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The Securities Exchange Commission was created in 1934 after two major acts were passed. It was created because of a lack of confidence in the stock market following the famous crash that led to the Great Depression. The SEC consists of five commissioners. To keep balance, no more than three commissioners can belong to the same political party. The SEC’s job is to keep a fair market, make important securities information available and enforce compliance through accountability among firms and professionals.
1. Enforces And Interprets Federal Securities Laws
The SEC believes that all large and private investors should be able to learn about investments before spending their money and after they have invested it as well. To do this, the SEC sets forth and enforces laws about making facts and other important investment information available. They check to make sure that public companies comply by disclosing financial information to the public. By doing so, they provide a useful service to potential investors that helps them make important decisions.
Related: What is Securities Fraud?
2. Issues And Amends Rules
In the SEC, there are many rules. To keep their reputation for transparency, they post any proposed rules online at SEC.gov to allow the public to see what changes may be made. They also post proposed amendments to existing rules. This gives the public and securities firms the opportunity to learn about them and voice any concerns. For a rule or amendment to be approved, the commissioners must agree on its specifics. Proposed rules, new rules and rule amendments are all available as far back as the 1990s.
3. Oversees Inspections Of Securities Firms
In addition to overseeing firm inspections, the SEC also oversees inspections of investment advisers, brokers and agencies that provide ratings. If public securities companies do not file the required information or leave out important details, they are investigated. If the questionable act appears to be intentional, the SEC may bring civil or administrative action against a company in federal court. To help them do this, they work closely with law enforcement agencies across the country. Most actions are settled without a trial. All SEC investigations are private and start with informal questioning.
4. Oversees Private Regulatory Organizations
The SEC oversees organizations in auditing, accounting and securities fields. In the SEC, there are several different divisions. The corporate finance division oversees the filing of required financial information of public companies. They must file specific and detailed information with the SEC at certain times. The division of trading and markets makes sure that the securities markets are fair, and the division of investment management works to protect investors by overseeing capital markets such as mutual funds, fund managers and analysts.
5. Coordinates With Authorities
The SEC also coordinates regulation of securities with foreign, federal and state authorities. There are several divisions that work together to accomplish this. To help promote cooperation with national regulatory agencies and maintain a high standard of regulation throughout the world, the SEC works with several international agencies. The international affairs office of the SEC is responsible for negotiations, proposing rule changes and verifying compliance of any international rules. Also, the foreign division works to advance the agenda of the commission. There is also a technical assistance program offered by the foreign division for the benefit of developing countries.
Any student who plans to enter a field related to securities should understand the SEC’s roles and how it impacts related financial companies. As students blossom into independent or corporate professionals, they must also know how to comply with the SEC’s rules.