What is the Securities and Exchange Commission (SEC)?

The U.S. SEC is an agency of the U.S. Federal Government. Its primary responsibility is to maintain orderly, fair and efficient markets, and to protect investors by upholding the laws and regulations by which the securities industry is governed.

How does the SEC Regulate the Industry?

The fundamental principal upon which the securities industry is regulated is the premise that all investors, from institutional traders to individuals, are entitled to accurate and timely information upon which they can make their trading decisions. To this end, all public companies are required by the Securities and Exchange Commission to disclose relevant financial and business information, and to make this data freely available to the public.

What are the Responsibilities of the SEC?

In its role enforcing securities laws, the SEC is responsible for taking action against individuals or companies in violation of these laws. These violations involve cases of insider trading, fraud, and the providing of false or misleading information.

It is also within the jurisdiction of the SEC to create new laws, and to amend existing ones.

The SEC is responsible for supervising all the main players in the securities industry, encompassing public exchanges, securities brokers and dealers, investment advisors, and mutual funds. The SEC’s key focus in this capacity is to ensure that fair trading practices are upheld, information is disseminated according to regulations, and to guard against fraud.

What is the History of the Securities and Exchange Commission?

During the 1920s, the trading of securities experienced a huge surge. Prior to the Great Crash of 1929, about 20 million investors were trading on the stock market. When the crash occurred, as well as losing their investments, investors lost their confidence in the markets, and the economy plummeted into what became known as the Great Depression. Banks who had loaned money to investors, as well as the investors themselves, lost large amounts of money during this time.

Identifying the need to take action to alleviate this situation, Congress passed two laws - the Securities Act of 1933 and the Securities Exchange Act of 1934, upon which the SEC were founded in 1934. The initial purpose of the SEC was to restore the confidence of investors by making the markets a fair and honest environment in which to participate.

How is the SEC Structured?

The SEC is governed by five presidentially-appointed Commissioners who each serve a staggered five-year term. One of them is appointed by the President to serve as Chairman of the Commission. To ensure against political bias, no more than three of the Commissioners may belong to the same political party.

A Final Word on the U.S. Securities and Exchange Commission

For the last 80 years, the SEC has been carrying out the responsibilities for which it was created; maintaining an environment where investors can trade securities in an atmosphere of fair trading and full disclosure of relevant information.

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