Securities and Exchange Commission (SEC)
The Securities and Exchange Commission, SEC, is an independent federal agency responsible for overseeing securities markets in order to protect investors, maintain fair securities exchange, and facilitate the formation of capital. Congress created the SEC in 1934 in the wake of the Great Depression to help restore investor confidence in the securities market. It is headed by five representatives, each of whom serves a term of five years. To promote non-partisanism, no more than three representatives may be from the same political party. Their terms are staggered so that only one representative is replaced each year.
What Are Its Goals?
SEC has four primary missions:
- to protect investors;
- maintain fair, orderly, and efficient markets;
- facilitate capital formation; and
- improve disclosure for investors.
The specific duties of the Commission (and its five commissioners) are outlined in Section 10 of the Securities Exchange Act of 1934. These responsibilities include:
- Passing and enforcing rules governing the securities industry
- Filing civil actions when necessary to enforce federal laws
- Developing an annual report on regulatory priorities and initiatives
- Overseeing registered national securities associations
- Evaluating the registration of new types of securities
- Monitoring trading markets for new types of securities
- Assuring that stock exchanges are regulating their members and protecting investors
- Developing rules governing the use of credit rating agencies in practice
- Reviewing certain public company filings for legal and accounting compliance
- Assuring that certain other regulated professionals are complying with rules designed to prevent misconduct
- Publishing information on a variety of matters, including securities trading practices, financial disclosure, etc.
- Reviewing applications by companies planning to go public.
Divisions of the SEC
The SEC has five divisions to interpret and enforce securities laws, provide oversight, and coordinate regulation at different levels of government. The five divisions are:
- Division of Corporate Finance: Provides investors with material information to ensure that they can make informed investment decisions.
- Division of Enforcement: Investigates cases and prosecutes civil suits to ensure that SEC regulations are maintained.
The SEC does not process criminal suits, however, it does work closely with organizations that do, such as the Department of Justice.
- Division of Investment Management: Provides regulation of financial institutions like investment companies and advisors.
- Division of Economic and Risk Analysis: Incorporates economic and statistical data into SEC regulations.
- Division of Trading and markets: Maintains standards for fair and orderly markets.
Examples of SEC Cases
Today the SEC continues its history of facilitating a fair and legal market space for investors. It is involved in nearly every major case of financial misconduct, with its most common offenses being insider trading, accounting fraud, and the dissemination of misleading or false information.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.