Investment firms
- Credit unions
- Credit card companies
Attorneys who practice in the field may represent or advise any kind of financial institution.
Financial Services Regulations Come From Both State and Federal Sources
Financial services regulate the creation, operation, and dissolution of financial operations.
For example, a federal or state authority must charter a bank.
Inquiries into the fitness of a bank include the bank’s proposed capital and its ability to meet regulations.
Banks must understand what regulations apply. A large part of banking regulations is required disclosures.
Disclosures are what information about the bank’s operations they must make public and in what form.
Major Financial Services Regulations Law
Major financial services laws include:
Bank Secrecy Act of 1970
The Bank Secrecy Act of 1970 is also called the Currency and Foreign Transactions Reporting Act.
The law requires banks to report transactions that exceed $10,000.
They must also report other suspicious activities.
The purpose of the law is to detect various financial crimes.
Right to Privacy Act
The Right to Privacy Act governs how banks can use customer information.
Banks must tell customers how they use their information.
Customers have the choice to opt out of disclosure of their personal information.
Financial institutions may track whether a person’s financial activities are consistent with their business ventures.
Community Reinvestment Act of 1977
Because of the Community Reinvestment Act of 1977, a bank must invest in the community it serves.
An institution that is subject to the Act must publish notice of their reinvestment efforts.
Truth in Savings Act
Federal law requires certain, uniform disclosures for banks.
Each bank must disclose its fees and the interest that it receives for investing.
The Truth in Savings Act was passed in 1991.
Expedited Funds Availability Act
Passed in 1987, the Expedited Funds Availability Act determines how long a bank can place a hold on a deposited check.
The bank must make the finances accessible to the customer after the prescribed period.
A bank may have less stringent standards, but they must at least comply with minimum accessibility requirements.
Equal Credit Opportunity Act
Lenders must evaluate creditors based only on their creditworthiness.
They may not consider the creditor’s race, religion, or marital status.
The Equal Credit Opportunity Act was passed in 1974.
Dodd-Frank Wall Street and Consumer Protection Act of 2010
The Dodd-Frank Wall Street and Consumer Protection Act is a recent and significant piece of financial regulation.
The purpose of the law is to prevent the financial collapse of major economic systems.
The Act allows the government to split financial institutions that are deemed so large that they are institutional risks.
Critics say that the Act is too overbearing to allow for international economic competitiveness.
Major Financial Services Regulatory Institutions
Major banking regulation government institutions include:
U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission creates federal securities regulations.
These regulations impact stock exchanges.
The Securities Exchange Act of 1934 created the Commission.
Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority is a private corporation.
It allows for self-regulation for participating institutions.
Commodities Future Tradition Commission
Created in 1974, the Commodities Future Trading Commission regulates futures markets.
The purpose of the Commission is to prevent fraud and provide a central system for regulation and control.
Federal Reserve System
The Federal Reserve System is the central bank of the United States.
The Federal Reserve Act created the Federal Reserve System to avoid sudden financial swings and plan for price stability.
Avoiding bank panics and stabilizing long-term interest rates are other functions of the Federal Reserve.
The actions of the Federal Reserve are often controversial and debated publicly.
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation provides deposit insurance for customers of participating banking institutions.
A person who deposits money can have an assurance that their funds are accessible even if the bank becomes insolvent.
The FDIC began in 1933. Banks pay dues to participate in the insurance program.
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency is part of the United States Treasury.
The Office charters banks and regulates them.
National Credit Union Administration
The National Credit Union Administration is the government agency that primarily oversees credit unions.
The administration is responsible for deposit insurance for more than 100 million credit union accounts throughout the United States.
The administration is governed by a three-member board and divided into three regional offices.
What Do Financial Services Regulation Lawyers Do?
Financial services regulation lawyers provide advice and counsel for financial institutions.
They also provide government oversight to ensure that financial institutions comply with laws.
A financial institution needs to know what regulations apply to them.
Because United States economic regulations are piecemeal throughout many different government departments and laws passed over time, knowing what regulations apply is not a simple question.
Attorneys guide their clients through the regulations process whether it is assisting them with chartering a new institution or complying with regulations on an ongoing basis.
When conflicts arise, attorneys work to mediate those conflicts to represent the best interests of their clients.
The area of financial services is largely regulatory.
Most of the work takes the form of advising clients about what they need to do and taking those actions on the client’s behalf.
Lawyers must understand and help their clients implement a large amount of laws and regulations.
Although there may be regulatory hearings, financial services regulation is not a litigation-based practice of law.
Lawyers have ample time to prepare for each hearing, and questioning witnesses in tense courtroom moments is few and far between.
Reading, interpreting, and implementing compliance regulations are the primary tasks for financial services regulation lawyers.
Who Practices Financial Services Regulation Law?
The attorneys who practice financial services regulation law know banking systems.
Becoming a financial services regulation attorney requires grasping a large volume of regulations from a variety of sources.
The very function of an attorney in the field is to understand and interpret these laws for their clients.
Attorneys in the field have a thorough knowledge of banking laws and regulations.
Because both the federal government and the states regulate financial transactions, attorneys in the field are spread throughout the United States.
They tend to congregate in political centers and the locations of the headquarters of financial institutions.
Most attorneys work for the government, as in-house counsel or as counsel for hire through a large or mid-sized law firm.
Why Practice Financial Services Regulation Law?
Specializing in financial services regulation law provides several advantages.
Most financial services regulation lawyers work either as in-house counsel or have only a small number of clients.
Attorneys don’t have to worry about attracting and retaining clients daily.
Attorneys enjoy relatively stable working hours.
While deadlines exist, most regulatory compliance takes place methodically over some time.
For attorneys wanting career stability, both working for the government or working for a private institution may provide the right career balance.
Finding the Right Fit in Financial Services Regulation
Financial services regulation law is tremendously consequential throughout the economy.
Attorneys in the field are a part of securing stability for the clients and the entire economy.
Financial service attorneys perform complex and important work as they create, interpret, and implement financial laws on behalf of regulators and their clients.