In the 1930s, the Securities and Exchange Commission introduced a doctrine of sorts that contained the shingle theory. It’s a little outdated today, especially since brokerages can operate without a brick-and-mortar store (ergo the “shingle”), but also for other reasons. The shingle theory is the theory that a broker who opens up a shop (“hanging a shingle”) will be an honest and fair businessman with his customers, taking responsibility where it’s due.
It’s a nice idea, but the real world tells us to be on our guard with brokerages. While there are legit brokerages out there, there are also scam brokerages, and everything in-between (think: “grey” brokerages that aren’t all scams, but aren’t totally honest, either).
The U.S. government has tried to keep brokers honest. There’s the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and other agencies that have slapped rules, regulations, and oversight onto brokerages. A few bad apples ruin the party for everyone.
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Finance: What are Insider Trading And th...11 Views
Finance a la shmoop what is insider trading and the securities fraud
Enforcement Act of 1988? all right well the Securities and Exchange Act of 1934
aka the 34 Act made it formally illegal to use inside information in trading
stocks amazingly that used to not be illegal or at least not explicitly so [People gambling]
and it wasn't enforced investing was well a clubby white man's insiders gig
and the boys took care of the boys well since people could make a lot of
money with insider information and thought they wouldn't get caught like [Boy peeing at a urinal]
well who's gonna know that I overheard the CEO of big company talking about a
merger in a Denny's washroom you know some folks pretty much ignored
the law well the 1988 law was basically Congress saying you guys were really [Congressman discussing the 1988 law]
serious about this so this new legislation added some hefty penalties
if you get caught as an inside trader people still trade on insider
information though and they still get caught and they go to jail and they lose [Jail door closes on man]
everything they have so he's got to realize some of us were just born to be
bad...
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