Financial Regulation: An Overview

3. Leveraged and Inverse Exchange-Traded Funds (ETFs): These securities were registered and approved by the SEC and are extensions of credit as defined by the Fed. However, the Fed did not opine on leveraged or inverse ETFs in the SEC registration process. Thus, a chasm in the regulatory environment needs to be filled.

4. Insurance: Insurance is regulated on a state-by-state basis. However, many financial products have complex security-like structures. Just ask anyone who dealt with American International Group(AIG). The question is going to be whether or not to place federal oversight on the insurance industry

5. Hedge Funds and Private Equity Funds: These operate outside of the realm of regulation. The funds and managers are not subject to either of the 40 Acts. There will be pressure to bring these operators and their fund structures under the auspices of the SEC. Unfortunately, an attempt to regulate this industry fell on deaf ears in Congress several years ago just as the financial bubble was gaining steam.

The lists I provided above are not exhaustive. The problems are far more complex and pervasive. No matter what solutions are enacted on Capitol Hill, I can ensure you that they will not be comprehensive, and smart minds will figure out other ways to arbitrage the new system.

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