Lessons Learned from Years with Services

A Primer on Financial Securities Law

Securities are debt and personal property that has monetary worth that can be sold in order to share profits. Many securities are purchased from an initial public offering, or IPO. Securities are governed by a considerable number of laws. This is because financial companies have been able to manipulate the stock market in their favor by selling risky securities. Financial firms greatly mishandled securities, which lead to the 2008 financial crisis in the United States.

Five Laws That Regulate Securities.

Securities sold to the public cannot misrepresent the truth or be sold fraudulently. In the midst of the Great Depression and a year after enacting The Securities Act of 1933, Congress created the Securities and Exchange Commission. Under the Securities Exchange Act of 1934, the SEC has the power to broadly regulate securities, including taking disciplinary action against individuals who fraudulently sell them on the New York Stock Exchange, the Chicago Board of Options, and NASDAQ.

The Securities Exchange Act of 1934 not only established the SEC. Insider trading is prohibited by the Act, which says that an individual cannot buy or sell a security if all information about the security has not been disclosed to the public. In a further effort to promote disclosure within the financial industry, Congress passed the Investment Company Act of 1940. The Act requires that companies, including mutual funds, share their policies regarding the overall financial health of the company each time the company’s stock is sold. The Act also stipulates a company must disclose investment activity with each selling of stock.

More recent legislation

The SEC registers people, too. Congress passed the Investment advisers Act of 1940 to mandate that investment advisers receiving compensation for their securities advice had to registered with the SEC.Although initially enacted by Congress more than a half century ago, the Act was amended in 1996 and 2010 to only include advisers who have more than $100 million in assets.

Passed in 2002, the Sarbanes-Oxley Act extended the reach of regulation by pushing for more corporate responsibility by creating a Public Company Accounting Oversight Board to monitor the practices of auditors.

Maybe the most radical change to financial regulations since the 1940s was the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The act would protect consumers, regulate credit ratings, and call for greater transparency, among other stipulations.

The future of financial regulations might be complicated by the latest onslaught of technology. Take Bitcoin. Bitcoin is a cryptocurrency, or a type of electronic cash, that can be difficult to legislate. The cryptocurrency is not easily compatible with our current financial system, according to Chris Brummer, director of Georgetown’s Institute of International Economic Law. Brummer says that it is not possible to identify the origins of one-third of Initial Coin Offerings, making keeping track of fraud impossible.

Governments will need new technologies to regulate the popularity of cryptocurrencies such as Bitcoin.

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