● As an independent federal regulatory agency established by the US Congress, the Securities and Exchange Commission (SEC) is responsible for regulating the securities markets and is the top agency in the US securities industry.
● The SEC was created by the passage of the Securities Act of 1933 and the Securities Exchange Act of 1934.
● The commission can itself bring civil persecutions against lawbreakers, and also works with the Justice Department on criminal cases.
Understanding the SEC
The SEC is a federal agency responsible for regulating the securities markets and protecting the rights and interests of investors.
The SEC was established according to the Securities Exchange Act of 1934. Since it’s the oldest securities regulatory agency in the world, we generally refer to it when talking about securities rules and regulations.
Established by the US Congress, the SEC is an independent quasi-judicial agency subordinate to the federal government. It is the top agency in the US securities industry.
The SEC was created to protect investors, maintain fair, orderly, and efficient functioning of the securities markets, and facilitate inflow of household and state capital into the capital markets.
Under its influence, Thailand, the Philippines, Sri Lanka, Nigeria, Ghana, and many other countries have set up their own securities regulatory agencies.
History of the SEC
Prior to the SEC’s creation, oversight of the trade in stocks, bonds and other securities was virtually nonexistent, which led to widespread fraud, insider trading and other abuses.
The SEC was created in 1934 as one of President Franklin Roosevelt’s New Deal programs to help fight the devastating economic effects of the Great Depression and prevent any future market calamities.
How the SEC works
After nearly 90 years of development, the SEC is now headquartered in Washington DC. It is headed by five commissioners appointed by the president, whose terms all last five years and one of whom is designated as chair.
According to the introduction on the official website of the SEC (https://www.sec.gov/), the commission now consists of six divisions, namely the Division of Corporate Finance, the Division of Examinations, the Division of Economic and Risk Analysis, the Division of Investment Management, the Division of Enforcement, and the Division of Trading and Markets. Under the six divisions, there’re 26 offices responsible for specific affairs including the Office of Acquisitions and the Office of Investor Education and Advocacy.
The two acts allow the SEC to pursue civil actions against wrongdoers and also work with the Justice Department on criminal cases.
As mentioned in its official website, in civil suits, the SEC seeks two main sanctions to regulate the securities markets:
Injunctions. A person or company that ignores an injunction is subject to fines or imprisonment for contempt.
Civil monetary penalties or the return of illegal profits. The SEC also reserves the right to seek a court order barring or suspending individuals from acting as corporate officers or directors, and bring proceedings including revoking or suspending registration.
In addition, the SEC has adopted its own whistleblower bounty rules. In September 2014, the SEC announced an award of over $30 million to an overseas whistleblower, the largest-ever whistleblower award by that time since the inception of the whistleblower program.(SEC expects to pay whistleblower a record $30 million, Sept.22,2014)