Securities Law and Ethics

Paper Summary:

This paper discusses the laws that protect investors and explores the changes in these laws over the years. The paper examines the conflicts of interest that exist for stock market analysts. The collapse of the stock market in 2002 is explored, describing the cavalier attitude of a securities research analyst that was allowed as the norm during the stock market bubble. The paper assesses current efforts to stop future occurrences, although admits that the prognosis is grim. Too much effort is placed on disclosure and little on eliminating unethical conduct.

From the Paper:

"After the stock market collapsed in 2002, more than seven trillion dollars vanished from the U.S. stock market and from the brokerage accounts and retirement funds of ninety million Americans, a vanishing act helped along by greed and corporate fraud (60 Minutes - the sheriff of Wall Street). The public, whose money was being used, whose interests the financial institutions were committed to serve, and who should have benefited from the financial proceeds of the stock market advances were systematically lied to and defrauded. In one instance a securities research analyst told an institutional investor in an email, "well, ratings and price targets are fairly meaningless anyway . . . but, yes, the `little guy' who isn't smart about the nuances may get misled, such is the nature of my business" (Securities and Exchange Commission Litigation Release No. 18116)."

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