Chapter 1 Flashcards
What does the SEC do?
ensure adherence to the rules and regulations that the commission makes and enforces
protects investors from fradulent activities, ensures that the securities market remain effective, and faciltates the capital formation required to support economic growth
When was the Federal Reserve Act passed
December 23, 1913
What does the Federal Reserve Act do?
stabilize prices
maximize employment
moderate long-term interest rates
What are the 4 components of the FED?
Board of Governors
Federal Open Market Committee
12 Regional federal reserve banks
member banks throughout the US
who establishes monetary policy
FOMC
duties of the FED
strengthening US economy standing
maintaining balance between private interests of banks and centralized responsibilites of government
ensuring the financial system’s stability and mitigating systemic risk with financial markets
FDIC
provides deposit insurance
oversees financial institutions to ensure their safety and soundness
facilitates the resolution of significant financial organizations and administers receiverships
what does the fdic NOT cover
annuities, mutual funds, life insurance policies, bonds or stocks
blue sky laws
anti-fraud regulations at state level
require sellers of new issues to provide indepth financial details of the entities involved in every deal
require brokerage firms, investment advisors, individual brokers offering securities in their states to obtain licenses
North American Securities Administrators Association
group of securities regulators dedicated to safeguarding investors against fraudulent activities
licensing securities firms, investment professionals
Securities Act of 1933
establish laws against misrepresentation and fraudulent activities in the securities market
ensure transparency in financial statements to help investors make informed decisions
must register with the SEC
what info must companies make available before IPO
description of security being offered
description of the company’s business and properties
financial statements that have been certified by independent accountants
Securities Exchange Act of 1934
regulate securities trading in the secondary market
compliance requirements such as proxy solicitations, company financial disclosures, registration of any securities listed on stock exchanges
Investment Advisers Act of 1940
must provide accurate and complete information to ensure their clients’ best interests and maintain the market’s integrity
exclusions to definition of investment adviser
banks and bank holding companies
lawyers, accountants, engineers, teachers
brokers and dealers
publishers
government securities advisers
credit rating agencies
family offices
Securities Investors Protection Act
created the Securities Investor Protection Corporation
SIPC
safeguard the customers of brokerage firms that become insolvent
cash and securities in an account are covered up to $500,000
coverage includes:
- joint accounts
- corporate accounts
- individual accounts
- trust accounts
- ROTH IRAs and traditional IRAs
- accounts held by legal guardian or estate executor
Penny Stock Reform Act of 1990
prevent fraud in non-exchange listed stocks (penny stocks)
penny stocks: <$5 stocks
{the NYSE mandates companies to have a certain minimum in outstanding equity shares and a specific market cap}
Insider Trading and Securities Fraud Enforcement Act of 1988
expanded the SEC’s authority to enforce insider trading laws
Investment Company Act of 1940
safeguard investors by making them aware of the risks of purchasing and holding securities
Telephone Consumer Protection Act of 1991
limits use of telemarketing
FINRA
established by combining the regulatory, enforcement, and arbitration functions of the NYSE
FINRA Rule 2266
requires SIPC member firms to provide written notice to customers about SIPC protections
FINRA Rule 2269
Disclosure of Participation or Interest in Primary or Secondary Distribution
requires firms to disclose any participation or interest in a primary or secondary distribution of securities to customers
