The  Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) is a United States government oversight agency. Its responsibility is to regulate the securities markets and protect investors.

It is an independent federal government regulatory agency that is responsible for protecting investors and maintaining fair and orderly functioning of the securities markets. It also facilitates capital formation.

The United States Securities Act of 1933 and the Securities and Exchange Act of 1934 established the regulator (SEC). It was largely in response to the stock market crash of 1929 that led to the Great Depression.

Created by Congress in 1934, it was the first federal regulator of the securities markets. The SEC promotes full public disclosure and protects investors against fraudulent and manipulative practices in the market.

It monitors corporate takeover actions in the United States and also approves registration statements for bookrunners among underwriting firms.

In general, issues of securities offered in interstate commerce, through the mail or on the Internet, must be registered with the SEC. This is necessary, before they can be sold to investors.

Financial services firms must also register with the SEC to conduct business. Such are broker-dealers, advisory firms and asset managers, as well as their professional representatives.

For instance, they would be responsible for approving any formal bitcoin exchange.

It can itself bring civil actions against lawbreakers. The SEC  also works with the Justice Department on criminal cases.

SEC Functions 

Its primary function is to oversee organizations and individuals in the securities markets. This includes securities exchanges, brokerage firms, dealers, investment advisors, and investment funds.

Through its established securities rules and regulations, the SEC promotes disclosure and sharing of market-related information. It also promotes fair dealing, and protection against fraud.

It provides investors access to registration statements, periodic financial reports, and other securities forms. This is through its electronic data-gathering, analysis, and retrieval database, known as EDGAR.

It is important to note that the Securities And Exchange Commission (SEC) formed in 1934 to help restore investor confidence in the wake of the 1929 stock market crash.

Organization Structure

Five commissioners run the SEC, and each serve a term lasting five years. The president appoints them, one of whom is designated as chairman.

A commissioner may serve for an additional 18 months until an appropriate replacement arises. The law requires that not more than three of the five commissioners come from the same political party. This is in order to promote nonpartisanship.

It consists of five divisions and 24 offices. They aim to interpret and take enforcement actions on securities laws, issue new rules, provide oversight of securities institutions, and coordinate regulation among different levels of government.

Each of the 5 divisions and their roles:

  • Division of Corporate Finance: Ensures investors receive all information relevant to a company’s financial prospects or stock price. This is in order to make informed investment decisions.
  • The Division of Enforcement: In charge of enforcing the regulations by investigating cases. It also regulates by prosecuting civil suits and administrative proceedings.
  • Division of Investment Management: Regulates investment companies, variable insurance products, as well as federally registered investment advisors.
  • The Division of Economic and Risk Analysis: Integrates economics and data analytics into the core mission of the Securities and Exchange Commission.
  • Division of Trading and Markets: Establishes standards and maintains them for fair, orderly, and efficient markets.

The  Securities and Exchange Commission only allows civil actions. That is either in federal court or before an administrative judge.

Criminal cases fall under the jurisdiction of law enforcement agencies that are within the Department of Justice. However, the SEC often works closely with such agencies in providing evidence and assisting with court proceedings.SEC, The  Securities and Exchange Commission (SEC)

SEC, The  Securities and Exchange Commission (SEC)

The SEC seeks two main sanctions in civil suits: Injunctions and Disgorgement

  1. Injunctions are orders prohibiting future violations. A person or company that ignores an injunction will be subject to fines or imprisonment for contempt.
  2. Civil money penalties and the disgorgement of illegal profits (the legally mandated repayment of ill-gotten gains imposed on wrongdoers by the courts).The SEC may also seek a court order barring or suspending individuals from acting as corporate officers or directors in certain cases.

It may also bring a variety of administrative proceedings. These are heard by internal officers and the commission.

Common proceedings include cease and desist orders. They also include revoking or suspending registration, as well as imposing bars or suspensions of employment.

The SEC also serves as the first level of appeal for actions sought by the securities industry’s self-regulatory organizations like FINRA or the New York Stock Exchange.

Among the SEC’s offices, the Office of the Whistleblower stands out. It is one of the most potent means of securities law enforcement.

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