Financial regulation refers to the rules and laws that govern how financial institutions, like banks and investment firms, operate. These regulations are designed to protect consumers, ensure fair markets, and maintain the stability of the financial system. By overseeing activities such as lending, trading, and investment practices, regulators aim to prevent fraud and reduce the risk of financial crises. Regulatory bodies, such as the Securities and Exchange Commission (SEC) and the Federal Reserve, play a crucial role in enforcing these rules. They monitor financial institutions to ensure compliance and can impose penalties for violations. Ultimately, effective financial regulation helps build trust in the economy and supports sustainable growth.