Chapter 1: Regulation Flashcards
What is the SEC’s primary purpose?
Ensure adherence to rules and regulations the commission makes and enforces
MSRB
Municipal Securities Rulemaking Board
FINRA oversees…
Brokerage firms and their associated persons
MSRB oversees…
Municipal securities market, including dealers, municipal advisers, and issuers
When was the Federal Reserve founded?
12/23/1913
The Federal Reserve Act was passed to:
Stabilize prices, maximize employment, and moderate long-term interest rates
Four primary components of the Federal Reserve
-Board of Governors
-Federal Open Market Committee
-12 Regional Federal Reserve Banks
-Member banks throughout US
FDIC
Federal Deposit Insurance Corporation
The FDIC was created to…
Foster stability within the financial system while concurrently upholding public confidence and efficacy
The FDIC also…
-Provides deposit insurance
-Oversees financial institutions to ensure safety and soundness
-Facilitates the resolution of significant financial organizations
-Administers receiverships
The FDIC extends its protections to…
Checking and saving accounts, money market accounts, certificates of deposit, IRA’s, revocable/irrevocable trust accounts, and employee benefit plans
What are blue-sky laws?
Anti-fraud regulations at the state level
Blue-sky laws vary from state to state but…
Require sellers of new issues to provide in-depth financial details of the entities involved in every deal
Blue-sky laws are what require producers to…
Get their licenses
NASAA
North American Securities Administrators Association
NASAA is a group of securities regulators dedicated to…
Safeguarding investors against fraudulent activities
The individuals of NASAA are responsible for…
Licensing securities firms, investment professionals, and other tasks
Securities Act of 1933: Goal 1
Establish Laws against misrepresentation and fraudulent activities in the securities market
Securities Act of 1933: Goal 2
Ensure transparency in financial statements to help investors make informed decisions
What is the primary objective of the Securities Exchange Act of 1934?
Regulate securities trading in the secondary market after their issuance
The secondary market is where…
Trading occurs after a company issues assets
Investment Advisors Act of 1940
Federal statute established to oversee and govern the operations of investment advisors as defined by law
Securities Investors Protection Act (SIPA)
Renew faith in the capital markets among investors and enhance financial obligation prerequisites for registered brokers and dealers
Securities Investor Protection Corporation (SIPC)
Nonprofit organization created by Congress to safeguard the customers of brokerage firms that become insolvent
Penny Stock Reform Act of 1990
Seeks to prevent fraud in non-exchange listed stocks, known as penny stocks
Penny Stock
Stock that trades below $5 per share
Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA)
Aims to increase the liability penalties in all involved parties f insider trading
Investment Company Act of 1940
Governs the formation and operations of investment companies and sets industry standards
Telephone Consumer Protection Act of 1991
Limits the use of telemarketing, including artificial messages, text messages, fax machines, prerecorded messages, and autodialing systems
Financial Industry Regulatory Authority (FINRA)
Nongovernmental and independent organization that establishes and enforces rules governing broker-dealers and brokers in the US
Uniform Practice Code (UPC)
Set of rules that govern the activities of FINRA member firms and ensures consistent practices in the securities industry
Code of Procedure (COP)
FINRA’s procedural rules, oversee disciplinary proceedings against FINRA member firms
Chicago Board Options Exchange (CBOE)
Facilitates trading activities mainly in options and future products
