Essential Financial and Security Regulations
There are laws that govern institutions that deal with securities. Under Securities Act of 1933, 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, investment contract, transferable share, 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. 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 organization or a person can sue the person who has participated in insider trading on behalf of the organization and recover the short-swing profits as a penalty by the law.
The 1977 foreign corrupt practices act FCPA) was made part of securities exchange act that was enacted 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. These companies manipulated their financial statements to hide the bribe payments to save their images. 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.