Laws & Regulations

U.S. and global financial markets are governed by rules and regulations intended to protect investors and consumers, and promote financial stability.

Frequently Asked Questions
  • How do pyramid schemes work?

    A pyramid scheme is a fraudulent business model premised on recruiting an ever-increasing number of investors whose fees and commissions are passed up the pyramid to earlier investors. Founders will recruit a few early investors whose return on investment depends on their ability to recruit more investors. This cycle of recruitment to profit repeats until eventually there’s no one left willing to join the “business” and the scheme implodes. “Investments” often include membership fees and the money new recruits pay for products they expect to resell.

  • What exactly did Bernie Madoff do?

    The ponzi scheme run by Bernie Madoff for nearly two decades was pretty simple. Madoff convinced clients that he could manage their wealth and net them reliable annual returns that were good but not miraculous. Once he had their money, he would deposit it in a bank account rather than invest it. And when a client asked to cash out, he simply withdrew their initial investment plus 15% or so. All the while, Madoff used his reputation as a respected Wall Street insider and sensible wealth manger to recruit new clients whose investments were passed off as profit.

  • What’s the difference between bribery and lobbying?

    Bribery involves an explicit agreement between two parties, usually individuals, that one will help the other circumvent standard processes or laws in exchange for some form of compensation (usually money). Lobbying, on the other hand, does not involve an explicit agreement or conditions; instead, lobbyists liaise with politicians to advocate for policies on behalf of their clients and donate to political campaigns to help industry-friendly leaders win increasingly expensive elections.

  • What is the Dodd-Frank Act?

    The Dodd-Frank Wall Street Reform and Consumer Protection Act is a piece of legislation passed by Congress in 2010 in response to the 2008 financial crisis. The act created multiple new regulatory bodies, including the Consumer Financial Protection Bureau (CFPB) and the Financial Stability Oversight Committee. It also enacted the Volcker Rule, which limits the speculative investments that banks are allowed to make. Parts of Dodd-Frank were repealed by the Economic Growth, Regulatory Relief and Consumer Protection Act signed by President Donald Trump in 2018.

Key Terms
Stare Decisis
Stare Decisis: What It Means in Law, With Examples
Checks and Balances
Checks and Balances: Definition, Examples, and How They Work
MiFID II: Definition, Regulations, Who It Affects, and Purpose
Basel on the Rhine at Night -- Basel, Switzerland
Basel Accords Guard Against Financial Shocks
What Is Adjudication? Definition, How It Works, Types, and Example
Full Frame Shot of Paper Currencies on Table
Exchange Controls: Meaning & How Companies Get Around Them
Williams Act
Williams Act: What it Means, How it Works
Financial Advisor Planning With Clients at Office
Attorney-in-Fact: Definition, Types, Powers and Duties
Block Trade: A large, privately negotiated securities transaction.
Block Trade: Definition, How It Works, and Example
Please Sign Here
Bundle of Rights Definition in Real Estate and What's Included
Delivered-at-Place (DAP) Definition, How It Works, and Obligations
Statute of Frauds: A legal concept stipulating that certain types of contracts must be executed in writing to be valid.
Statute of Frauds: Purpose, Contracts It Covers, and Exceptions
CUSIP Number
What Is a CUSIP Number, and How Do I Find a Stock or Bond CUSIP?
Markets in Financial Instruments Directive (MiFID)
Markets in Financial Instruments Directive (MiFID) Definition
Couple Signing Contract
Credit Support Annex (CSA): What It Is and How It Works
Qualified Institutional Buyer (QIB): A class of investor that can safely be assumed to be a sophisticated investor and hence does not require the regulatory protection that the Securities Act's registration provisions give to investors.
What Is a Qualified Institutional Buyer (QIB), and Who Qualifies?
Soldiers on the battlefield
How War Affects the Modern Stock Market
Shadow Banking System
Shadow Banking System: Definition, Examples, and How It Works
Legal & Contract Signature
Best Execution Rule: What it is, Requirements and FAQ
Asset-Backed Commercial Paper Money Market Fund (AMLF)
Asset-Backed Commercial Paper Money Market Fund (AMLF)
How Government Regulation Impacts the Railroads Sector?
Circuit Breaker: Temporary measures that halt trading to curb panic-selling on stock exchanges.
What Is a Circuit Breaker in Trading? How Is It Triggered?
What Is the Threshold Securities List? Definition and Criteria
Financial Shenanigans: What It Means, How It Works
The Regulations That Govern Banking in India
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Attorney's Letter: What it is, Accounting, Auditing
Trans-Pacific Partnership: Meaning, Overview, Alternatives
Accountant's Letter
Accountant's Letter: What It Is, How It Works
Department of Housing and Urban Development
What the Department of Housing and Urban Development Does
What are the legal barriers to vertical integration?
Promissory Estoppel
Promissory Estoppel Explained, With Requirements & Example
How Strongly Do Regulations Impact the Utilities Sector?
Businessman Lobbying for His Cause
Which Industry Spends the Most on Lobbying?
Soft Dollars: Definition, Arrangement Examples, Vs. Hard Dollars
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Qualified Professional Asset Manager (QPAM)
'Just Say No' Defense
Principle-Agent Relationship: An arrangement in which one entity legally appoints another to act on its behalf.
Principal-Agent Relationship: What It Is, How It Works
Environmental Leaders Support No On Recall, Yes On Bustamante
American Rule: Meaning, Exceptions, Example
ISO 9000 Standard: Benefits, How to Achieve
Businessman signing document in boardroom
Exempt Transaction: What it is, How it Works
Clearinghouse: An Essential Intermediary in the Financial Markets
Anti-Diversion Clause
Anti-Diversion Clause
What Is a 1031 Exchange? Know the Rules
Carriage Paid To (CPT)
Carriage Paid To (CPT): What It Means, How It Works, Example
Individual Transfer Quota (Itq): What It Is, How It Works
Field Of Use: What It Means, How It Works
National Retail Federation (NRF): Meaning, Foundation, Membership
Collateral Source Rule: What it is, How it Works, Pros and Cons
Anticipatory Breach: Contract Law Definition and Example
Business Planning
CRM2: What it Means, How it Works, Impact
Street in City of London in the Evening, London, UK
Financial Services Authority (FSA): What It Was, What Replaced It
A US flag hanging outside the New York Stock Exchange
Covered Security: What it Means, Tax Handling
Wrongful Termination Claim: Meaning, Types, Filing
pen on check
What Is Regulation CC? Definition, Purpose and How It Works
Businessmen in discussion
What Is the Business Judgment Rule? With Exemptions & Example
What is the minimum liquidity coverage ratio required under Basel III?
Penny Stock Reform Act: What It Is, How It Works
What Are Intellectual Property Rights in Biotechnology?
Signing a boilerplate contract
Boilerplate Language, Uses, History, Examples, Pros & Cons