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Laws that Affect the Financial and Securities Sector – The Securities Exchange Act of 1934

Congress established the Securities and Exchange Commission via the Securities Exchange Act of 1934. Through the Act, the SEC is empowered with comprehensive authority over the whole securities industry. This means the SEC can register, regulate, and supervise transfer agents, clearing agencies, self regulatory organizations (SROs), and brokerage firms. Examples of SROs are the New York Stock Exchange and the NASDAQ Stock Market, along with the Financial Industry Regulatory Authority (FINRA).

The Act also singles out and forbids particular types of actions in the markets and gives the Commission authority to discipline regulated entities and people who are associated with them.

In addition, the Act gives the SEC power to require regular reports from companies having publicly traded securities.

Corporate Reporting

Companies that own assets in excess of $10 million and whose securities are held by no less than 500 owners have to file reports yearly along with other needed periodic reports. Such reports are open to the public through the SEC’s EDGAR database.

Proxy Solicitations

The Securities Exchange Act also controls the disclosure in materials that are used to get shareholders’ votes in yearly or special meetings conducted to elect directors and approve other corporate action. This information, which is found in proxy materials, need to be filed with the Commission before any solicitation so that disclosure rules are complied with. Whether by management or shareholder groups, solicitations should express all key facts that concern the issues that holders are to vote on.

Tender Offers

As per the Securities Exchange Act, there should be a disclosure of all pertinent facts by any person who would like to acquire in excess of 5 percent of a company’s securities, whether by direct purchase or tender offer. In most cases, such an offer is made in order to acquire control over the company. No differently from the proxy rules, this enables shareholders to make wiser decisions on these vital corporate events.

Insider Trading

The securities laws comprehensively forbid deceitful actions of any type involved in the offer, purchase, or sale of securities. These provisions are the foundation for several types of disciplinary sanctions, including those against devious insider trading.

Registration of Exchanges, Associations, and Others

The Act dictates that a range of market participants register with the Commission, from exchanges, to transfer agents to clearing agencies and more. Registration for such organizations calls for filing of up-to-date disclosure documents on a regular basis.

As stated previously, the exchanges and the Financial Industry Regulatory Authority (FINRA) are both SROs. SROs have to implement rules for disciplining members who display improper conduct, and for setting forth measures that enhance market integrity and strengthen investor protection. SRO proposed rules are up for SEC review and published for public comsumption and feedback.

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