The Securities Law establishes a comprehensive regulatory framework governing securities companies' business activities. This framework is built on core principles including investor protection, market integrity, risk management, and compliance oversight. Securities companies must operate within strict legal boundaries, with certain practices explicitly prohibited to maintain market stability and protect investors. Understanding these regulatory principles is essential for analyzing which business activities comply with or violate securities law requirements.
Option A involves a securities company providing guarantees for its shareholders through a board resolution. This practice directly violates the Securities Law, which explicitly prohibits securities companies from providing guarantees for any party, including their own shareholders. Such guarantees create significant financial exposure for the company, potentially destabilize market operations, and subject the firm to severe regulatory penalties. The law distinguishes clearly between permitted normal business operations and prohibited guarantee activities. This prohibition exists to protect the financial integrity of securities companies and maintain market stability.
Option B involves securities companies providing financing services for client securities trading. This practice is generally permitted under the Securities Law when conducted through proper licensing and regulatory frameworks. Margin trading and securities lending are legitimate business activities for qualified securities companies. However, compliance requires meeting specific conditions including proper licensing, robust risk management systems, regulatory oversight, and adequate capital requirements. The key distinction is between legitimate licensed financing services and prohibited unlicensed lending activities. When properly regulated and licensed, financing services support market liquidity and client investment strategies while maintaining market integrity.
Option C involves securities companies promising minimum returns of a certain percentage on client investments. This practice directly violates the Securities Law, which strictly prohibits securities companies from guaranteeing investment returns to clients. Such promises create false security for investors and distort the fundamental risk-return relationship in financial markets. The prohibition exists because guaranteed returns can lead to market manipulation, create systemic risks, and undermine investor protection principles. Securities companies must allow market forces to determine investment outcomes rather than making unrealistic return promises that they cannot sustainably fulfill.