Types of Financial and Security Regulations

The activities of companies that hold or trade on securities engage in various activities while adhering to the law. The Securities Act of 1933, clarify a security is any stock, bond, treasury stock, note, debenture, evidence of indebtedness, fractional undivided interest in gas, oil, or other mineral rights, collateral-trust certificate, certificate of participation or interest in any profit-sharing agreement, transferable share, investment contract, preorganization certificate or subscription, certificate of deposit for a security, or voting-trust certificate. These are some of the financial and security regulations.

Federal law determines insider trading as illegal because it leaves those who do not have inside information at a disadvantage. Officers, directors, or important shareholders of the company have the means to access essential confidential information in the company hence they have a great advantage over other members of the company. Others may still be ignorant when the officers, directors, or important shareholders of the company are selling shares to avoid future losses from a fall in prices because they are the first to know when the company makes irrecoverable losses or loses vital contracts. The law allows the corporation or a shareholder to sue the person who engages in insider trading on behalf of the organization to recover the short-swing profits.

The 1977 foreign corrupt practices act FCPA) was made part of securities exchange act that was enacted in 1934. FCPA curbs falsity of the financial statements by companies. The 1970s investigations by Watergate Special Prosecutor and Securities and Exchange Commission (SEC) found out that many companies that were getting US licenses or signing contracts with foreign official were bribing these officials. These companies manipulated their financial statements to hide the bribe payments to save their images. Congress had to do mitigate abuses of financial reporting by creating the FCPA that prevents the issuer, “any director, employee, officer, or agent” of an issuer or a stockholder acting as a legal representative of the issuer from using either their interstate commerce or mails corruptly to offer, promise or pay anything of value to foreign political parties, foreign officials, or candidates with the aim of convincing the official to influence the government to favor the US corporation.

Dodd-frank Act is a financial regulation amendment in the US that was signed in 2010 by Obama. The act improves the financial stability in the US because it enhances transparency and accountability financial system. The law was developed to ends institutions that feel do not respect the rights of consumers because they have the pride to think that they are too important to be brought down, protects US taxpayer through ending bailouts and protects consumers from experiencing financial services practices that are abusive.
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