Securities Regulation and Legal Framework for Publicly Traded Companies

Primary and Secondary Markets: An Overview

Publicly traded companies operate in two main markets: the primary and secondary markets. The primary market is where companies issue and sell securities to the public for the first time, typically through an initial public offering (IPO).

In contrast, the secondary market is where existing securities are traded among investors, such as stock exchanges like the New York Stock Exchange (NYSE) and Nasdaq. These markets provide liquidity for investors and enable companies to raise capital. Learn more about strategic management in the finance industry.

Securities regulation is crucial in both markets to protect investors, maintain market integrity, and ensure transparency. Regulations govern the issuance, trading, and reporting requirements for publicly traded companies.

Regulatory Bodies and Compliance: SEC and FINRA

In the United States, the primary regulatory bodies responsible for securities regulation are the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

The SEC's mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. FINRA regulates broker-dealers and exchange markets, focusing on investor protection and market integrity. Discover the basics of financial regulation and compliance for businesses.

Companies listed on public markets must comply with various regulations, including filing regular financial reports, disclosing material information, and adhering to corporate governance standards. Non-compliance can result in penalties, fines, or delisting from the exchange.

Landmark Legislation: Sarbanes-Oxley and Dodd-Frank Acts

Two significant pieces of legislation that have shaped securities regulation are the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

The Sarbanes-Oxley Act was enacted in response to major corporate scandals, such as Enron and WorldCom, and focuses on corporate governance, internal controls, and financial disclosures. It established the Public Company Accounting Oversight Board (PCAOB) to oversee auditors of public companies.

The Dodd-Frank Act was enacted following the 2008 financial crisis and introduced new regulations for financial institutions and publicly traded companies. It aims to promote financial stability, protect consumers, and improve accountability and transparency in the financial system. Understand antitrust laws and their role in promoting business competition.