Regulatory Entities Flashcards
Securities & Exchange Commission (SEC)
Sets laws and regulations to protect investors and cultivate fair & efficient markets
The Securities Act of 1933
Issuers must comply with a series of rules, including disclosing all material company information, in order to protect investors from fraud
The Securities Exchange Act of 1934
In the secondary market, issuers with over $10 million in assets and held by 500 owners, must disclose information pertinent to the sale of their securities, and certain issuers are required to file periodic reports with the SEC (annual reports)
The Investment Advisors Act of 1940
Limits the advertising investment advisors must engage in. Prohibits advertising that is “fraudulent, deceptive, and manipulative” (external testimonial (I made all this money))
Registered Investment Advisor
may charge performance fees to “Accredited Investors” and “Qualified Clients” only
Accredited Investor
individual/couple with net worth exceeding $1 million, or earned in excess of $200k / $300k for three successive years
Qualified Client
Meeting one of five criteria related to assets under management
Investment Company Act of 1940
Regulates the organization of mutual funds and unit investment trusts, that engage in:
-investing, reinvesting, and trading in securities
-and whose own securities are offered to the investing public
-Primarily this requires investment companies to disclose:
-The financial condition and investment policies to investors
-Information about the fund and its investment objectives
-investment company structure and operations
-DOES NOT give the SEC authority to directly supervise the investment decisions or activities of these companies or judge the merits of their investments
-Requires 85% of company assets to be in liquid securities
-Redemption price to be based on the daily consumption of net asset value and redemption prices to be paid in 7 days
New York Stock Exchange (NYSE)
largest stock exchange in the world. To be a part, companies must meet rigorous requirements related to size and finances
Chicago Board Options Exchange (CBOE
Largest options exchange in the world. Investors can trade put and call options on: publicly traded stocks, exchange-traded funds, and exchange-traded notes.
Financial Industry Regulatory Authority (FINRA)
-Supervised by the SEC
-Is a “not for profit” organization
-Oversees broker deals in the US
-Writes and enforces the broker-deal rules
-Ensures market transparency
-Provides education to investors
Municipal Securities Regulator)
Writes and enforces rules & procedures for investment firms and banks who sell: municipal bonds, notes, and other municipal securities
-Muni securities are issued by a state, municipality, or a county
-used to finance projects
-Basically tax exempt, and interest paid is tax free
United States Treasury
Writes and enforces rules & procedures for investment firms and banks who sell: municipal bonds, notes, and other municipal securities
-Muni securities are issued by a state, municipality, or a county
-used to finance projects
-Basically tax exempt, and interest paid is tax free
Financial Crimes Enforcement Network (FinCEN)
Bureau within treasury. Enforces the Currency and Foreign Transactions Reporting Act of 1970: which requires the US financial institutions to assist the US government agencies with detecting and preventing money laundering
Internal Revenue Service IRS
Collects taxes and administers tax law
