Note: Sample below may appear distorted but all corresponding word document files contain proper formattingExcerpt from Term Paper:
This would help to protect those people who invest in these kinds of companies, and also help them feel safer in doing so. In addition, it would protect the people who work for these companies so they could be less concerned about whether they will lose jobs if the company were to suddenly fold up based on things like bad accounting practices and lying. That is what happened with Enron, and people who had worked at the company for years and were close to retirement suddenly found that they had no job and no pension. A tightening of SEC rules would not completely prevent this, but would go a long way toward helping protect people from unscrupulous companies.
From reviewing the literature, it would appear as though the SEC has some problems in its organization, but also that they fail to deal with a lot of the issues that are outside of the organization. This is one of the biggest concerns for people who are involved in the market in any way, and is an especially large concern for those who rely on other people and their expertise to invest and trade safely for them. There is always some risk when it comes to investing in the market, but that does not mean that these people who trust others should have to fear for the safety of their money based on whether the broker is trying to cheat them or the company is overinflated and on the verge of collapse.
Many of these people may have difficulty making the kind of return on investment they have come to expect, due to the fact that many brokers find ways to trade which are somewhat unsavory. They are able to make the most money for themselves while not allowing much money to be returned to an investor. Naturally, this is a serious problem and it is something which must be remedied in the future.
Although the SEC looks to be uninterested in creating new rules or regulations, it is time that this changes and that the people who deal with this organization decide to take what they do more seriously. They need to ensure that all investors, however small they might be, are protected. Even though it would require dealing with Congress and would also involve a lot of time, it is recommended that the rules and regulations which are created and enforced by the SEC be stricter, so as to help protect people from unsavory and unscrupulous business practices by companies and investment brokers.
It is SEC's job deal with these kinds of people, and when they sit back and wait for what happens next a lot of innocent people are hurt. This can happen because these people did not understand how the market works or because they (wrongly) assumed that someone who had stock offered at a good price was being honest regarding the reasons behind it. Instead, it may have been that the stock was about to drop and an insider tip caused a particular person to try to unload it on others before it fell too sharply.
Another recommendation for the future would be that anyone who is planning to involve themselves in any kind of equities market be very careful about who they deal with. There are a lot of brokerage firms out there, and most people are going to try to pick the cheapest one so they can save on commissions. However, paying less money for a broker does not always provide the best service and is not always better in the long run. The old saying that a person gets what he pays for is generally true in the market just like it is in other places.
It is necessary to keep this kind of information in mind when looking for a broker to deal with or looking at a stock to invest in. Even 'sure things' like technology companies sometimes go wrong, and no one should invest more in any kind of market where he could lose that investment then he can afford to lose. Many people assume it cannot happen to them but it can happen to any person, and losses that were dealt with when technology stocks collapsed in 2000 as well as deceitful business practices that led up to it could occur at any time, to any person, for virtually any reason. Those who choose to invest in this kind of enterprise should be very careful in what they invest in, who they deal with to make their investment, and how much money they actually put toward this kind of investment.
Conclusions in this matter are largely subjective, as there are no hard statistical data sets to be discussed. However, issues like the equities market crash are very touchy and there is a lot of blame and finger-pointing. Companies that collapsed are largely to blame for issues that everyone else faced, but not all of these people and companies can be prosecuted. Those that blatantly lied and have records which can be analyzed could be prosecuted for fraud or other criminal issues.
Those who simply engaged in unethical matters to arrange transactions will be much more likely to get away with the things that they did. There are a lot of former employees in these companies that are suffering, even though it has been years. Some people who were nearing retirement age are troubled because of the pension they lost. Others are worried that they will never be able to find the kind of employment and pay scale they were enjoying before the crash. As for investors, a large majority of them were scared off from other technology stocks even if a company was reliable, and this hurt technology overall. Based on what a few disreputable companies chose to do, it looks as though technology companies will never again grow as big as they did. It can now be seen that much of the growth of a lot of these companies was not legitimate, but was only inflated in order to get more people to invest so that more money could be made.
Some technology companies, like Microsoft, still remain large and will continue to do so. However, Microsoft grew for its abilities, not because of false accounting practices and other difficulties. Even Microsoft can get into trouble sometimes for practices that are too monopolistic, and some other issues which could be considered unethical.
Other technology companies are having a hard time continuing on, and investors even now are still concerned about investing in these kinds of companies, because they remember the losses they suffered in 2000 through 2002. It would appear this will not be allowed to take place again, but it is still very important that studies like this one exist and issues be analyzed in the hope of ensuring this type of problem can be completely prevented in the future. Without a change in some SEC rules, and without companies being required to have better accounting practices and more auditing, it is clear this issue will not actually be corrected and people who invest in the market will still take more risks than are necessary, based on standard risk assessments taken for market investment.
Choi, SJ. (2001) Promoting Issuer Choice in Securities Regulation, 41 VA. J. INT'L L. 815
Clements, J. (Sept. 11, 2002). The Stock Market Isn't as Bad as You Think. The Right Moves for Tough Times, WALL ST. J., at D1
Jacob, J., Lys, TZ, & Neale, MA. (1999) Expertise in Forecasting Performance of Security…[continue]
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