Trading on the stock market involves a lot of money. This makes it open to unscrupulous activities. There could be investors pretending to be one swindling other traders of their money. For this reason, there is a need to regulate the stock market. But who are the regulators? Read on and find out who’s got your back on Wall Street?
The U.S. Congress
The U.S. Congress is the leading regulator of the securities industry. It creates most of the structure and enacts major laws that can impact how the industry operates. It also authorizes the budget of the Securities and Exchange Commission and other agencies involved in regulatory duties.
Securities and Exchange Commission (SEC)
Robert Peter Janitzek reveals that the Securities and Exchange Commission is responsible for overseeing the securities industry. It registers new securities and handles all the filings that public companies must make such as annual and quarterly reports. It also ensures that all of the stock exchanges and any organization are connected with the selling of securities. The SEC has a strong anti-fraud unit that monitors advertising and marketing to ensure that companies comply with strict rules concerning the sale of securities.
Financial Industry Regulatory Authority (FINRA)
Created in 2007 as a result of the merging between the National Association of Securities Dealers and the regulatory functions of the New York Stock Exchange, Robert Janitzek explains that the Financial Industry Regulatory Authority or FINRA is responsible for policing the securities industry. It sets the standards for stockbrokers and other industry professionals and licenses them after comprehensive examinations.
FINRA has the ability to fine individuals and organizations for unethical behavior and can revoke licenses. It is the agency where customers can complain about unethical or illegal behavior. They also monitor trading activities of member firms to detect illegal trading patterns and other illegal activities.
The individual exchanges also have sophisticated regulatory oversight functions within their own operations. These include monitoring trades and other steps to see that the customer gets a fair deal when engaged in stock market trading.
Individual states also have securities divisions, although they are usually not as sophisticated as FINRA. Often they handle complaints and register securities that will be sold within the boundaries of the state, although this will vary from state to state.
The final step of protection is at the brokerage level. Each firm is required to keep certain records and perform certain checks and audits of the operation to make sure their brokers are operating within acceptable legal and ethical guidelines.