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Essential Financial and Security Regulations

Multiple laws control institutions that handle securities. 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. A variety of financial and security regulations are discussed below.

The federal law prohibits insider trading because it creates unfairness to those who do not have inside information. 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. Prices of shares may fall in the future if the company makes huge losses or losses key contracts, but other people may find out later after the officers, directors, or important shareholders of the company has sold their shares because they can get the information before the rest of the people. The law’s penalty for insider trading is to allow the corporation or a shareholder to sue the person who is part of the insider trading in the capacity 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 focuses on false financial statements that some organizations file. An investigation was done by Watergate Special Prosecutor and Securities and Exchange Commission (SEC) in theb1970s, and it established that many companies were bribing to get licenses for US companies from foreign officials or induce them to get into contacts. The companies had to maintain a good reputation to the public by hiding bribe payments in several financial statements. FCPA was established by the congress control abuses of financial reporting by creating the FCPA to stop the issuer, “any director, employee, officer, or agent” of an issuer or a stockholder acting as the insured legally 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 wall act is a consumer protection amendment act from the financial regulations of 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. It also protects US taxpayer through ending bailouts, protects consumers from experiencing abusive financial services practices and ends institutions that feel that they cannot end no matter how they treat consumers.

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