Securities market refers to a place, where the buyers and sellers can come together and make economic transactions. However, this platform will be available only for financial trading. In fact, the securities market is a subset of the overall financial market, which is belonging under the money market. It will deliver an institutional framework for the efficient flow of capital to the enterprises from investors. This kind of a space is required to facilitate the proper flow of surplus as well as household savings in order to fulfill the capital requirements of the enterprise.
What exactly are securities?
Securities are the financial instruments, which are issued by the government, financial institutions, and companies with the objective of raising funds. Investors will usually go ahead and purchase these securities. They do it with the surplus savings that they have. The main reason on why they go ahead with such purchases is to convert those savings into financial assets, which are capable of delivering profitable returns. This would eventually help them to have a secure platform, which is satisfying the goals that they have.
Why do the securities market need regulators?
It is important for the securities market to have well-defined regulators. That’s because the regulators will be able to properly regulate the market and overcome the activities of fraud, manipulations, tunneling, and insider trading that can happen. For example, we can see how numerous irregular activities have taken place in the securities markets in the past. The NSEL Scam is a popular example to prove the above-mentioned fact. When there are regulators, it is possible to keep such activities away from happening. Hence, all the people who interact with the securities market will be provided with a fair environment for proceeding with their trading activities.
Example for a reason on why regulators are needed – Insider trading
Insider trading is the act, where people purchase or sell stocks while relying on information that is not available for the public. It can either be stocks or any other security. This is a direct breaching of the fiduciary duty. Hence, you need to ensure that you don’t commit insider trading at any given time.
You will be able to get to know about the stocks that are up for sale on the company that you are working for. However, these stocks might not be available to any other party. In other words, your company might not have published information about stocks to the public. In such a situation, you should not purchase insider trading. That’s because it has the ability to create an impact on the stock price of the company.
In most of the instances, an insider trader is a person who has fiduciary duty. However, any other person working for the institution can commit this offense as well. You just need to keep your eyes wide open and make sure that you are not getting involved with any of the insider trading activities. Then you will be able to overcome all the negative consequences that would come on your way.
How does insider trading work?
Let’s deep dive into the facts and learn more on how insider trading is working. Insider trading can take place when there is no fiduciary duty present. For example, it can take place when there is corporate espionage. There are organized crimes, where people gain access to the systems of companies and get their hands on the personal information. Then those details will be used for their crime activities.
Insider trading has the ability to help a person to get all the useful facts, which will be able to help him with securing profits. On the other hand, insider information can also be used to reduce the losses that you have to face. However, you will be doing that by abusing the powers that you have. Hence, you need to make sure that you are not abusing the position of power of knowledge that you have. It becomes illegal because it causes unfair advantage to all the other people that you know.
ICMAgroup says If you are prosecuted for insider trading, you will lose your job. On the other hand, it will cause a black mark on your career and you will have to go through a difficult time when you are trying to secure a job in the future.
However, it is also important to keep in mind that not all the insider trading is illegal. That’s because there are numerous factors, which determine whether insider trading is illegal or not. You will be able to get in touch with a corporate attorney and get more facts on this. If you are in doubt, you shouldn’t proceed with anything. Instead, you will need to tell your problem to the attorney and seek assistance. Then you will be able to confirm whether you are going to commit any crime or not.
Understanding the penalties for insider trading
It is worthy to have a clear understanding about the penalties that are associated with insider trading as well. Then you will be able to refrain from encountering the negative consequences linked with those penalties.
The penalties associated with insider trading would vary depending on the situation. For example, there is a monetary penalty that you have to pay. On top of that, you will have to spend your time in the jail as well. It all depends on the severity of the case that you commit. Hence, you need to keep the facts in mind and make sure that you don’t commit insider trading.
Final words
Now you have a clear understanding about one of the most common reasons on why regulators are required to be present in the securities trading. While keeping this in mind, you can learn the important role that the regulators play. They will ensure the betterment of the overall securities market and help investors to be exposed to fair trading activities.
