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# There are three necessary prerequisites for effective self-regulation

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Intern
Joined: 31 Oct 2022
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Concentration: Entrepreneurship, Technology
GMAT Focus 1:
705 Q86 V85 DI84
Intern
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Location: Spain
Concentration: Entrepreneurship, Technology
GMAT Focus 1:
705 Q86 V85 DI84
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Re: There are three necessary prerequisites for effective self-regulation [#permalink]
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ramiav wrote:

Intern
Joined: 31 Oct 2022
Posts: 21
Own Kudos [?]: 15 [0]
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Location: Spain
Concentration: Entrepreneurship, Technology
GMAT Focus 1:
705 Q86 V85 DI84
Re: There are three necessary prerequisites for effective self-regulation [#permalink]
The ones that are now, are the rights,
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There are three necessary prerequisites for effective self-regulation [#permalink]
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Explanation

­
Q1: The passage suggests that self-regulation would fail if which of the following were to occur in a stock exchange?

Explanation

A) is mentioned in the passage as a potential consequence of a failure to curb abuses by member-brokers. A decrease in trading volume would deter investors and lower profits for all members, supporting the motivation for self-regulation. Therefore, this option is not a reason for self-regulation to fail.

B) aligns with the passage's emphasis on diversity and checks and balances within the governing body. If a small group dominates, it could disrupt the balance and potentially lead to a failure of self-regulation. This is a plausible reason for self-regulation to fail.

C) The passage suggests that brokers will regulate themselves effectively within a system of checks and balances. If member-brokers outside the governing body band together to defend their common interests, it does not necessarily imply a failure of self-regulation.

D) is not directly discussed in the passage as a factor influencing self-regulation. It relates more to investor perceptions rather than the internal dynamics of self-regulation within the stock exchange.

E) aligns with the concept of consensual decision-making and checks and balances mentioned in the passage. Allowing members to question decisions may contribute to a system that harmonizes conflicting interests, supporting effective self-regulation.