The Securities and Exchange Commission (SEC) was established by the Exchange Act as a government body with the jurisdiction to oversee the securities sector. The SEC has the authority to issue regulations in accordance with the Federal Securities Acts, as well as to enforce federal law and its own rules.
Additionally, Congress can grant the SEC additional powers beyond those contained in the Exchange Act. Most notably, Congress can authorize the SEC to regulate directly under the Constitution if it believes that doing so is necessary to fulfill a role reserved to the federal government under that document. Such legislation would be known as a "constitutional amendment." To date, no such amendment has been proposed to the Senate.
The Federal Trade Commission (FTC) was also established by the Exchange Act as another agency with the power to regulate the securities industry. Like the SEC, the FTC has the authority to issue regulations in accordance with the Federal Trade Commission Act as well as to enforce federal law and its own orders. Unlike the SEC, however, the FTC does not have the power to bring actions in court or conduct investigations. Rather, it must request that the Attorney General file an action on behalf of the United States.
Finally, each state has its own securities regulators who can act alone or in partnership with other states or the federal government to investigate and prosecute violations of securities laws. Some states also have civil enforcement agencies that can pursue claims on behalf of investors or co-conspirators.
The Securities and Exchange Commission (SEC) is a federal organization in the United States that is in charge of regulating the securities markets and safeguarding investors. The SEC has the authority to file civil lawsuits against lawbreakers and collaborates with the Justice Department on criminal prosecutions. Its main office is located at 350 Washington Street, 5th Floor, New York, NY 10281.
As part of its mission to protect investors, promote public interest and ensure the fair market for all securities, the SEC regulates the following:
Securities - includes stocks, bonds, mutual funds, exchange-traded funds and other investment vehicles that are traded on a public market.
Exchanges - specialized trading platforms that match up buyers and sellers in transactions without affecting the price that consumers pay for products. There are two types of exchanges: open outcry where a trader calls out a price and then waits for traders of both parties to step forward; and electronic where an order is submitted to the exchange electronically and it matches up the traders based on criteria such as price and quantity. Most equity options are traded on exchanges.
Brokers - financial intermediaries that provide services to investors by buying or selling securities on their behalf. Brokers do not actually handle money; they work with brokers who do. Banks, investment companies, insurance companies and other large organizations can be brokers.
The SEC was created by Congress in 1934 to replace the American Stock Exchange (ASE) and the New York Stock Exchange (NYSE). Prior to the creation of the SEC, these functions were performed by several different agencies. Today, the SEC has authority over all public companies that sell their stock on any U.S. market. The SEC also regulates broker-dealers, investment banks, hedge funds, private equity firms, and other entities that trade or provide services related to securities.
How did the Securities and Exchange Commission come about? In 1933, after the crash of the Wall Street market, President Roosevelt signed the Securities Act of 1933 into law. This act established the SEC to prevent another market collapse by ensuring that investments are safe and transparent. The SEC began operating on July 2, 1934.
Who are some famous people who work at the Securities and Exchange Commission? Richard Benford was an economist with the Federal Reserve Bank of San Francisco when he joined the SEC in 1992. He now works as an assistant director at the agency. Charles "Chuck" Cox was once the chief operating officer at the SEC before becoming its general counsel in 2005.
The Securities Act and the Exchange Act provide investors with information about the securities they purchase as well as the corporations that issue those securities. The primary way that federal securities laws do this is by forcing corporations to disclose information about themselves and the securities they issue. For example, companies must include a statement of ownership with their annual reports to shareholders. This ensures that investors will know who actually controls a company and what interests they have in its success or failure.
In addition to requiring corporate disclosure, the Securities Act also sets certain standards for the content of these disclosures. For example, companies cannot make statements about their future performance that are "misleading" or fail to include important information about risks involved with investing in their stocks. Violations of the Securities Act can result in fines up to $1 million for each violation or percentage of income, whichever is greater.
The Securities and Exchange Commission (SEC) enforces the federal securities laws. It has the power to investigate companies, bring lawsuits against those it believes have violated the law, and suspend or revoke securities licenses if it finds them to be violating the regulations set out in the Securities Act and the Exchange Act.
Investors should be aware that even if they buy shares of stock from an individual or entity that is not a registered broker-dealer or investment adviser, they may still be dealing with a regulated business.