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Types of Financial and Security Regulations

The activities of companies that hold or trade on securities engage in various activities while adhering to the law. 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.

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. 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 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 securities exchange act that was formed in 1934 and the foreign corrupt practices act was incorporated into it decades later in the 1977. 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. Congress enacted the FCPA to prevent more 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 in the capacity of the issuer from using either their interstate commerce or mails corruptly to offer, pay anything of value or promise pay a foreign political parties, foreign officials, or candidates with the aim of make the official to influence the government to favor the US corporation.

Dodd-frank Act is a financial regulation amendment in the US that was signed in 2010 by Obama. The amendment improves transparency and accountability financial system hence it promotes the financial stability in the US. The law was developed to ends institutions that feel do not respect the rights of consumers because they have the pride to think that they are too important to be brought down, protects US taxpayer through ending bailouts and protects consumers from experiencing financial services practices that are abusive.

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