The United States of America has set into place many rules and regulations that govern the investment industry. This is to keep investors safe from any unethical behaviors that investment companies can display. There is a main governing body for the investment industry. This governing body is called the Securities and Exchange Commission or SEC. Investment companies must report their financial information as well as meet up to date educational requirements in order to legally sell investment products in the USA. Investment companies also must agree to a periodic audit of their books and practices.
The SEC protects investors by setting rules and regulations in place. Financial advisers take on the fiduciary responsibility to keep their clients’ best interest in mind when making investments on their behalf. This is to keep the investors safe from any potential wrong doing. Financial advisers oftentimes make a commission off of the investments that are made on the client’s behalf. When the financial adviser makes an investment for the client, it is important that the SEC rules are in place to avoid the adviser from acting unethically in order to make more commission. These rules have prevented many people from losing their money when investing.
Most investments require a certain minimum income level as well as a certain net worth that a potential investor must meet before investing. These are called suitability standards. The suitability standards are often set into place by the SEC when the investment is approved for sale in the USA. These suitability standards are in place to be sure an investor will not be financially destroyed if they make one bad investment. There is no guarantee I the investment industry, but the suitability standards create a cushion for investors to qualify for investments based on their net worth and income.
Having the security of a governing body such as the SEC looking out for investors creates a safer atmosphere in which to invest in the USA. There are many investment products to invest in, and it is important that the financial adviser commit to their due diligence when investing on behalf of their client. This can safeguard the client against potential losses and increase the change for the investor to receive returns on their portfolio. Investing can provide an extremely successful way to build financial freedom and create a nest egg that will provide security for many generations in the future.