The United States Securities and Exchange Commission enforces the federal securities laws that regulate the electronic securities markets, the stock exchanges, options exchanges, and the securities industry as a whole.
The organization was created in 1934 and since then there has been a number of laws established that give it the power that it has to oversee what is happening within the stock exchanges and the futures market. It is very important that the laws are followed or the SEC can impose a penalty on those that do not. Brokers, advisors, traders, financial institutions, and many others are subject to the rules that are set forth by the SEC in order to ensure legitimate trading throughout the markets.
Before the SEC, trading was regulated at the state level. This continued until the Great Depression. It was during the aftermath of the Crash of 1929 that something had to be done to make sure that trading was fair amongst investors so that investors would not be afraid to invest.
The structure of the SEC begins with 5 individuals who are appointed as Commissioners by the U.S. President. To ensure neutrality, no more than three of the commissioners can belong to a specific political party.
There are also 4 divisions with 19 offices. These four divisions have a number of regional offices throughout the United States.
As for what makes up the divisions, there is: Investment Management, Trading and Markets, Corporation Finance, and Enforcement. Since there are so many functions in the SEC regulating securities activity, it works bet when there is a division that takes care of certain tasks. This ensures the smooth running of the SEC and of the markets. For instance, corporation finance is responsible for overseeing the disclosures that public companies make as well as transaction registration.
The self-regulatory organizations also need to be regulated and that is what the Trading and Markets division does. Investment houses and broker-dealer firms fall into this category.
When it comes to investment advisors and mutual funds, the Investment Management Division does all of the managing. This is where the federal security laws are administered. Laws for the public are made, no-action requests can be filed here because it is this divisions responsibility to do so, investment company and advisor filings are reviewed, new SEC rules and regulations are adopted, and so much more. This is, perhaps, the busiest of the divisions.
Lastly, there is the Enforcement Division that works with the other three divisions to enforce the rules and investigate any violations. When the violators are identified, action is brought against those violators. And when there are issues, the SEC may work with other regulatory agencies.
This shows that when you make an investment, you are protected. If something occurs that you feel you've been violated, you can file a claim with the SEC and they will investigate the issue. That way you know that the money you invest is going to be protected. The SEC is meant to encourage investing and not to deter it. Without the SEC, investing would be a very risky activity, but the good news is that it's not other than the usual risk that is involved when investing in a stock, bond, or other investment.
One act that has been prohibited by the SEC is "naked short selling." This was a strategy used to reduce market volatility. When this was brought to the SEC's attention, they prohibited it, protecting investors once more.
So if you're worried about your money when investing, don't worry, the SEC is designed to identify those that are cheating and to make them pay in the worst way when caught.
Our specialists will conduct a custom search to find local planners and advisors who meet your specific requirements.
"There are lots of choices out there when it comes to financial advice, and it was honestly overwhelming - but this site helped me narrow my search down to only the most knowledgeable and affordable advisors around!"
Laura D, Boston MA