Securities Regulation Essay

2738 words - 11 pages

Connie Burkey
Unit 3
Regulations in the Industry of Accounting
Research Paper
Professor Lerner

When looking at the regulations that the government has set down in the accounting sector the old saying “rules are made to be broken comes to mind. Like the rules that are created in the home or for society as a whole, government regulations are set in place to ensure that transactions are being conducted in an honest and lawful manner, and to give a sense of accountability to everyone. These laws that were created by Congress may negatively work for one party and positively affect another. In most cases these regulations are put in place to protect the investor and consumers, and ...view middle of the document...

These are the The Securities Act of 1933 and 1934, Foreign Corrupt Practices Act of 1977, and Sarbanes Oxley Act of 2002.
The Securities Acts of 1933 and 1934 were created to safeguard the security industry. These two acts provide principles that ensure that the sales of securities are done lawfully. Beatty and Samuelson’s text defines a security as “any transaction in which the buyer invests money in a common enterprise and expects to earn a profit predominantly from the efforts of others” (2010, pg. 361). As with many regulations, these two acts provide more protection for the investor than for the business.
The Securities Act of 1933, which is also known as the “truth in securities” law, has two objectives that are to be met. First it requires that investors receive financial and any other significant information concerning the securities that are being offered for sale to the public. The second requirement for this act is that it prohibits any deceit, any misrepresentation and any other fraud with the sale of the security.
In order for a business to meet these objectives they must register through the SEC and provide information any information that is needed for the investor can make sound decisions when making purchases. Some of this information that may be needed is a description of the business, the type of securities that are for sale, and information on the management of the company and financial statement for the company. Once the company is registered through the SEC, this does not guarantee investors that the purchase of a security will mean success and be profitable; it just means that the company has provided all the information necessary to place the security on the market. Under the Securities Act of 1933 there were some securities that were exempted from the registration process. These included private offerings and offerings of a limited size that don’t need the mandatory registration through the SEC.
The following year the Securities Act of 1934 was created. The Securities Exchange Act of 1934 was passed by congress to strengthen the government’s control of the financial markets. It was preceded by the Securities Exchange Act of 1933 which was enacted during the Great Depression in hopes that the stock market crash of 1929 would not be repeated. The basic difference between the two acts was that the 1933 Act was to govern the original sales of securities by requiring that the issuers, the companies offering the securities, offer up sufficient information about themselves and the securities so that the potential buyers could make informed decisions. The 1934 Act was aimed at the secondary market where buyers don’t buy from the issuer but instead from other investors (Security, 2012). The 1934 Act also required more disclosures from issuers and was enacted to prevent unfair practices at the various exchanges as well as giving the authority of the exchange to the SEC which was one...

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