Assignment 3 Assignment 1

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Seeronie Singh
AC502-Business Law
Unit 3 Assignment #1
Final Project Part 1-Research Paper 1
Professor Lerner

January 7, 2014

TABLE OF CONTENTS

I. INTRODUCTION ………………………………………………………....…..……………....1

II. SECURITIES ACT OF 1933 AND 1934………………………….…....……….…………....1
II.1 SECURITIES AND EXCHANGE COMMISSION V. SUBAYE, INC ...……….....3

III. THE FOREIGN CORRUPT PRACTICES ACT OF 1977.………...…………...…………....4
III.1 THE BANANAGATE SCANDAL...………….……………………..…..………….5

IV. THE SARBANES OXLEY ACT.………...…………...………………..…………….……....6
IV.1 THE ENRON CORP. SCANDAL...………….……………………..…..………......7

V. CONCLUSION …………………………………………….....………....…..……….….…....8

VI. REFERENCES …………………………………………….....………....…..…….…….…....9

I. Introduction According to the Webster dictionary the word regulation is a rule or order issued by an executive authority. Throughout history countries including the United States of America have setup regulations and rules to govern the accounting industry. Rules and regulations have been created to protect the general public. In the accounting industry rules and regulation are aimed to make sure that companies are producing data on their financial statements accurately because these financial statements are the basis of investors’ investments. In the United States, many accounting failures of corporations have led the US government to implement regulations like the Securities Acts of 1933 and 1934, the Foreign Corrupt Practices Act of 1977 and the Sarbanes Oxley Act of 2002. The U.S. Securities and Exchange Commission (SEC) is an agency “created by Congress”, the SEC has the power to create laws called regulations. The president of the United States and the senate appoints five commissioners that makes up the SEC. These commissioners are designed to make sure that there is “full disclosure and to protect the investing public against fraudulent and manipulative practices in the securities markets”, (Investopedia, 2013).
II. Securities Acts of 1933 and 1934 The SEC enacted the Securities Act of 1933 after the crash of the stock market in 1929 and during the Great Depression. The stock market crashed in 1929, the Dow Jones Industrial Average dropped from 381 in 1929 to 41 in 1932, losing 89% of its value. Fortunes were lost and the crash ushered in the Great Depression, (Galbraith, 1997). The Securities Act of 1933 was the first major federal legislation to regulate the offer and sale of securities. Before this Act, regulation of securities was chiefly governed by state laws, referred to as Blue Sky laws. Blue Sky laws created in the early 1900s, with the desire to protect investors against securities fraud, by requiring sellers to registered their offers and provide financial details. The Securities Act of 1933 “requires that, before offering or selling securities in a public offering, the issuer must register the securities with the Securities and Exchange Commission” (Beatty et al., 2013, pg. 413). The SEC deemed the Securities Act of 1934 as a law governing the secondary trading of securities like stocks, bonds and debentures, in the United States of America. This Act also empowers the SEC with authority over all aspects of the securities industry, like registering, regulating, transferring agents, etc. The Securities Act of 1933 is responsible for regulating the original issuance of securities while the Securities Act of 1934 is to regulate trading of those securities issued. “The purpose of the 1934 Act is to provide investors with ongoing information about public companies (that is, companies with publicly traded stock). The Securities Act of 1934 requires that “public companies make regular filings with the SEC, including annual reports, quarterly reports, and Form 8-Ks” (Beatty et al., 2013, pg. 415). Both the Securities Act of 1933 and 1934 “regulate securities”, there main goal is to prevent fraud. “A security is any transaction
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