Short answers, pulled from the story.
Financial regulation is a broad set of policies applied to the financial sector in most jurisdictions. It exists primarily because of two features of finance: systemic risk, meaning failures of financial firms carry public interest consequences, and information asymmetry between institutions and retail clients.
The Code of Hammurabi, written around 1700 BCE, contained standards for lending and the regulation of interest. This makes it one of the earliest recorded attempts to impose rules on financial activity.
The first recorded ban on short selling was enacted by Dutch authorities in 1610. This made the Dutch pioneers in regulating trading practices in the early modern period.
Financial regulators typically pursue market confidence, financial stability, consumer protection, reduction of financial crime, and regulation of foreign participation. Each objective addresses a different kind of risk within the financial system.
During the medieval period in Europe, Church restrictions on usury, the charging of interest on loans, heavily influenced financial regulation. These restrictions shaped the development of early merchant banks in Italy, which evolved partly to move money across borders without violating those prohibitions.
Financial law comprises three categories: financial regulation, market practices, and case law. Financial regulation forms one pillar alongside the conventions of market participants and the body of judicial decisions interpreting both.