Control of Global Business – Legal Questions and Tendencies

This paper examines the impact of regulation on market competition and market performances. It analyses the importance of strict financial regulation for a well performing economy. Heavy regulation decreases market flexibility, vital in the financial sector and decreases the possibility of competition. In a rigid legal environment economic actors will be drawn to the possibility of avoiding legal rules, and operate in a informal manner. At the same time regulation is necessary to enable financial stability, market integrity and confidence. This aspects are very important in transition countries which are on the way to implement and accept the modern market mechanism which are replacing state economy. The paper discusses the legal tendencies in regulating the financial sector in EU, the benchmark for Croatian legislation. In order to understand the scope and to be able to advocate this legislation and institutions a sight on its roots and development in US is also laid down. In spite of the outmost goal of transparency the European legislation is rather complicated and reveals more the interests of biggest stakeholders and professional rent seeking groups than genuine public and small investor’s expectation. In assessing concrete legal solutions, European directives are so far the only international model of financial supervision in a predominantly national regulatory environment. The question about its positive effects inducing economic growth at the top although intricate on such level of abstraction is not yet too confirmed. It is not about bundle of legislation but its nature and pace of implementation that will gradually induce confidence and investment. In order to achieve that open and right questions are to be publicly advocated rather than premature and anticipating statements. The question posed is if regulation is a core factor in good financial and overall economic performance in countries around the world, or is it only a trend in EU and transition countries