February 18, 2014
In recent years there has been many different regulations that have been put into effect to avoid any more accounting scandals. Some scandals that has gotten worldwide attention would be scandals such as WorldCom, Enron and Avon. These regulations have been put in place to help investors and to prevent companies from being put in situations where a scandal could arise. Companies need to pay close attention and follow the regulations or there can be stiff penalties and consequences against both the employee and the company. There are debates on whether there should be more or less regulations regarding ...view middle of the document...
The objectives of this act is that investors would receive any financial or other significant information that would be related to any securities that would be for sale to the public. Another objective is to forbid any deceit, misrepresentation and any other fraud that could happen in the sale of securities.
Registering of financial information of securities is to have the important financial information disclosed. With this information being disclosed it is to help the investors not the government to make better judgments on whether or not to purchase and invest in a company's securities. While the information is not guaranteed it is to provide more accurate information. If an investor can prove that in the financial information there was incomplete or inaccurate information they do have recovery rights if there are losses suffered.
When a company wants to sell securities in the United States they must be registered. When a company registers they file the following information: descriptions of the company's properties and business, description of the security to be offered for sale, information about the management of a company and financial statements that are certified by independent accountants. Once registration statements are filed with the SEC they are make public shortly. There are some exemptions of companies that do not need to be registered companies that are private offerings to a limited number of persons or institutions, offering of limited size, intrastate offerings and securities that are municipal, state and federal governments. By offering these exemptions from the registration process, this helps the SEC to lower the cost of offering securities to the public (The Laws That Govern the Securities Industry).
Securities Exchange Act of 1934
The SEC has broad authority over all parts of the securities industry which includes power to register, regulate, and oversee brokerage firms, transfer agents and clearing agencies as well as the nation's securities self regulatory organizations. There are many different securities exchanges such as; New York Stock Exchange, NASDAQ Stock Market, Chicago Board of Options and Financial Industry Regulatory Authority. An important aspect of this act is that it identifies and prohibits certain types of conduct in the markets and allows the Commission to take disciplinary action over regulated entities and persons that are associated with them. Companies that are publicly traded need to report financial information periodically.
This act requires that important information is disclosed by anyone that is seeking to acquire more than five percent of a company's securities by direct purchase or by tender offer. This offer is usually extended when there is an effort to gain control of a company. This allows for people to make informed decisions on critical corporate events.
There are security laws that prohibit any kind of fraudulent activity of any kind that are in...