The Securities Laws in the United States establish a foundation of disclosure and fraud prevention in the securities industry. The details of how those laws are implemented are in the hundreds of pages of regulations that the Securities and Exchange Commission has issued throughout its more than 80 years of existence. Those regulations are further interpreted through SEC forms, releases, no-action letters, and other agency statements that the Commission publishes from time to time. The Commission also brings administrative actions and civil and criminal actions against individuals and entities that violate securities laws, and the opinions of courts and administrative panels lend further definition to the securities laws.
All published regulations and forms can be accessed through the Commission’s website and other U.S. governmental portals. The SEC also publishes:
- advisory opinions in the form of interpretive releases, accounting releases, or litigation releases
- staff accounting and legal bulletins that focus on accounting-related disclosures and the opinions of the Commission’s staff on interpretations of securities laws
- No-action, interpretive, and exemptive letters that respond to inquiries on specific matters from issuers and other persons and entities
The formation of derivative financial instruments and futures, swaps, and options paved the way for the enactment in the United States of the Commodities Future Trading Commission (“CFTC”) Act of 1974. The CFTC promulgates additional regulations, staff letters, opinions, and adjudicatory orders that regulate the securities markets for derivatives.
Individual stock exchanges and other self-regulating organizations also impose regulations on industry participants in terms of licensing and other operational and administrative matters. The Financial Industry Regulatory Authority, Inc. (“FINRA”), for example, is a private corporation that oversees enforcement and administration of membership on the New York Stock Exchange.
Last, individual states have their own securities regulatory bodies that oversee the enforcement of state Blue Sky laws.
The highly-regulated nature of the securities industry adds compliance costs and other expenses to transactions, but those costs and expenses are more than justified by the transparency and protection against fraud and misrepresentation that they inject into the market. To participate at any level in the securities markets, individuals and organizations need far more than just a passing familiarity with applicable laws and regulations. Regulatory compliance and detailed knowledge of securities laws are the consideration that participants pay for access to investment opportunities, capital, and liquidity that might otherwise not be available without regulations and controls. Individual investors derive the benefits of the regulatory environment through their equal access to timely and valuable information that enables them to evaluate every investment decision in light of the most objective information that may be available.