DEFINITION of 'Functional Regulation'
A concept stating that a company with a specific business should be supervised and reviewed by the proper regulating body. Functional regulation is there to ensure that the most qualified and knowledgeable people are overseeing the daily functions of a specialized field.
BREAKING DOWN 'Functional Regulation'
For example, ideally an insurance company would be supervised by state insurance commissioners, whereas sellers or underwriters of securities would be supervised and regulated by the Securities And Exchange Commission (SEC).