As investment banks are regulated in the United States?


Investment banks in the United States are continuously reviewed and regulated by the securities Commission and exchange Commission, or sec. They are also sometimes governed by and investigation by Congress. Investment banks technically exist because they are legally different from commercial banks on the basis of prior acts of Congress.

Investment Banks and Glass-Steagall

Investment banks became the official legal name of the next Banking act of 1933 known as the glass-Steagall act. The banking act was a response to the Congress on the financial disaster of the great Depression, where more than 10,000 banks had closed or suspended operations.

Supporters of the glass-Steagall act argue that the financial sector will be less risky by reducing conflicts of interest between banks and customers. Hearings were conducted by the Subcommittee Pecora-glass, to determine whether investors are faced with undue risks, banks with branches security. No significant evidence is presented and it is established that banking should be separated, but protected by Federal Corporation on insurance of deposits, or the FDIC.

This gave rise to investment-only banks. Congress has identified them as banks into insurance business and securities transactions. In contrast, commercial banks are defined as those that took deposits and loans.

The barriers between commercial and investment Bank, was shot in 1999 of the Law on modernization of financial services, or the Gramm-leach-Gramm. This legislation was a broader term adopted for all kinds of monetary intermediaries and financial institutions.

Key Regulations Influencing Congress Investment Banks

Several other influential acts of Congress, and then in the banking Act. The law of 1934 the securities and exchange Commission provided new rules for stock exchanges and broker-dealers. This act created the securities Commission.

Of the act on investment companies and the Law on investment Advisers was adopted in 1940 and the establishment of regulations for consultants, managers and others.

After the fall of the stock market in 1969, there were fears that trading volumes grow too large for investment banks to handle. Congress responded founder securities Corporation for the protection of investors, or sipc.

Investment Bank capital requirements were updated in 1975 with a Single domination of capital, or UNCR. In UNCR forced investment banks to maintain a certain level of liquid assets and to provide detailed information in the quarterly financial and operational combined Uniform, or focus reports.

Problems with various international standards of the Basel capital Agreement of 1988. Although it was primarily designed for commercial banks, it was an important moment in creating supranational rules for financial institutions.

Congress tried to abolish the separation between investment and commercial banks in 1991 and 1995, before managed with the Gramm-leach-Gramm. This act enabled the creation of financial holding companies that could own both commercial banks and investment banks with insurance companies as partners.

The Sarbanes-Oxley act (SOX) was passed in 2002, which was intended to regulate managers and empower auditors. After the financial crisis of 2008, Congress passed the Dodd-Frank wall Street reform and the law On protection of consumer rights. Dodd-Frank brought a huge number of new rules for all types of financial institutions.

Sec regulatory powers affecting investment banks

The powers of the sec are a continuation of those listed in the legislation of Congress. Almost every aspect of investment banking services regulated by the sec. This includes licensing, compensation, reporting, record keeping, accounting, advertising, product offerings and fiduciary duties.

TRC monitors the world securities and its participants, including securities exchanges, brokers and dealers, investment advisers and investment funds. Promoting the disclosure of important market-related information, maintaining integrity and fraud protection is the main mission of the sec.

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