Final answer:
The Federal Securities Act of 1933, alongside subsequent legislative reforms, empowers the Securities and Exchange Commission to regulate and combat insider trading among investment advisors and other entities involved in the sale of securities.
Step-by-step explanation:
The act that regulates the abuses of insider trading as it applies to investment advisors is primarily the Federal Securities Act of 1933. This law established the legal standards for disclosure of information relevant to publicly traded securities such as stocks and bonds. Alongside complementary legislation and amendments over the years, especially in the 1990s, it led to the creation and empowerment of the Securities and Exchange Commission (SEC), which oversees and enforces federal securities laws, including those about insider trading. Additionally, the SEC ensures that brokers, dealers, and bankers who sell securities meet certain standards of conduct and are held accountable when they engage in practices like insider trading.
Reforms and criticisms of regulations often emerge following economic challenges, such as those posed by the 2008-2009 recession. In response, legislation has evolved to further protect investors and maintain the integrity of financial markets. Banks and financial institutions are now under greater scrutiny, and their regulators are expected to make their findings public and act promptly upon identifying any issues.