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 Parts of Dodd-Frank were repealed by the Economic Growth, Regulatory Relief and Consumer Protection Act signed by President Donald Trump in 2018.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
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Checks and Balances: Definition, Examples, and How They Work
MiFID II: Definition, Regulations, Who It Affects, and Purpose
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Basel Accords Guard Against Financial Shocks
What Is Adjudication? Definition, How It Works, Types, and Example
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Exchange Controls: Meaning & How Companies Get Around Them
Williams Act
Williams Act
Financial Advisor Planning With Clients at Office
Attorney-in-Fact: Definition, Types, Powers and Duties
Block Trade: Definition, How It Works, and Example
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Bundle of Rights Definition in Real Estate and What's Included
Delivered-at-Place (DAP) Definition: How It Works and Obligations
Statute of Frauds: Purpose, Contracts It Covers, and Exceptions
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What Is a CUSIP Number, and How Do I Find a Stock or Bond CUSIP?
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Markets in Financial Instruments Directive (MiFID) Definition
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Credit Support Annex (CSA): What It Is and How It Works
Stock Investment
What Is a Qualified Institutional Buyer (QIB), and Who Qualifies?
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How War Affects the Modern Stock Market
Shadow Banking System: Definition, Examples, and How It Works
Legal & Contract Signature
What Is the Best Execution Rule?
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Asset-Backed Commercial Paper Money Market Fund (AMLF)
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Process
Standardization
What Is the Threshold Securities List? Definition and Criteria
Financial Shenanigans
The Regulations That Govern Banking in India
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Attorney's Letter
Trans-Pacific Partnership (TPP) Definition
Accountant's Letter
Accountant's Letter
Department of Housing and Urban Development
What the Department of Housing and Urban Development Does
What are the legal barriers to vertical integration?
Estoppel
Primary Estoppel Explained, With Requirements & Example
How Strongly Do Regulations Impact the Utilities Sector?
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Which Industry Spends the Most on Lobbying?
Soft Dollars: Definition, Arrangement Examples, Vs. Hard Dollars
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Qualified Professional Asset Manager (QPAM)
Brexit Meaning and Impact: The Truth About the UK Leaving the EU
'Just Say No' Defense
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Principal-Agent Relationship: What It Is, How It Works
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American Rule
ISO 9000
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Exempt Transaction
Clearinghouse: An Essential Intermediary in the Financial Markets
Anti-Diversion Clause
Anti-Diversion Clause
What Is a 1031 Exchange? Know the Rules
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Carriage Paid To (CPT): What It Means, How It Works, Example
Individual Transfer Quota (ITQ)
Field of Use
National Retail Federation (NRF)
Collateral Source Rule
Anticipatory Breach: Contract Law Definition and Example
Business Planning
CRM2
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Financial Services Authority (FSA): What It Was, What Replaced It
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Covered Security
Wrongful Termination Claim
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What Is Regulation CC? Definition, Purpose and How It Works
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What Is the Business Judgment Rule? With Exemptions & Example
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Penny Stock Reform Act
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Boilerplate Language, Uses, History, Examples, Pros & Cons