2. State and Federal
Enforcement Agencies
• Role of state agencies is limited.
• Federal agencies make the most substantial
response:
oU.S. Department of Justice: when criminal
prosecution warranted.
3. oFBI: corporate scandals (e.g., Enron)
oSome resources shifted to the war on
terrorism.
oInspectors General: conduct audits and
investigations of companies to which they
are attached.
4. oU.S. Postal Inspection Service: frauds
involving a postal element (e.g., mail
fraud)
oU.S. Secret Service, U.S. Customs, U.S.
Marshals: counterfeiting or forgery of U.S.
currency; money laundering; pursuit of
white collar criminals
oIRS Criminal Investigative Division: tax
frauds
5. Regulation
• “Any attempt by the government to control
the behavior of citizens, corporations, or
subgovernments.”
• Allows for more flexible responses.
6. Economic Regulation
• Addresses market relations (e.g., securities,
antitrust matters, interstate commerce) and
the attempts to ensure stability.
7. Social Regulation
• Addresses harmful consequences to workers,
consumers, and citizens.
• Less likely to serve business interests.
• Usually a government response to public
pressure.
• Typically arises following a crisis, tragedy, or
panic over some industrial condition or
practice.
8. Selected Regulatory Agencies
• FDA – regulates, inspects, monitors, tests,
and develops guidelines for a wide range of
foods, drugs, cosmetics, and medical
devices.
• FTC – primary weapon against monopolistic
trusts (e.g., Standard Oil), also contends
with unfair and deceptive business
practices.
9. • SEC – regulates and polices the securities
markets.
• EPA – sets standards and monitors practices
relating to air quality, water quality, and the
disposal of various forms of hazardous
wastes.
• OSHA – develops and enforces procedures
and standards for workplace health and
safety.
10. Evolution Of A Regulatory Agency:
The SEC
Between 1929 and 1941 the people of the United
States suffered through the Great Depression, the
deepest and most prolonged economic crisis in
American history.
Although many factors contributed to the
economic depression, the crash of the stock
market in October 1929 marked its beginning.
Investors in securities, stocks, and bonds lost
everything in the unregulated market.
11. Following the leadership of President Franklin
D. Roosevelt, Congress passed new legislation
known as the New Deal, designed to protect
citizens from economic fluctuations.
Two of these legislative remedies were the
Securities Act of 1933 and the Securities
Exchange Act of 1934. Both laws restored
investor confidence in the market by
providing more structure and government
regulation.
12. The 1933 Securities Act required both
businesses who desired to sell their stock and
stockbrokers who sold stock to provide full
information about stocks to potential
investors.
The Securities Exchange Act of 1934
prohibited certain activities in stock market
trading and set penalties for violations. It also
established the Securities and Exchange
Commission (SEC) to oversee stock market
trading.
13. These laws were based on two ideas:
First, companies offering stock on the market
had to tell the public the truth about their
businesses and the risks involved in investing
in them.
Second, stockbrokers were to put the interests
of investors above any other consideration
and deal with them fairly and honestly.
14. The two 1930s acts remain the foundation of
securities regulation.
The SEC continues to be the top regulatory
agency. The SEC oversees all key participants in
the securities market including the stock
exchanges, stock brokerage firms, the actions of
individual stockbrokers, investment advisors,
and mutual funds (groups of stocks in which
people may invest).
It is the overseer to protect investors against
deceptive or illegal activities such as security
fraud.
