Enhanced Supervision Of Stocks To Help Prevent Fraudulent Activities

Submitted by Alden Brooks as part of our contributors program.

Stocks have a very important role to play in the economy. This article depicts how stocks and the laws governing them maintain a certain level of transparency in the economy. Before you get any further into understanding the importance of stocks in the economy, it’s important that you know what they actually are. It is very natural to have more than one legal questions looking at the way stocks are being maintained these days.

Capital investment is necessary when you’re trying to launch your business. It is quite different from what we know about the general assets. There are fluctuations in the values of the assets. The stocks of a business are divided into smaller units called shares. A particular value is assigned to each share. The value of shares depends upon the total value of the stock.

What are shares to investors?

As a shareholder, you’re a partial owner of the business. You’ll be given a stock certificate that will determine your ownership. A stock certificate is a legal document that proves the authenticity of the number of shares owned by you as a shareholder. Both public and private companies have shareholders.

Anyone could be shareholder. It isn’t necessary for a shareholder to be a person. An organization can also be shareholder. It is important to note that the there’s a difference between shareholders and retail buyers. Even the largest of shareholders couldn’t be retail buyers. They could be corporate entities. They could be large mutual funds as well. The right of using the property and equipment of a company isn’t available to anyone even if they own more than 50% of the company’s shares. This is largely because of the fact that the company is more of a legal entity.

Stock Exchanges

The aforesaid paragraphs tell how important stock exchanges are. They have found themselves a strong place in the world economy. Stock Exchanges are marketplaces. These are where the enlisting of companies with shares takes place. This allows them to find prospective buyers to sell shares. NASDAQ, BSE, NIKKEI are some famous stock exchanges operating at present.

There are several companies, big and small, that trade their shares on an everyday basis in various stock exchanges all across the globe. It’s really hard to imagine how high the market values of big corporations such as Microsoft and Siemens could go. This has given birth to fraudulent activities.

The frauds

You wouldn’t want to hear this. It is reported that the frauds are worth millions and billions of dollars. These crimes, also known as white collar crimes, tend to hurt the economy. Since this is a subject of great complexity, it is never without the involvement of knowledgeable people that fraudsters can have their missions accomplished. Frauds of this type and magnitude affect retail share traders and large scale stock holders alike. Choosing the legal options is the only way to get relief from these frauds. It has to be a class action lawsuit. The U.S. Securities and Exchange Commission is responsible for the supervision of the securities market.