Securities and Exchange Commission (SEC)

Definition

The SEC is a federal agency responsible for protecting investors, maintaining fair and efficient markets, and facilitating capital formation. It enforces the laws concerning the trading of stocks and bonds.

Analogy

Think of the SEC as a referee in a football game. Just like how referees ensure that all players follow the rules of the game, the SEC ensures that companies follow financial rules when they sell stocks and bonds to prevent fraud or deception.

Related terms

Insider Trading: This refers to buying or selling a security by someone who has access to material, nonpublic information about the security.

Initial Public Offering (IPO): This is when a company first sells its shares to the public.

Securities Fraud: This involves deceptive practices in stock or commodities markets, often leading to investor losses.