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3.10 Smart Investing: Regulations & Returns

Last updated 2 months ago
19 questions
Note from the author:

QUESTION OF THE DAY: What major event caused the federal government to start regulating the stock market? 📷5 min

Answer the question on the first slide in the space below. Then, compare your answer to the answer on the second slide. Finally, follow your teacher’s directions on how to answer the follow-up questions on the last slide.
1

What major event caused the federal government to start regulating the stock market?

INFOGRAPHIC: A Brief History of Regulation

VIDEO: The Securities and Exchange Commission (SEC) vs. Financial Industry Regulatory Authority (FINRA) 📷6 min

The role of federal regulation in the financial markets has a history that dates back to almost 100 years. Read through this infographic that summarizes this history. Then, watch the video to learn more about the role of two important regulatory agencies. Finally, answer the questions.
2
What is the SEC _______ and FINRA_______ ?
1

What is the purpose of the SEC and FINRA?

1

One of the things the Securities Exchange Act of 1934 did was to create reporting and financial disclosure requirements for companies listed on the stock exchange. Why do you think this was an important piece of the legislation?

VIDEO: What is Insider Trading?

ARTICLE: What is Insider Trading and When Is It Legal? 📷8 min

Another thing the Securities Exchange Act of 1934 did was prohibit insider trading. Let’s explore what this is in more detail. Watch this YouTube short and then read the article until you reach the section Legal vs. Illegal Insider Trading. Then, answer the questions.
1
  1. Insider trading is illegal when the trades were made using information that is material and non-public.
  2. Material information is…_______
  3. Non-public information is…_______
1

In your own words, explain how illegal insider trading can give someone an unfair advantage.

1

Most famous examples of insider trading involve CEOs, Directors, and other senior-level roles of corporations. Why do you think it’s still important for the average investor to be aware of insider trading practices?

ACTIVITY: PLAY: Insider Trading Shenanigans

Put your knowledge of insider trading to the test in this activity where you’ll have to decide whether the actions taken are legal or if they’re examples of illegal insider trading. Follow your teacher’s directions to complete this activity.
1

What did you learn from this activity?

EDPUZZLE: Capital Gains Taxes Explained 📷10 min

Now that we've covered the essential rules that keep the stock market fair and transparent, let's consider another way that the government plays a role in the stock market: collecting taxes on investment profits. It's the government's way of getting a share when our investments do well. Watch this video and follow your teacher's directions to answer the questions either in your student activity packet or within the EdPuzzle itself.
1

True or False: The price of a stock you invested in has gone up. You haven't sold the stock, but you should expect to be taxed on the money you have gained.

4

What types of investments might capital gains tax apply to? (Select all that apply)

2

Which of the following are true about short-term capital gains tax? (Select 2 right answers)

2

Long-term capital gains tax is... (Select 2 right answers)

1

How might short and long-term capital gains taxes impact an investor’s decisions?

ARTICLE: Real vs. Nominal Interest Rates 📷7 min

Another factor that can impact your investment returns is inflation. Let’s take a look at the difference between nominal and real interest rates in this article. First, read the section titled Real vs. Nominal Interest Rates. In the second section (What Real & Nominal Interest Rates Mean for You) read only the For Investors section. Finally, answer the questions below.
2
_______ __________ (Nominal/Real) interest rates take inflation into account.
_______ __________ (Nominal/Real) interest rates do not take inflation into account.
1
If you have an investment that gave you a nominal rate of return of 5% and inflation was 2%, what was your real rate of return on investment?_______
2
Which number do you think is more important to consider when calculating your return on investment - the real return or nominal return?_______ Why?_______
1

Which of the following is an example of insider trading?

1

What is one difference between short and long-term capital gains tax?

1

The real rate of return on an investment would allow an investor to…