The rules and regulations that are implemented will most certainly be even more onerous than before thereby increasing the regulatory cost of a smaller new entrant -making it less attractive for a competitor to enter the market. Consequently bigger established firms are given an advantage as they would have a greater capacity to absorb increased regulatory cost or lobby regulators in their favour.
Ironically more regulation does not make investors safer it:
- Lulls the investor into a false sense of security under the delusion that some nameless, faceless government bureaucrat will protect them; thereby making them complacent and neglectful of conducting their own due diligence.
- Limits the number of participants or options the investor has and limits their ability to discipline errant service providers by moving their investment dollars elsewhere.
- Serves to place the regulator and bureaucrats in privileged positions to defend or destroy a market player or potential entrant solely at their discretion for political or personal reasons.