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Types of Financial and Security Regulations

There are laws that govern institutions that deal with securities. The Securities Act of 1933, states that securities are any stock, bond, treasury stock, note, debenture, fractional undivided interest in gas, oil, or other mineral rights, collateral-trust certificate, evidence of indebtedness, 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. The officers, directors, or important shareholders of a company are more advantaged than other stakeholders because they are allowed to access information that is crucial and confidential in 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’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 foreign corrupt practices act (FCPA) of 1997 was incorporated into the securities exchange act that was formed in 1934. Falsified financial statements by an organization is an unlawful act under FCPA. 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. The companies had to hide the payments that they make in bribe in multiple financial statements to maintain great images to the public. 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 enhances transparency and accountability financial system of the US by improving its financial stability. 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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