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Vital Financial and Security Regulations

Multiple laws control institutions that handle 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.

It is illegal under federal law to engage in insider trading because you will be unfair to those who cannot access inside information. The company grants its officers, directors, or important shareholders ease access to its vital private information which makes then to have more advantages than other stakeholders. 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 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. In 1970s Watergate Special Prosecutor and Securities and Exchange Commission (SEC) carried out research whose finding stated that hundreds of companies bribing foreign officials to convince them to grant US companies licenses or enter into contracts. These companies manipulated their financial statements to hide the bribe payments to save their images. Congress had to do mitigate abuses of financial reporting by creating the FCPA that prevents the issuer, “any director, employee, officer, or agent” of an issuer or a stockholder acting 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 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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