Derivatives and SEC Enforcement Homepage College of 主页衍生物和SEC执法大学.pptVIP

Clarifications An uninformed investor is one who has no superior information Uninformed is not the same as uneducated or ignorant. An informed investor is one who has information other market participants do not. Clarifications An uninformed investor may be as educated and as sophisticated and knowledgeable and as highly able and trained as an informed investor. It is not superior ability, merit, education, training, birth, social position or any personal attribute that makes the informed investor informed, it’s the fact that they have superior information! :) Clarifications Uninformed investors can compute betas, they have access to all historical information, just not to current value relevant information that is not public. Market efficiency does not imply there are no returns to information -- just that there are none to public information. There still are returns to private information. Derivatives and SEC Enforcement Today we examine the enforcement procedures of the SEC in the context of the use (and abuse) of financial derivatives. Enforcement process has two thrusts: Policing of companies for failure to disclose the extent of speculation in financial derivatives Policing of brokerage firms selling financial derivatives to client firms without sufficient information regarding risks and losses. Understanding financial derivatives What are “financial instruments”? Cash Ownership interest in an entity shares of stock Contractual right to receive or deliver cash Receivables and payables Contractual right to receive or deliver another financial instrument Understanding financial derivatives What is a derivative security? “…a financial agreement whose value is linked to, or derived from, the performance of an underlying asset.” Changes in the value of the underlying asset indirectly affect the value of the derivative. Examples: futures, forwards, swaps, and options. Understanding financial derivatives What is the purpose of derivative securities? They can prov