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USA’s Securities and Exchange Commission (SEC)

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The Securities Exchange Commission or ‘SEC’ is the United States of America’s financial regulatory authority overseeing U.S. financial markets (i.e. assets’ trading, sale, false advertising, etc).

Created in the 1920s to protect against existential risks related to the financial system, the SEC is an independent agency of the USA responsible for enforcing federal securities laws, proposing directives and regulating the financial industry. The SEC has a three-part mission: to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

Origins of the SEC

The SEC (Securities and Exchange Commission), founded in the wake of the 1929 Wall Street Crash, is an independent agency of the U.S. government. Created in 1934 by the Securities Exchange Act of the same year, it was designed to replace so-called blue sky laws, which regulated the offering and sale of securities in the U.S. However, these laws were seen as ineffective – being enforced at the state rather than the federal level, and easily circumvented.

U.S. President Theodore Roosevelt named his friend Joseph P. Kennedy – President John F. Kennedy’s father – as the first chairman of the commission, with the explicit goals of:

– Restoring investor confidence in the securities market (which had all but collapsed in the wake of the 1929 Wall Street Crash)

– Restoring integrity to securities markets by prosecuting fraudulent practices targeting investors

– Ending rife million-dollar insider trading by financial elites

– Establishing a universal system for registering securities sold in the U.S.

What is the SEC’s purpose? 

The SEC’s primary roles are to protect investors, maintain fair, orderly and efficient markets, and to facilitate capital formation. 

The SEC, in accordance with statutory requirements, requires that public companies and other regulated companies submit quarterly, annual and other periodic reports, as well as requiring that company executives file a management discussion and analysis (MD&A) document, wherein they provide a narrative outline of the previous year of operations, explaining how the company fared in that time period. 

The SEC enforces the Securities Exchange Act (1934), the Securities Act (1933), the Trust Indenture Act (1939), the Investment Company Act (1940), the Investment Advisers Act (1940), the Sarbanes–Oxley Act (2002), and other statutes.

What does the SEC oversee? 

The SEC oversees and regulates securities markets.

SEC Organisation 

The SEC is made up of five divisions, and has its headquarters in Washington D.C. The five divisions are: 

  • Corporation Finance
  • Economic and Risk Analysis
  • Enforcement
  • Investment Management
  • Trading and Markets

The SEC has 11 regional offices, in Atlanta, Boston, Chicago, Denver, Fort Worth, Los Angeles, Miami, New York City, Philadelphia, Salt Lake City and San Francisco. 

The SEC and the CFTC

In a nutshell, these are two different organisations with different responsibilities, and with different means of fulfilling those responsibilities at their disposal. 

The most fundamental difference between these two governmental agencies is that the CFTC regulates the derivatives market, while the SEC regulates the securities market. 

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