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by: Dominic Erdman

FinancialInstitutionsandMarkets FRL315

Dominic Erdman
CSU Pomona
GPA 3.91


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Class Notes
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This 16 page Class Notes was uploaded by Dominic Erdman on Saturday October 3, 2015. The Class Notes belongs to FRL315 at California State Polytechnic University taught by WeiYu in Fall. Since its upload, it has received 31 views. For similar materials see /class/218175/frl315-california-state-polytechnic-university in Finance,Real Estate&Law at California State Polytechnic University.

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Date Created: 10/03/15
The mission of The US Securities ond Exchonge Commission is To proieoi inves rors moin roin foir orderly ond efficient morkeis ond fooili roie oopiiol formo rion Before fhe SEC Posf WWI esfimdfed 50 billion in new securifies were offered hdlf become worfhless due fo frdud Sfook Crdsh chober l929 0 Blue Sky Lows Enforced sfofe level regulofion of offer ond sole of securifies fo profecf from froud Relquired regisfrofion of oil securifies offerings ond so es Lisfed every US sfocllt broker ond brokeroge firm lneffeofive becouse firms would jusf moil if ocross sfofe lines History cont Securities Act of 1933 i Regulates interstate sales of securities at federal level Securities Exchange Act of 1934 w Regulates sales of securities in the secondary market m Created the US Securities and Exchange Commission to enforce these new securities laws 5 Joseph P Kennedy Sr was appointed first chairman of the SEC Securities and Exchange Commission After the stock market crash the SEC was brought in to restore investor confidence in capital markets Companies publicly offering securities for investment dollars must tell the public the truth about their businesses the securities they are selling and the risks involved in investing People who sell and trade securities must treat investors fairly and honestly putting investors interests first The Commission ConsisTs of five Commissioners oppoinfed by The presidenf on sToggered 5 yeor Terms n One is Choirmon w No more Thon Three of commissioners moy belong To The some porfy a Five divisions u 18 offices in Woshingfon DC in ii Regionol offices ThroughouT The counTry Responsibility of the Commission Inferpref federal securier laws Issue new rules and amend exisfing rules Oversee fhe inspecfion of securifies firms brokers invesfmenf advisors and rafings agencies Oversee privafe regulafory organizafions in fhe securifies accounfing and audifing fields Coordinafe US securifies regulafion wifh federal sfafe and foreign aufhorifies The Divisions Division of CorporaTion Finance Reviews documenTs ThaT publicly held companies are reaUIred To file wiTh The commissron Also provides companies wiTh assisTance inTerpreTing The commrssron s rules and recommends new rules DIVIsion of Trading and MarkeTs Day To day oversighT of The major securiTies markeT parTicipanTs including The securiTies exchanges securiTies firms self reguIaTory organizaTions Including The Financial IndusTry RegulaTory AuThoriTy The Municipal SecuriTies Rulemaking Board clearing agencies Transfer agenTs and crediT raTing agencies The Divisions cont Division of Inves rmen r Mdndgemen r a Assisi The Commission in execuiing iis respinsibliiy for inves ror proieciion n Promo re CClplTClI formd rion Through oversigh r dnd reguldiion of Americo s 26 Trillion invesimeni mdndgemeni indusiry Including mu rUdI funds dnd rheir respec rive fund mdndgers Andlys rs who resedrch individuol dsse rs dnd dsse r Cldsses Inves rmen r ddvisors ro individuol cus romers The Divisions cont Division of Enforcemen r Execu res ldw enforcemen r func rion of the SEC by recommending the commencement of inves rigd rions of viold rions Also recommends to bring civil dc rions in federdl coun a Prosecu res coses on behdlf of the commission a Common Viold rions ihd r may lead ro SEC inves rigd rions a Misrepresenldlion or omission of imporldnl informdlion dboul securllles Mdnipuldling The mdrkel prices of securilies Sledling cuslomers funds or securilies a Violdling broker dedlers responsibilily lo iredl cuslomers fdirly a lnsiderlrdding Selling unregislered securilies Division of Risk Strategy and Financial Innova on a Help further identify new risks and trends in the markets a Was established in 2008 after the mortgage crisis SEC Acfions more recent Sarbanes Oxley Acf of 2002 2 Resqu of fne Enron Fiasco Required more sfringenf financial reporfing a CFO musf sign off on financial reporfs a Prevenfs falsifying financial reporfs Hedge Funds regisfrafion a Revised amendmenfs underfne lnvesfmenf Advisers Acf of l940 I Resulfed from mulfiple convicfions of high ranking porffolio managers during probes SEC Actions more recent Funds FrdudlnsiderTrdding ledding ro SEC dciions u Berndrd L Mddoff i Used 0 Ponzi scheme to defrdud investors a Cred red fdlse rrdding repor rs based on The re rurns rhd r Mddoff ordered for each customer Pldced inves ror s money info 0 Chose dccoun r instead of dc ruoHy investing ii a When asked for returns by investors Mddoff would pay rhem with Their own or other inves ror s Chose OCCOUHB SEC Actions more recent u Raj Rajarathnam E Convicted of 14 accounts of insider trading a Tapped a huge network of informants from the nation s largest corporations w Intel Goldman Sachs Group Alle Morgan Stanley IBM etc n Joseph Chip Skowron lll Used insider information received from an informant within the steering committee that oversaw the trials of a new failing drug a Saved FrointPoint Partners 30million Subprime Mortgage Crisis of 2008 SEC relaxed rules in 2004 ThaT enabled invesTmenT banks To The level of debT They were Taking on fueling growTh in morTgage backed securiTies Top 5 U invesTmenT banks greale increased financial leverage during 2004 2007 which also increased Their vulnerabiliTy These banks reporTed 41 Trillion in debT in 2007 approximaTely 30 of The economy a Lehman BroThers wenT bankrupT 1 Bear STearns and Merrill Lynch were sold To oTher banks a Goldman Sachs and Morgan STanley converTed To commercial bank models in order To qualify for federal aid EEC was responsible for financial disclosure ThroughouT e crIsIs Conclusion Although the SEC isn t perfect at predicting catastrophes and regulating the market the SEC is ever evolving They have a lot of authority involving the market They can bring charges against those involved in illegal trading activities They can writemodify legislation that will protect investors from repeat failures


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