How do federal securities laws protect investors from securities fraud?
Federal securities laws protect investors from securities fraud by setting rules for businesses to follow that ensure a fair and efficient market. These laws were created to maintain investor confidence in the financial markets. They do this by establishing standards for disclosure, restricting insider trading, and creating rules that regulate the sale of securities. The Securities Act of 1933 and the Securities Exchange Act of 1934 are the two primary federal securities laws that protect investors from fraud. The Securities Act of 1933 requires companies to publicly disclose certain information about their stock issue to investors before it can be sold in the market. This includes information about the company’s financial condition and any risks associated with the investment. The Securities Exchange Act of 1934 regulates the sale and trading of stocks after they have been issued. It puts restrictions on insider trading and requires companies to make periodic reports to the Securities and Exchange Commission about their financial condition. This allows investors to make more informed decisions about their investments. In North Carolina, state law also plays an important role in protecting investors from securities fraud. The North Carolina Securities Division enforces securities laws and regulations, reviews all applications for securities and conducts investigations of possible violations. The division also works to educate investors about their rights and shares resources with them to help them avoid being victimized by fraud.
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