A Quick Overlook of Options – Your Cheatsheet

Financial and Securities – The Securities Exchange Act of 1934

Congress passed the Securities Exchange Act of 1934, formally creating the Securities and Exchange Commission. The Act provides the SEC with wide authority over all areas of the securities sector. This means the SEC can register, regulate, and supervise transfer agents, clearing agencies, self regulatory organizations (SROs), and brokerage firms. The New York Stock Exchange and the Chicago Board of Options are examples of SROs, and so is the Financial Industry Regulatory Authority (FINRA).

The Act also pinpoints and disallows specific types of conduct in the markets and gives the Commission disciplinary authority over regulated entities as well as persons connected with them.

Additionally, the Act empowers the SEC to require regular reporting by companies that have publicly traded securities.

Corporate Reporting

Companies having over $10 million in assets with securities held by at least 500 owners should file reports annually and other necessary periodic reports. Such reports can be accessed by the public via the SEC’s EDGAR database.

Proxy Solicitations

The Securities Exchange Act also has power over the disclosure in materials intended to win shareholders’ votes in annual or other meetings set for electing directors and approving of other corporate action. This information, which is contained in proxy materials, should be filed with the Commission ahead of any solicitation to guarantee compliance with the disclosure rules. Whether by management or shareholder groups, solicitations should express all key facts that concern the issues that holders are to vote on.

Tender Offers

As per the Securities Exchange Act, there should be a disclosure of all pertinent facts by any person who would like to acquire in excess of 5 percent of a company’s securities, whether by direct purchase or tender offer. This offer is typically made to secure control of the company. Like the proxy rules, this lets shareholders make educated decisions on such major corporate developments.

Insider Trading

The securities laws comprehensively forbid deceitful actions of any type involved in the offer, purchase, or sale of securities. All disciplinary actions will be based on the said provisions, including sanctions against fraudulent insider trading.

Registration of Exchanges, Associations, and Others

The Act requires a many different market participants to register with the Commission, like exchanges, transfer agents, and the restUnder the Act, various market participants should register with the Commission, such as brokers and dealers, clearing agencies, etc. Registration for such organizations calls for filing of up-to-date disclosure documents on a regular basis.

As stated previously, the exchanges and the Financial Industry Regulatory Authority (FINRA) are both SROs. SROs should establish rules on disciplining members for unacceptable conduct and on applying measures that uphold investor protection and market integrity. SRO proposed rules are up for SEC review and published for public comsumption and feedback.

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