Capital Market and Capital Market Regulations

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The capital market is an essential part of the United States financial and economic world now and has been for the past 100 or so years. For the amount of the public getting involved in the capital market, it is essential for a solid base of understanding to be built. This not solely helps in avoiding potential frauds but also in maximizing returns and profit for one who is actively or planning to be involved in the market. This article aims to explain what the capital market is, what are the essential controlling factors, and essential regulatory drivers of the capital market. 

The capital market is where securities are traded and sold, or in other words the stock market. Securities are stocks, bonds, shares of investment funds, and digital assets. The capital market plays a crucial role for the United States' economical standpoint and businesses. The regulatory and overseeing organization of the stock market is the Securities and Exchange Commission, that is the SEC. The SEC makes laws and controls operations of the capital market to minimize fraudulent actions and trades and promote the health of the market. Certain “fundamental concepts” control how and why the SEC puts in regulatory processes. 

The SEC has five "fundamental concepts” that help in understanding capital market processes and regulatory practices. I will omit the “Retail and institutional investors.” concept as it does not prove essential to this blog. 

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The first is "regulatory philosophy", as the name suggests relating to regulatory processes. The SEC main focus is giving investors all the necessary information to avoid loss of profit. This "regulatory philosophy" aids in ensuring this happens. The second concept of the five is Public and private securities offerings. This relates to how securities are sold, stating that all securities are registered with SEC or have a specific exception. The third concept is Primary and secondary markets, relating to the types of markets that trade securities. Secondary markets are where securities are traded to provide an environment where stocks can be traded in heavier volumes while avoiding decrease in values(liquidity). Primary markets are where stocks are first issued in both private and public trade environments. Finally, the fourth concept is Capital formation and investor protection, the SEC’s most important goals. The goal is to protect investors and produce as much securities/profit or capital as possible.

It is also worth noting that the SEC is divided into divisions, each has its own function and value. These divisions are Corporation Finance Division, Enforcement Division, Examinations Division, Investment Management Division,Trading and Markets Division, and Economic and Risk Analysis Division. The name of these divisions are self explanatory.

As mentioned earlier, the SEC has regulations in place that encase the quality and safety of the market. A few of the major ones are the Securities Act of 1933, Securities Exchange Act of 1934, Investment Company Act of 1940, Investment Advisers Act of 1940, Sarbanes-Oxley Act of 2002, and Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Securities Act of 1933 ensures investors are given essential information to avoid fraud of securities. This requires companies to make essential information public, this information is deemed by the SEC. Securities Act of 1933 ensures investors are given essential information to avoid fraud of securities. Law requires companies to make essential information public, this information is deemed by the SEC. Securities Exchange Act of 1934 created the SEC and governs the secondary market. The Investment Company Act of 1940 regulates investment companies (mutual funds). The Investment Advisers Act of 1940 makes sure Investment Advisers are given wages for promoting securities. This act outlines and regulates Investment Advisers and requests them to register with the SEC. The Sarbanes-Oxley Act of 2002 improves reliability of financial reporting, and reporting of reporting overall by creating a committee. Finally, the Dodd-Frank Wall Street Reform and Consumer Protection Act makes the SEC save shares of those in debt along with easing regulatory requirements for startups in securities.

That's the capital Market.

"Capital Markets and Securities Regulation: Overview and Policy Issues." Congress.gov, Library of Congress, 6 January 2026, https://www.congress.gov/crs-product/R48521.