Equity Markets, Valuation, and Analysis

CHAPTER 4Securities Regulation

Douglas Cumming

DeSantis Distinguished Professor of Finance and Entrepreneurship, Florida Atlantic University

Sofia Johan

Assistant Professor of Finance, Florida Atlantic University

INTRODUCTION

Securities regulation is a diverse topic that covers many areas, including but not limited to the distribution of new securities (United States Securities Act of 1933), trading of securities, brokers, and exchanges (United States Securities Act of 1933), debt securities (United States Trust Indenture Act of 1939), mutual funds (Investment Company Act of 1940), and investment advisors (Investment Advisers Act of 1940). Given that the book's focus is on equity markets and valuation, this chapter focuses on trading securities on public stock exchanges.

According to Cumming and Johan (2019), some authors have written about the impact of securities regulation without even understanding that the source of regulatory change that they have studied involves exchange-trading rules. Two types of regulatory regimes are available: regulator-led and market-led. Hence, recognizing that trading rule sources are not always the same around the world is important. The source of securities regulations for trading on exchanges varies by country, and the source likewise varies over time. For example, in China, the rules pertaining to the trading of securities are found in the China Securities and Regulatory Commission rules. In the United States, the trading rules are listed ...