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How does the Securities Market Law protect you as an investor?


Welcome to another chapter, dear trader.

Today we are going on a trip to law school to show you a very important concept for all of us who are reading this blog:

The Securities Market Law

It is a regulation that regulates the functioning of the stock market and its main objective is to protect you as an investor.

This law is of great importance in the world of investments, since it establishes the rules and mechanisms necessary to guarantee transparency and security in the market. Establishes the obligations and responsibilities of issuers, intermediaries and other market participants.

What is an investor and why does it need protection?

An investor is a person or entity that invests their money in the stock market with the objective of obtaining a return. Investors can be individuals, companies, investment funds, among others.

The main objective of an investor when investing is obtain a profit, but you must also take into account the risks you face.Investors need protection because the stock market can be very volatile and there are risks associated with investing.

To mention something, stock prices can fluctuate rapidly due to external factors such as the global economy, politics or natural disasters. In addition, there are specific risks associated with each company or issuer, such as financial or legal problems. Here we give you some tips to improve your risk management.

How does the Securities Market Law work to protect investors?

It has several mechanisms:

  • The obligation of issuers to provide complete and truthful information about their financial situation and operations.

  • Intermediaries have the obligation to act with diligence and transparency in their operations.

  • Specifies sanctions for those who fail to comply with market standards and rules. For example, fines or even jail terms may be imposed for those who commit fraud or market manipulation.

  • Establishes specific requirements for public disclosure of financial information by publicly traded companies. This includes annual reports, quarterly reports, and other important financial reports.

Transparency is essential in the stock market because trust is key at all times. It doesn't matter if you buy or sell, there is no room to play with anyone's time or money.

What are regulatory agencies and how do they protect investors?

Regulatory agencies are government entities in charge of supervising and regulating the securities market.

These agencies have the power to impose sanctions and fines on those who fail to comply with the norms and rules of the market.

Some important regulatory agencies include the National Securities Market Commission (CNMV) in Spain, the Securities and Exchange Commission (SEC) in the United States, and the Financial Conduct Authority (FCA) in the United Kingdom.

What are investment prospectuses and why are they important?

Investment prospectuses are legal documents that contain detailed information about a public offering of securities. They provide key information about the issuer, its operations, financial condition and reputation.This law regulates investment prospectuses to ensure that they are complete, accurate and truthful.

Prospectuses must always be reviewed and approved by regulatory authorities before they can be offered publicly.

Audits, financial reports and conflicts of interest

  • Audits are independent reviews conducted by accounting experts to evaluate the financial condition and operations of a company or issuer. They are a necessary filter, since they allow an objective and impartial evaluation of the issuer's financial situation.Listed companies are required to undergo annual audits by independent auditors.

  • Financial reports are documents that contain detailed information about the financial condition and operations of a company or issuer. This is key information about the financial performance of the issuer. Every listed company is required to present annual and quarterly financial reports.

  • Conflicts of interest occur when a person or entity has opposing or divergent interests in a given situation. The Securities Market Law regulates conflicts of interest to ensure that they are handled appropriately and do not negatively affect investors. For example, intermediaries are required to disclose any potential conflicts before conducting a transaction with a customer. Again, sincerity above all.

Always stay very alert

If fraud or stock market malpractice is suspected, immediate steps should be taken to protect your investments so you know what to do.

You can also contact the relevant regulatory authorities to report any suspicious or illegal activity on the market. They have the power to investigate these complaints and impose sanctions if any illegal activity is discovered.

In our world, scammers are as abundant as good opportunities. That's why being part of a strong community is so important.

Save time and money right now with all the power of AI at your fingertips with our indicators.

Let us know what topics you would like to see on the blog below. Success in your operations this week, trader!


For this article, prompts have been used to request information

interpreted and provided by AI (Google Bard). Written and edited

by Kevin David Terán and verified by Pedro Arizaleta and Erwin Sánchez

Cover image by Freepik



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