Discuss how the government regulates securities markets.
What will be an ideal response?
Answers will vary. The securities industry is subject to state and federal laws. The two key federal laws governing securities markets are the Securities Act of 1933 and the Securities Exchange Act of 1934. The Securities Act of 1933 deals mainly with the process of issuing new securities. It prohibits misrepresentation, deceit, or other forms of fraud in the sale of new securities and requires firms issuing new stock to file a registration statement.The Securities Exchange Act of 1934 regulates the trading of previously issued securities and established the Securities and Exchange Commission (SEC), which was given broad powers to oversee the securities industry. The SEC was given the power to prosecute individuals and companies that engaged in fraudulent securities activities such as insider trading (the practice of using inside information not available to the general public to unfairly profit from trading in company securities).
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