Multiple laws control institutions that handle 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.
It is illegal under federal law to engage in insider trading because you will be unfair to those who cannot access 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. They can sell their shares to avoid losses from future price fall if they learn about losses or the company has lost key contracts while others are still in the dark. 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 foreign corrupt practices act (FCPA) of 1997 was incorporated into the securities exchange act that was formed in 1934. FCPA focuses on false financial statements that some organizations file. 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.
The federal government of the US amended the financial regulation and created the dodd-frank act that Obama signed in 2010. 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.