The U.S. Securities and Exchange Commission, or SEC, is an official federal agency created to protect investors, facilitate capital formation to sustain growth, and maintain efficient, fair, and orderly markets. As more investors enter the market and securities exchanges mature, the role of the SEC becomes more prominent. Within the world of banking, the federal government guarantees deposits.
Securities, however, can lose value so there are no guarantees in the investment world. Rules and laws regarding the securities industry are based on the idea that investors should have access to basic information regarding an investment before they purchase it and while they hold it. The SEC requires that publicly traded companies disclose this information to the public.
The SEC is also responsible for overseeing the key players in the securities arena. These include securities dealers and brokers, securities exchanges, mutual funds, and investment advisors. The agency focuses on fraud protection, maintaining fair dealing, and promoting disclosure of critical information related to the market. It also has enforcement authority regarding securities laws. This enables it to bring hundreds of actions against companies and individuals each year.
Despite its role of primary regulator of securities markets in the U.S., the SEC works with Congress and other federal agencies and departments, self-regulatory organizations like stock exchanges, private sector organizations, and state securities regulators. The Chairman of the SEC is a member of the President’s Working Group on Financial Markets. The Chairman, four Commissioners, and their staff interpret laws, issue and amend rules, and oversee relevant organizations while coordinating U.S. securities regulation with state, federal, and foreign authorities.
The SEC was created after the October 1929 stock market crash. The laws that led to its establishment were developed to restore investor confidence in the capital market. Clear rules regarding honest dealing and the provision of reliable information were at their core and these remain the goals of the modern-day SEC.