SEC regulator overview

Judy Rubio

The acronym SEC means the Securities and Exchange Commission. It is a very influential financial regulator. Its main competency is to regulate the US securities market, and its purpose is to protect the interests of individuals who invest in securities. On the “CFTC Financial Regulator” page, you can learn more about the work of another important organization.

The legal framework that the SEC guides

The commission was founded by Roosevelt in 1934 with the goal of preventing a recurrence of the Great Depression caused by the collapse of the US stock market. The following laws were adopted to regulate its activities:

  • Trust Agreement
  • Sarbanes-Oxley Act, which tightens the requirements for financial reporting and disclosure of data on top management and organizational structure. Was adopted after Enron fraudulent scheme detection
  • Securities Market Regulation Act
  • Law on Investment Advisers and Investment Companies

SEC is headed by 5 authorized persons. They are appointed by the President of the United States, after that they must be approved by the Senate.

When the SEC can launch an investigation

  • violation of the law and ethical rules when communicating with a broker and investor;
  • theft of money and securities from a client account controlled by a broker;
  • contractual transactions aimed at manipulating the price of assets;
  • insider trading;
  • concealment of data on securities, as well as misrepresentation;
  • sale of securities registered in improper way.

Key tasks and functions of SEC

  • control of operations in the stock markets of the United States, the fight against manipulation, fraud, securities speculation, as well as the conduct of contractual and insider transactions;
  • absolute control over the work of private regulators, their accounting documents, financial statements, audit;
  • exchange regulation - NASDAQ, NYSE;
  • overseeing compliance with US laws by stock market participants;
  • control over the availability of financial reporting data and other information about the activities of financial intermediaries to investors;
  • control over corporate acquisitions and mergers in the United States. If a transaction is made to purchase more than 5% of the organization, the buyer must notify the SEC. Such a deal may entail monopolization and talk about takeover.

What opportunities for an investor are provided by the SEC license 

  • The investor can get comprehensive information about the broker. The commission obliges brokers to periodically publish financial statements.
  • Protection from unscrupulous brokers. SEC fines may be more than $ 200 million. Sanctions are imposed for manipulation and fraud, as well as in the case of disclosure of corporate information. If someone notifies the broker of the violation, the SEC will reward such a person. Thus, the regulator encourages the work of private auditors.
  • Protecting the rights of market participants in court. Each year, over 400 claims are sent through a court to banks, brokers and investment funds.

The role and importance of SEC is difficult to overestimate. The regulator monitors what is happening on the stock exchanges, builds trusting relationships and offers a remuneration system to auditors and tries to create optimal conditions for investors to work. Perhaps soon he will make a positive decision on Bitcoin ETF, and then the cryptocurrency rate will go up sharply. Why not invest in it now and make money on the growth of quotes in the future?