What's The Difference: Law Vs Regulation?

Laws and regulations are two distinct concepts. Laws are enacted by governments and carry legal consequences for those who break them, including potential jail time. On the other hand, regulations are created by industry bodies or individual companies, and while they are not laws per se, they are often based on laws and carry their own consequences for violators. So, what happens when you break a regulation? Are the consequences similar to breaking a law? Let's explore this intriguing topic and decipher the differences between regulations and laws, and the repercussions of violating them.

Rules vs. laws: definitions

Laws are passed by governments and are enforceable by the courts and police. If someone breaks a law, they are likely to be punished by the state, for example, by being fined or imprisoned. Laws are made at a national level and apply to everyone in the country. For example, in the US, laws are passed by both houses of the US Congress and then signed by the president.

Regulations are rules that are created by agencies to enforce laws. They are more specific than laws and explain how a law will be enforced and what needs to be done to comply with it. Regulations are created through a rule-making process, which includes a notice of proposed rule-making and a public comment period. Once a final rule is issued, it has the force of law because it is implementing a law. Regulations can be comprised of many individual rules. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act included nearly 400 rule mandates.

Rules are created by industry bodies or individual companies and are more specific than regulations. They are often created to help an organisation comply with relevant regulations. If someone breaks a rule, they might be fined or lose access to certain services, but they will not be punished by the state.

Guidance is supplemental material published by an agency that helps clarify existing rules. It is not subject to rule-making procedures, so there is no proposal or comment period. Guidance is not binding, and organisations cannot be punished for failing to follow it. However, it can be used as an example of best practices for complying with laws and regulations.

Who creates rules and laws?

The creation of laws and rules is a complex process that varies across different political systems and contexts. Here is an overview of who creates rules and laws:

Laws:

• In democratic systems, laws are typically created by a country's legislative body, which may consist of elected representatives from different political parties. For example, in the United States, laws are passed by Congress, while in other countries, it may be called a Parliament or another name.
• The process of creating laws usually involves proposing legislation, debating it, and then voting on it in the legislative body. If a majority of members support the legislation, it can be enacted into law.
• In some countries, the head of state, such as a President or Monarch, may also have the power to create laws or influence the law-making process. For example, they might propose new laws or have the power to veto or approve legislation passed by the legislative body.
• In federal systems like the United States, laws can be created at both the national and state levels, with state laws typically focusing on issues relevant to that particular state.
• The judicial branch of government, which includes courts and judges, also plays a crucial role in interpreting and applying laws. While they don't create laws directly, their rulings can shape how laws are understood and enforced.

Rules:

• Rules are often created by industry bodies or individual companies to govern their specific operations or practices. For example, a financial institution might have rules regarding banking procedures or a technology company might have rules about product development.
• Rules can also be created by regulatory bodies or standard-setting organizations that establish guidelines for specific industries or sectors. These rules aim to ensure consistency, safety, or ethical practices within an industry.
• In some cases, international organizations or agreements can also influence the creation of rules that apply across multiple countries or regions. These rules might relate to trade, environmental standards, or other cross-border issues.

It is important to note that the distinction between laws and rules can vary depending on the context and the specific political or legal system in question.

What happens if you break a rule?

Rules are created by individual companies or industry bodies, and breaking them is distinct from breaking the law. Breaking a rule may result in a fine or losing access to certain services, but it will not result in jail time. On the other hand, laws are made by governments, and breaking them can lead to imprisonment.

If you break a rule, the consequences will depend on the specific rule and the context in which it was broken. Here are some possible scenarios and outcomes:

• Industry rules—These are rules set by industry bodies or organizations. For example, in the financial industry, there are rules governing how banks operate. Breaking these rules could result in fines, restrictions on business operations, or loss of access to certain services provided by the industry body.
• Company rules—Each company has its own set of rules, also known as policies, that employees are expected to follow. Violating company rules could lead to disciplinary action, which could include verbal or written warnings, suspension, or even termination of employment.
• Contractual rules—Contracts often contain specific rules that outline the expectations and obligations of the parties involved. Breaking a contractual rule could result in legal consequences, such as breach of contract claims, financial penalties, or termination of the contract.
• Regulatory rules—Regulatory rules are typically enforced by government agencies and are usually industry-specific. For instance, the Electronic Code of Federal Regulations in the US outlines various regulations, and violating them can lead to civil or administrative penalties, including fines or injunctions.

It is important to note that the consequences of breaking a rule can vary depending on the severity of the violation, the impact on others, and any previous history of non-compliance. In some cases, breaking a rule may also lead to reputational damage or loss of trust, which can have indirect consequences on an individual's or organization's opportunities and relationships.

What happens if you break a law?

Laws are made by governments, and if you break a law, you will likely face legal ramifications that can have a significant impact on your life. These consequences can range from minor fines to long-term imprisonment, and can affect a person's personal and professional life for years to come.

When an individual is convicted of a criminal offense, there are three primary punishments that they will typically be issued: community service, a fine, or imprisonment. The type of punishment will depend on the severity and nature of the crime committed. For instance, minor misdemeanor offenses, like traffic violations, often result in community service or a fine, while more serious offenses, such as burglary, assault, drug-related offenses, robbery, or murder, frequently lead to incarceration.

The period of incarceration can vary significantly, from a few years for first-time non-violent offenders to life sentences for repeat and violent offenders. In some cases, individuals convicted of murder may even be sentenced to the death penalty.

In addition to legal consequences, breaking the law can also lead to personal and professional repercussions. For example, a person may have trouble finding a job or housing and may face social stigma and discrimination due to their criminal record.

Therefore, understanding the legal ramifications of breaking the law is crucial. These consequences serve as a deterrent to criminal behavior, hold criminals accountable for their actions, and ensure that justice is served.

How to succeed in regulated industries

Breaking a regulation is not the same as breaking the law. Laws are made by governments, and breaking them can often lead to jail time. On the other hand, regulations are created by industry bodies or individual companies, and breaking them might lead to fines or a loss of access to certain services.

• Understand the distinction between rules and laws: Be clear about the difference between industry rules and actual laws. Rules can often be bent or circumvented, while breaking laws can have more serious consequences.
• Build a strong legal team: Hire a General Counsel and legal team who understand the nuances between rules and laws in your industry. Ensure they are problem solvers and support innovation and rule-breaking, rather than a conservative approach that stifles new ideas.
• Foster a culture of innovation: Encourage a company culture that embraces change, takes risks, and pushes boundaries. Celebrate rule breakers and their behaviours to reinforce this culture.
• Nurture a culture of care: Invest in your employees and create a sense of belonging. This will lead to better customer service and a more unified company.
• Integrate the customer into your core values: Understand your customers' wants and needs and integrate them into your company values. Personalised communications can be very effective in regulated industries, helping you to connect with customers on a deeper level.
• Communicate regularly: Hold regular meetings with cross-functional stakeholders to discuss emerging issues and share progress on innovations. This provides a space to address concerns calmly and collaboratively.
• Track the competition: Keep an eye on how other organisations in your industry are innovating and pushing boundaries. This can help stakeholders become more comfortable with your innovation agenda.
• Be patient: Innovating in regulated industries takes time, and setbacks are common. Don't be discouraged; focus on understanding innovation, its risks, and its benefits in the context of your industry.

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