Regulatory Risk

AAA

DEFINITION of 'Regulatory Risk'

The risk that a change in laws and regulations will materially impact a security, business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape.

BREAKING DOWN 'Regulatory Risk'

For example, utilities face a significant amount of regulation in the way they operate, including the quality of infrastructure and the amount that can be charged to customers. For this reason, these companies face regulatory risk that can arise from events - such as a change in the fees they can charge - that may make operating the business more difficult.

Another type of regulatory risk would be a change by the government in the amount of margin that investment accounts are able to have. While this is an unlikely change, if it were to be changed, the impact on the stock market would be material as this would force investors to either meet the new margin requirements or sell off their margined positions.

RELATED TERMS
  1. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
  2. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  3. Systematic Risk

    The risk inherent to the entire market or entire market segment. ...
  4. Stock Market

    The market in which shares of publicly held companies are issued ...
  5. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  6. Risk

    The chance that an investment's actual return will be different ...
Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Taiwan

    Take a look at the largest Taiwan ETF: BlackRock's iShares MSCI Taiwan. Learn how investors can best apply EWT to their overall portfolio.
  2. Professionals

    Investigating The Securities Police

    Learn about the history of FINRA and how this organization protects investors.
  3. Investing Basics

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  4. Credit & Loans

    5 Signs a Reverse Mortgage Is a Bad Idea

    Here are the key situations when you should probably pass on this type of home loan.
  5. Credit & Loans

    5 Signs a Reverse Mortgage Is a Good Idea

    If these five criteria describe your situation, a reverse mortgage might be a good idea for you.
  6. Investing News

    Mexican Energy, Telecom Reforms Please Foreign Investors

    Two years into his first term, Mexican President Enrique Peña Nieto is following through on radical campaign promises he made to Mexican citizens for sweeping multi-industry reform.
  7. Credit & Loans

    Getting Government Loans For Your Small Business

    Would a government loan provide a more cost-effective way to finance your business? See whether your company qualifies for a government loan.
  8. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  9. Investing

    Top Cities Where Airbnb Is Legal Or Illegal

    Thinking of subletting your apartment on Airbnb? Make sure that you meet your city's regulations first.
  10. Fundamental Analysis

    Is India the Next Emerging Markets Superstar?

    With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP.
RELATED FAQS
  1. What are the primary risks an investor should consider when investing in the Internet ...

    There are always security risks that are unique to the Internet. Data theft poses a significant risk to the Internet sector ... Read Full Answer >>
  2. Where are the Social Security administration headquarters?

    The U.S. Social Security Administration, or SSA, is headquartered in Woodlawn, Maryland, a suburb just outside of Baltimore. ... Read Full Answer >>
  3. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  4. Is the Social Security administration a government corporation?

    The U.S. Social Security Administration (SSA) is a government agency, not a government corporation. President Franklin Roosevelt ... Read Full Answer >>
  5. What are the disclosure requirements for a private placement?

    The U.S. Securities and Exchange Commission (SEC) has set forth disclosure requirements for private placements, including ... Read Full Answer >>
  6. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!