Government Regulations

GOVERNMENT REGULATION

Government Regulation

I. INTRODUCTION

Current state of the accounting industry and corporate America. Is there a need for additional regulation? Is there a need for less regulation?

As long as we have the capital markets, businesses and people investing money, we will have the accounting industry. The recent economy has given rise to more rigorous regulations, increasing the importance of fraud prevention and detection. As an example we are reviewing the purpose and regulatory extent of three major pieces of regulation.

A. The securities Acts of 1933 and 1934

The securities and exchange Acts of 1933 and 1934 established the Securities and Exchange Commission.

The securities act of 1933 was the first federal legislation specially intended to regulate a company’s sale of securities, the basic objectives:

a) Require that all sales of securities be registered with the government,

Investors receive financial and other significant information concerning securities being offered for public sale, and

b) Prohibit dishonest, misrepresentations, and other fraud in the sale of

securities.

Following the 1933 act, the 1934 act requires issuers to follow similar procedures as the 1933 act but for the secondary market instead of the primary market. The 1934 act gave a large amount of power to the securities and exchange commission to over see a all aspects of security industry, which included the secondary market.

A.1 Securities fraud, also known as investor or stock fraud, covers a range of activities that violate federal and state laws pertaining to buying, selling and trading securities. The most common forms of securities fraud include, Misrepresentation (presenting misleading or false information to investors about a company, or its securities), Insider Trading buying, selling or trading securities based on information that is not readily available to the general public.

A.1.1 Analysis of Related Fraud and Scandal...