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The Key Legislation That Governs the Financial Securities Industry

Securities are debt and personal property that has monetary worth that can be sold in order to share profits. Many securities are purchased from an initial public offering, or IPO. Securites are regulated by numerous laws. Regulations are strict to prevent corporations from buying and selling securities that are dicey on the Exchange. Financial firms greatly mishandled securities, which lead to the 2008 financial crisis in the United States.

Know These Five Laws That Regulate Securities.

As stated in the Securities Act of 1933, the public must be sold securities that have been properly vetted. In the midst of the Great Depression and a year after enacting The Securities Act of 1933, Congress created the Securities and Exchange Commission. The SEC not only governs securities but it also can take legal action against individuals who misrepresent securities on the various U.S. stock exchanges.

The Securities Exchange Act of 1934 not only established the SEC. Insider trading is prohibited by the Act, which says that an individual cannot buy or sell a security if all information about the security has not been disclosed to the public. In a further effort to promote disclosure within the financial industry, Congress passed the Investment Company Act of 1940. Company officials must disclose the strength and weaknesses of the company each time they sell company stock. The Act also stipulates a company must disclose investment activity with each selling of stock.

Trends in securities law

Financial firms are not the only entities catalogued at the SEC. Congress passed the Investment advisers Act of 1940 to mandate that investment advisers receiving compensation for their securities advice had to registered with the SEC.The Act was changed in recent years to only require advisers with more than $100 million in assets to register.

Passed in 2002, the Sarbanes-Oxley Act extended the reach of regulation by pushing for more corporate responsibility by creating a Public Company Accounting Oversight Board to monitor the practices of auditors.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was in response to the financial crisis of 2008. The act highlighted several areas to protect consumers, including by regulating corporate governance and disclosure policies.

The future of financial regulations might be complicated by the latest onslaught of technology. Bitcoin is one example. The cryptocurrency Bitcoin is one that is challenging to regulate. Chris Brummer, director of Georgetown’s Institute of International Economic Law, says the cryptocurrency will be difficult to use within our existing financial system. Brummer has stated that the origins of Initial Coin Offerings are not always identifiable, making it impossible for investors to keep track of fraud.

Regulating cryptocurrencies will pose new challenges for governments of the future.

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