Functional Regulation

Functional regulation is just that: regulation based on the function of the good or service (rather than of the company). The idea is that one company might have multiple departments that should have multiple regulators overseeing what they’re doing. Otherwise, more general oversight might be more of a “show” than real oversight.

For instance, banks sell many different types of products, each of which could be (and should be) regulated by different agencies. The Fed is supposed to be overseeing banks to protect consumers, which would mean looking at what the decision-makers are doing, while people from the Federal Deposit Insurance Corporation (FDIC) focus on overseeing bankers working with deposits, and the Securities and Exchange Commission (SEC) focuses on overseeing the brokerage side of the bank.