The legal industry has been under fire for years for the lack of a consistent process for issuing bonds and securities, a result that has contributed to the industry’s overall lack of accountability and transparency.
But the new banking and financial regulatory framework set out in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the JOBS Act, is finally bringing some accountability and financial transparency to the realm of securities and bonds.
This year, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, and the Federal Reserve announced new rules that will make it easier for investors to purchase and sell securities, and will require companies to disclose their internal financial statements.
But there’s still a long way to go in improving the financial system and making sure people can be confident in their financial decisions.
Many of the key issues facing the financial industry, from the rise of cryptocurrencies to the growing power of big banks, are related to a lack of transparency.
And while the SEC and the regulators have created new tools to increase accountability and protect consumers, the rules have been criticized by consumer advocates and others for not addressing the most pressing financial issues.
While there’s been a lot of progress over the past decade in bringing transparency to financial institutions, regulators still have a lot to do, said David E. Rifkin, president and chief executive officer of the Investor Protection Institute, a nonprofit group that advocates for investors.
The JOBS and JOBS-E rules are a big step forward, but it’s not enough, Rifkins said.
“We need to be able to hold companies accountable for their actions,” he said.
“That includes making sure the securities are not just sold to the highest bidder.”
Here’s how the JOBs, JOBS rules and other new regulatory measures are designed to improve financial transparency and help consumers make more informed decisions.
1.
Citizens will have a way to verify the financial status of an individual before buying or selling securities.
The new JOBS regulations allow individuals to obtain a copy of a person’s financial statements before buying a security or bond.
2.
If an investor is not sure whether a security is a security, they can request a public accounting of the financial condition of the company and/or the issuer.
3.
Investors will have more information about the companies they are purchasing.
For example, investors will be able more easily compare companies with similar products, such as credit cards, home loans, health care and other products.
They will be better able to determine if an investor has been overcharged for a product, or if a company has made significant financial or other mistakes.
4.
Companies will be required to report on the total number of employees and other costs associated with an investment.
5.
When an investor buys or sells a security in the U.S., he or she will be provided a copy to view before the transaction.
6.
An investor who has questions about a company’s financial health, or a company that has made a mistake, will be given an opportunity to make a formal complaint with the SEC or the SEC’s Office of the Inspector General.
7.
Insurers will be prohibited from offering products that offer more than a 5 percent return.
8.
Individuals who are looking to buy or sell securities or bonds must provide a copy (including a financial statement) to a broker or dealer within 60 days.
9.
Anyone who is interested in purchasing or selling a security can also request an audit of the issuer or the company by contacting a financial adviser.
10.
While the SEC has the authority to require financial advisors to do background checks on their clients, the agency has not required financial advisors and brokers to do the same.
11.
Bond dealers and issuers will have to comply with more rigorous financial disclosures.
12.
In addition to disclosing financial information, issuers and issuer financial advisers must provide the SEC with copies of their internal documents that include internal financial analysis.
13.
There are new financial disclosure requirements for companies that sell securities and other investments.
14.
Consumers can obtain a financial history from the SEC, and financial advisors can provide information on how to access their customers’ financial data.
15.
A financial adviser must disclose the name of the firm and its principal executive officer, the total assets of the business, and its income statement.
16.
Under the new JOBs rules, issuer advisers will be barred from offering investment products that have more than 10 percent of their sales or profits coming from securities or other investments that they own.
17.
To encourage the use of technology, issuors will be forced to provide a more complete record of customer transactions, including the names and addresses of all the parties to the transaction and the financial transaction history.
18.
All financial advisors must report to the SEC a financial information technology system. 19
