TradingKey - In the wave of global financial integration, stock market regulation is undergoing unprecedented challenges and transformations. From the Financial Supervisory Service of South Korea pursuing cross-border accountability for international investment banks' illegal short - selling, to the China Securities Regulatory Commission (CSRC) implementing "consistency in foreign and domestic capital" regulation for northbound trading; from the U.S. Department of Justice's antitrust scrutiny of financial institution mergers to the EU's push for the digitization upgrade of the Market Abuse Regulation (MAR)—these international regulatory dynamics collectively outline the multi-dimensional landscape of contemporary stock market regulation.

Origins and Early Development (17th Century - Mid-19th Century)

The stock market originated in Europe, with the Dutch East India Company being the first to issue publicly traded shares. Initially characterized by small-scale and irregular trading rules, regulation was almost non-existent.

Establishment of Regulatory Framework (Mid-19th Century - Early 20th Century)

In response to the market disorder, some countries started enacting relevant regulations and laws to effectively oversee and regulate the stock market. In 1844, the UK passed the Companies Act, which mandated that companies must issue detailed prospectuses. In 1864, the New York Stock Exchange established strict membership behavioral guidelines and trading rules, thereby initiating a system of self-regulation within the exchange.

Evolution of Regulations Post-Crisis (Early 20th Century - 1970s)

The 1929 stock market crash in the U.S. triggered the Great Depression, leading countries to prioritize stock market regulation. The U.S. enacted the Securities Act of 1933 and the Securities Exchange Act of 1934, creating the Securities and Exchange Commission (SEC) to enhance disclosure and combat illegal activities. As the stock market evolved, various nations continued to introduce regulations in response to market crises, including the Black Monday crash of 1987 and the dot-com bubble burst in the early 21st century.

Globalization Phase (1970s - Present)

Global economic integration has propelled the internationalization of stock markets, with cross-border trading becoming increasingly frequent and international regulatory cooperation strengthening. In 1988, the Basel Committee released the Basel Accord, profoundly impacting capital flows and risk control in stock markets. Countries continue to refine their regulatory frameworks to address financial innovations and market changes.

International Organization of Securities Commissions (IOSCO)

As the authoritative organization in global securities regulation, IOSCO includes members from over 130 countries and regions' securities regulatory bodies, representing more than 95% of the world's securities market capitalization. IOSCO aims to protect investors, ensure market fairness and efficiency, and mitigate systemic risks by establishing core principles for securities regulation.

United States

The SEC, as the core regulatory entity in the U.S. financial market, wields extensive powers, overseeing security issuances, trading activities, and the behavior of market participants. The SEC enforces strict information disclosure requirements, mandating that publicly listed companies regularly disclose detailed financial statements and conditions, as well as their operational performance. Moreover, the SEC is actively engaged in the vigorous prosecution of insider trading and market manipulation cases, imposing severe penalties on those found guilty. Additionally, comprehensive legal frameworks, such as the landmark 1933 Securities Act and the pivotal 1934 Securities Exchange Act, provide a robust legal foundation for regulation and ensure the stability of the stock market.

Japan

The Financial Services Agency (FSA) oversees Japan's financial market, enforcing comprehensive regulations. Its responsibilities include developing and implementing financial laws, supervising financial institutions, maintaining market stability, and protecting investors' rights, promoting the healthy development of the Japanese stock market through various measures.

Europe

The European Securities and Markets Authority (ESMA) strives to establish unified regulatory standards and rules, facilitating the integrated development of European capital markets. Various European countries also contribute to market regulation, with the UK's Financial Conduct Authority (FCA) adopting a rigorous regulatory style that values conduct guidelines and investor protection. The Federal Financial Supervisory Authority (BaFin) in Germany focuses on risk management and systemic stability through robust monitoring mechanisms, while France’s Autorité des Marchés Financiers (AMF) emphasizes market transparency and fairness, vigilantly supervising listed companies to curb manipulation and fraud.

Securities Regulations: Foundations and Principles

Securities regulations serve as the cornerstone for stock markets, ensuring a fair, orderly, and efficient operation. They cover all aspects and participants of the market, supplying a legal basis for regulation. Although different countries have varying regulations, some core principles are universally applicable, such as the Securities Act of 1933 and the Securities Exchange Act of 1934 in the U.S.

Information Disclosure System

Publicly listed companies are required to periodically disclose financial statements, operational status, and significant events. For instance, Apple publishes detailed financial reports quarterly, enabling investors to make informed decisions. This system safeguards investors' right to information, enhancing market transparency and trust while promoting healthy market development.

Prohibition of Insider Trading and Market Manipulation

Insider trading involves individuals using non-public information for unjust gains, while market manipulation misleads investor decision-making. Securities regulations impose strict penalties on these illegal activities, as highlighted by the harsh repercussions faced by executives in the Enron scandal, underscoring the importance of combating such conduct.

Compliance and enforcement mechanisms are crucial components of the regulatory environment governing the stock market. Regulatory bodies use various strategies to ensure adherence to laws among market participants. They continuously monitor the stock market, detect potential violations promptly, and assess market behavior for compliance. Regular audits of market participants’ financial reports and business practices, overseen by professional auditing teams, validate the authenticity of financial information and enhance transparency in financial operations, thereby maintaining market stability.

The Importance of Compliance

For market participants seeking to operate legally in the securities market, compliance with regulatory requirements is paramount. Complying offers multi-dimensional value:

Protection Mechanism: Strictly enforced regulatory standards effectively safeguard client assets, employee rights, and investor profits, creating a buffer against risks for market participants.

Reputational Capital Accumulation: In an era of tightening regulations, compliance records have become critical indicators of corporate governance, directly influencing market access and investor trust.

Competitive Advantage Building: As corporate social responsibility scrutiny becomes more detailed, compliance capabilities have evolved into core competencies, significantly enhancing bargaining power and brand equity in capital markets.

Future regulatory trends will exhibit three main features: first, digitalization of rules, such as the widespread use of blockchain for the record - keeping; second, cross-border collaboration, illustrated by regional data-sharing agreements; and third, proactive risk management, such as the normalization of macroprudential stress - testing. Investors need to keep abreast of regulatory developments, such as the proposed U.S. global tariff policy set for implementation in 2025, which may indirectly impact compliance costs for cross-border investments through data provisions in trade agreements.