Question

Assess the role that Congress plays in protecting investors from fraud. Based on your assessment, recommend at least two key actions that Congress could take to protect investors from fraud. Provide specific examples or evidence to support your response.

Answer 1

Congress plays a vital role in protecting investors from fraud. U.S. Securities and Exchange Commission (SEC), the first federal regulator of the securities markets was created by Congress in 1934. It promotes full public disclosure and protects investors against fraudulent practices in the market. Issue of securities and all financial services firms must be registered with SEC. SEC brings civil actions against lawbreakers, and also associates with the Justice Department on criminal cases.

Two key actions that Congress could take to protect investors from fraud.

1. Execute Injunctions: These are orders to prohibit future violations of rules. If person or companies ignores an injunction, they are subject to fines or imprisonment. This will help to prevent fraudulent practices in the securities market.
2. Penalties and the disgorgement of illegal gains. More than that SEC may also seek a court order to suspend individuals from acting as corporate officers or directors. Other common proceedings are revoking or suspending registration, suspensions of employment etc