Markets that are not regulated by a specific regulator are governed by existing agreements between the parties involved; however, the offering process is typically regulated so that it adheres to a set of established rules and principles. They are also known as private items or private offers because the method of offering is usually private.
As they are a substitute for goods sold in public markets, they are also known as alternative market items. Section 21 of the Capital Markets (Securities) (Public Offers, Listings, and Disclosures) Regulation, 2002 outlines a list of nine requirements that must be met before issuing a private offer in Kenya.
Impact of Deregulation
Small businesses are more likely to be squeezed out of the market by larger, more established enterprises if there are no restrictions in place. Larger corporations can form monopolies and grab market dominance.
Consumers' interests may not always be served by deregulation. Banking regulations, for example, require banks to retain a certain amount of cash on hand, which helps clients who need to withdraw money.
Companies in a deregulated sector are not compelled to inform the public about how they conduct their activities. Financial industry regulations, for example, outline how publicly traded companies must publish financial statements so that investors may evaluate the business and make investment decisions.
Without government restrictions and oversight, businesses can commit fraud more easily, putting customers at risk.
Pros of Unregulated Market or Free Market Economy
Opportunity for high profit; if the market is deregulated, you can charge whatever you want for your goods. Furthermore, if your product is unique, you may gain market exclusivity. You have complete control over the market's entry and exit.
You can avoid paying taxes if the government does not monitor the market or if the market is uncontrolled. There is no tax on water, commercial real estate, or the environment. However, the local legal system determines whether it is unusual or not.
If a company does not follow government regulations, low-cost labour is available. Consider skipping ESI, PF, and other benefits to provide workers with as little money as possible.
Advantages of Free Market Economy
Free Market Economy Disadvantages
1. It is a Free Market Economy.
Profit is advantageous to business. On the other hand, companies so focused on making a profit frequently overlook the bigger picture: people are working hard to create a product. Businesses will sometimes disregard their employees to gain an advantage. Employers frequently disregard their employees' health because they must provide a high-quality product to generate more revenue.
2. When it Fails, The Consequences are Disastrous.
When a market fails, serious consequences follow. We can look no further than history for proof; two prime examples are the 2008 real estate crash and the 1930s Great Depression. The entire world was affected, not just one country. People lost their homes as well as their jobs. Some people have been able to recover, while others have required more time to heal.
How do free market economies work? Explain with the examples.
Ans: The majority of countries' economies are mixed, with both private and public sectors. Different countries have varying degrees of government involvement, private-sector regulation, and social programmes that encourage widespread participation in the market economy.
A command economy, which is a type of planned economy in which resources are distributed and centralised, differs from a free-market economy. People with more resources typically have more influence in these types of economies because they have government officials' ears (and often the control).
Unquestionably, some consumer data must be controlled to protect consumers from misleading advertising. However, this should not be interpreted as a complete prohibition on product marketing. Advertising is critical for ensuring transparency and preventing producers from covering up problems.
Free Market Economy
Before deciding whether to invest in or avoid unregulated products, investors must understand their investment purpose, risk tolerance, and available investment products. We strongly advise you to consult a financial advisor before investing in either of the two types of investments.
We must abandon the notion that all financial products must be regulated to advance our capital markets. Instead, we must clearly distinguish between a private and a public offer and allow both to coexist.