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PUBLIC UTILITIES HOLDING COMPANY ACT OF 1935

The Public Utilities Holding Company Act of 1935 regulates all companies that are in business to provide retail distribution of gas and electric power. Because the companies are regulated by this act, their securities are exempt from state registration requirements.

FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA)

The Maloney Act of 1938 was an amendment to the Securities Exchange Act of 1934 that allowed the creation of the National Association of Securities Dealers (NASD). The NASD, now part of FINRA, is the SRO for the OTC market, and its purpose is to regulate the broker dealers that conduct business in the OTC market. FINRA has four major bylaws. They are:

• The Rules of Fair Practice

• The Uniform Practice Code

• The Code of Procedure

• The Code of Arbitration

THE TRUST INDENTURE ACT OF 1939

The Trust Indenture Act of 1939 requires that corporate bond issues in excess of $5,000,000 dollars that are to be repaid during a term in excess of one year issue a trust indenture for the issue. The trust indenture is a contract between the issuer and the trustee. The trustee acts on behalf of all of the bondholders and ensures that the issuer is in compliance with all of the promises and covenants made to the bondholders. The trustee is appointed by the corporation and is usually a bank or a trust company. The Trust Indenture Act of 1939 only applies to corporate issuers. Both federal and municipal issuers are exempt.

INVESTMENT ADVISERS ACT OF 1940

The Investment Advisers Act of 1940 regulates industry professionals who charge a fee for the advice they offer to clients. The Investment Advisers Act sets forth registration requirements for advisers as well as disclosure requirements relating to the adviser's:

• Recommendation methods.

• Types of securities recommended.

• Professional background and qualifications.

• Fees to be charged.

• Method for computing and charging fees.

• Types of clients.

 
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