After reading this chapter, you should understand the following:
In Chapter 22 "Legal Aspects of Corporate Finance", we examined state law governing a corporation’s issuance and transfer of stock. In Chapter 23 "Corporate Powers and Management", we covered the liability of directors and officers. This chapter extends and ties together the themes raised in Chapter 22 "Legal Aspects of Corporate Finance" and Chapter 23 "Corporate Powers and Management" by examining government regulation of securities and insider trading. Both the registration and the trading of securities are highly regulated by the Securities and Exchange Commission (SEC). A violation of a securities law can lead to severe criminal and civil penalties. But first we examine the question, Why is there a need for securities regulation?