The Financial Security Law is a real response to the crisis of confidence and uncertainty that surround financial markets and market mechanisms. The vote, adopted last July, is aimed at restoring investor and depositor confidence. It strengthens regulatory bodies, improves the protection of depositors and policyholders, and strengthens corporate controls and transparency.
In this regard, the law on financial security represents a certain progress for democracy, since democracy can only be fully realized in the context of broad market transparency, especially financial markets. Under the general title “financial security”, the text contains very different provisions, covering a wide range of banking, financial and insurance laws, as well as company laws. Key features and measures are presented in this article.
First, the law allows the merger of the Securities and Exchange Commission, the Financial Markets Board and the Disciplinary Board for Financial Management with the aim of creating a single regulator (AMF). The law gives it an unprecedented status as an independent state body with legal personality. This status allows him to freely recruit experienced employees from the private and public sectors, guaranteeing effective regulation.
Legal personality also allows you to directly allocate resources from financial transactions and controlled entities in the amount of about 50 million euros per year. Thus, AMF has a legal status comparable to its colleagues, which is likely to strengthen its international position. Its public nature complies with the requirements of the Market Abuse Directive, which guarantees independence from economic operators and avoids conflicts of interest.
In addition to overseeing issuers, investors, financial intermediaries, analysts, or rating agencies, he is entrusted with three missions: protecting savings; information for investors; and the smooth functioning of the market. AMF develops a general provision detailing the rights and obligations of financial players, defining the functioning of markets and financial instruments, as well as conducting an IPO, increasing capital or acquisition proposals. It controls financial transactions and information published to the public about financial instruments, ensures compliance with the obligations of people who make public savings.
Over the past twenty years, a series of events – from the Asian financial crisis to the bursting of the dotcom bubble, from the most recent global financial crisis to the debt crisis in the eurozone – have undermined investor confidence in the stock market. Nevertheless, a large number of industry and scientific studies show that it is preferable for long-term investors to invest in stocks than to maintain liquidity.
Liquidity can provide security in the short term, but in the long term, the risk of decline is represented by inflation, which can reduce the purchasing power of money. In long-term periods, equity investments generally yielded higher returns than types of investments that were considered safer, such as liquidity and government bonds, albeit with a higher risk.
There are several arguments in favor of long-term investments:
– A report for 2011, published by the World Economic Forum and a consulting firm, indicates that long-term investors are better able to use the opportunities arising from secular issues. or macroeconomic trends, such as population aging and the transition from a service-based economy to a knowledge-based economy.
– Long retention periods and long horizons are usually associated with low costs, as they often lead to a decrease in portfolio turnover. Buy / hold strategies can help avoid behavioral errors such as buying higher and selling down.
– As shareholders of the company, long-term investors can achieve positive results by improving the corporate decision-making process through more active participation in society.
– In some countries, the use of liquidity in long-term investments may provide tax advantages for capital gains.
Trapti India financial security. Experts in a 2012 document argue that capital market turmoil over the past ten years has increased the competitive advantage of the long-term investment horizon, as long-term investors can benefit from inadequate ratings in the short term during periods of increased risk aversion.