SEC

Definition

The Securities and Exchange Commission (SEC) is the primary regulatory body responsible for overseeing and enforcing federal securities laws in the United States. Its primary mission is to protect investors, maintain fair and orderly functioning of securities markets, and facilitate capital formation.

5 Must Know Facts For Your Next Test

1. The SEC is an independent federal government agency that was created in 1934 after the stock market crash of 1929 and the Great Depression.
2. The SEC is responsible for overseeing key participants in the securities industry, including securities exchanges, broker-dealers, investment advisors, and mutual funds.
3. The SEC requires public companies to disclose meaningful financial and other information to the public so investors can make informed decisions.
4. The SEC has the authority to investigate potential violations of securities laws and bring civil and criminal enforcement actions against companies and individuals.
5. The SEC plays a critical role in promoting transparency, accountability, and investor protection in the U.S. financial markets.

Review Questions

• Explain the primary objectives and responsibilities of the SEC.
  • The SEC's primary objectives are to protect investors, maintain fair and orderly functioning of securities markets, and facilitate capital formation. To achieve these goals, the SEC is responsible for overseeing key participants in the securities industry, requiring public companies to disclose meaningful financial and other information, and investigating and enforcing violations of securities laws. The SEC plays a critical role in promoting transparency, accountability, and investor protection in the U.S. financial markets.
• Describe the key legislation that established and empowered the SEC.
  • The SEC was established by the Securities Exchange Act of 1934, which gave the agency the authority to regulate the securities industry, including stock exchanges, broker-dealers, and public companies. The Securities Act of 1933 also plays a key role, as it requires companies that offer securities for public sale to register with the SEC and provide investors with detailed financial information. Additionally, the Dodd-Frank Act of 2010 expanded the SEC's regulatory powers in the aftermath of the financial crisis, further enhancing its ability to oversee the financial industry and protect investors.
• Analyze the importance of the SEC's role in promoting transparency and investor protection in the U.S. financial markets.
  • The SEC's role in promoting transparency and investor protection is crucial for the proper functioning and stability of the U.S. financial markets. By requiring public companies to disclose meaningful financial and other information, the SEC helps ensure that investors have access to the data they need to make informed decisions. Additionally, the SEC's enforcement of securities laws and its oversight of key industry participants, such as broker-dealers and investment advisors, help deter fraudulent and manipulative practices that can harm investors. This, in turn, fosters confidence in the markets and facilitates the efficient allocation of capital, which is essential for economic growth and development.

Related terms

Securities Act of 1933: This act requires companies that offer securities for public sale to register with the SEC and provide investors with detailed financial information about the company and the securities being offered.

Securities Exchange Act of 1934: This act established the SEC and gave it the authority to regulate the securities industry, including stock exchanges, broker-dealers, and public companies.

Dodd-Frank Act: This act was passed in 2010 in response to the financial crisis and gave the SEC additional regulatory powers to oversee the financial industry and protect investors.