Copyright

Regulatory Agencies: Definition, Role & Impact on Business

Regulatory Agencies: Definition, Role & Impact on Business
Coming up next: Representative Money: Definition & Overview

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:02 What Are Regulatory Agencies?
  • 0:17 The Role of Regulatory…
  • 1:14 Implementing Laws
  • 3:00 Enforcing Laws
  • 5:27 Impact on Business
  • 5:55 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Shawn Grimsley
Few business activities are not subject to the watchful eye of regulators. In this lesson, you'll learn about regulatory agencies, including their role and impact on business. A short quiz follows the lesson.

What Are Regulatory Agencies?

A regulatory agency is a governmental body that is created by a legislature to implement and enforce specific laws. An agency has quasi-legislative functions, executive functions, and judicial functions.

The Role of Regulatory Agencies

If you own a business, you probably know it is subject to a cornucopia of laws. Your business is subject to laws that govern social and economic matters, including income taxation, payroll taxation, environmental laws, occupational health and safety laws, real estate law, employment laws, criminal laws, and laws that are specifically related to your particular industry, such as insurance or transportation. The list can go on and on. So, what does this have to do with regulatory agencies?

Regulatory agencies serve two primary functions in government: they implement laws and they enforce laws. Regulations are the means by which a regulatory agency implements laws enacted by the legislature. You can think of regulations as formal rules based upon the laws enacted by a legislature that govern specific social or economic activities.

Implementing Laws

Regulatory agencies use a specific procedure to create and implement regulations. We'll use the federal process as an example:

1. Advance notice

An agency that is about to start drafting new regulations will publish advance notice of its proposed rulemaking in the Federal Register, which is available to the public and usually monitored by industry experts to stay informed of proposed changes in regulations or proposed new regulations.

2. Proposed regulation

The regulatory agency will draft the proposed regulations to fulfill the requirements of the law upon which the regulation is based. For example, if a new law is passed by Congress that limits water pollution produced by a business, the agency will develop regulations that carefully outline the limits of pollution, how the limits are measured, reporting requirements, enforcement powers vested in the agency, and penalties the agency is entitled to impose under the law.

3. Public comments

The proposed regulations are published and the public is invited to comment. It's not unusual for industry leaders and interest groups to comment in an attempt to modify the rules to advance their particular interests.

4. Review of comments

The agency will review the public comments and may or may not make any changes based upon them.

5. Final regulation

The completed regulation is published in the Federal Register and will eventually be added to the Code of Federal Regulations, which is essentially a list of all the federal regulations, broken up into titles and chapters.

6. Implementation

The regulation is implemented, or made effective, and enforcement commences.

Enforcing Laws

Regulatory enforcement is the other primary role filled by regulatory agencies. Agencies have a responsibility to monitor businesses to ensure they are complying with regulations. Agencies vary on how they perform their enforcement responsibilities, but we can take a look at a generalized process:

1. Investigation

If the agency has reason to believe that a business has violated its regulations, the agency will commence an investigation. The investigation may include interviewing relevant witnesses and reviewing documents. Some investigations may utilize scientific testing, such as environmental investigations to determine the level of pollution spewing out of a factory's smokestack. The agency will give the business a chance to respond to the allegations. The response is usually presented in writing with any supporting documentation.

2. Decision

The agency will make a decision, demand any corrective action if necessary, and impose any penalty that it deems appropriate that it is authorized to impose by law.

3. Appeal

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create An Account
Support