U.S. Securities and Exchange Commission
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The U.S. Securities and Exchange Commission (SEC) is the U.S. regulatory agency charged with the oversight of securities markets and market participants in the U.S. Its mission is to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation.
Organization and Purpose
The SEC has five commissioners, all of whom are named by the U.S. president, with staggered five-year terms. One appointee is designated as chairman of the SEC and serves as the agency's chief executive. By law, no more than three of the commissioners may belong to the same political party. Elisse B. Walter is the current chairman, having been appointed in November 2012 after the resignation of Mary Schapiro. On January 24, 2013, President Obama nominated Mary Jo White to be the next SEC head. She is currently awaiting confirmation.
The laws and rules that govern the securities industry in the U.S. derive from a singular concept. According to the SEC, "All investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions."
The SEC is the overseer of such market participants as securities exchanges, securities brokers and dealers, investment advisors, and mutual funds. In this area, the SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud.
Through the SEC's enforcement authority, each year hundreds of civil enforcement actions are brought against individuals and companies for violation of the securities laws. Typical infractions include insider trading, accounting fraud, and providing false or misleading information about securities and the companies that issue them.
Investor information is a major source of actions brought by the SEC. To help support investor education, the SEC offers educational information on its Internet Web site, which also includes the EDGAR database of disclosure documents that public companies are required to file with the SEC. The SEC's Office of Investor Education and Advocacy,  which provides a variety of services to address the problems and questions investors face, also serves in advisory capacity to the Alliance for Investor Education.
Though it is the primary overseer and regulator of the U.S. securities markets, according to the SEC, it "works closely with many other institutions, including Congress, other federal departments and agencies, the self-regulatory organizations (e.g. the stock exchanges), state securities regulators, and various private sector organizations. In particular, the chairman of the SEC, together with the chairman of the Federal Reserve, the Secretary of the Treasury, and the chairman of the Commodity Futures Trading Commission, serves as a member of the President's Working Group on Financial Markets."
The SEC's functional responsibilities are organized into four divisions and 18 offices, each of which is headquartered in Washington, DC. The Commission has approximately 3,800 staff located in Washington and in 11 regional offices throughout the country.
The SEC was created in 1934 after the Great Market Crash of 1929, during the days of the ensuing U.S. Depression. Prior to the Crash of 1929, there was little support for federal regulation of the securities markets.
According to the SEC, "Tempted by promises of 'rags to riches' transformations and easy credit, most investors gave little thought to the systemic risk that arose from widespread abuse of margin financing and unreliable information about the securities in which they were investing. During the 1920s, approximately 20 million large and small shareholders took advantage of post-war prosperity and set out to make their fortunes in the stock market. It is estimated that of the $50 billion in new securities offered during this period, half became worthless."
Congress passed the Securities Act of 1933. Along with the Securities Exchange Act of 1934, which created the SEC, it was designed to restore investor confidence in U.S. capital markets by providing investors and the markets with more reliable information and clear rules of honest dealing. President Franklin D. Roosevelt appointed Joseph P. Kennedy, former President John F. Kennedy's father, to serve as the first chairman of the SEC.
Monitoring the securities industry requires a highly coordinated effort. Congress established the Securities and Exchange Commission (SEC) in 1934 to enforce the newly-passed securities laws, to promote stability in the markets and, most importantly, to protect investors.
In July of 2009, the Obama administration sent Congress legislation designed to protect investors by bolstering the authority of the SEC. The proposal unveiled was part of the sweeping plan for overhauling the U.S. financial rule book that the administration is pressing lawmakers to enact to help avert another meltdown. It sought to put investment advisers providing services to retail investors and stockbrokers under the same standards of conduct, and to strengthen rules governing the timing and quality of disclosures by investment funds.
On September 5, 2014, the SEC named Tracey McNeil, a longtime SEC official, its first ever ombudsman, a role mandated by the 2010 Dodd-Frank financial overhaul. McNeil will act as a liaison in resolving problems that retail investors may have with the Commission.
- Obama to designate SEC's Walter as chairman. MarketWatch.
- Tough-as-Nails Prosecutor White to Tackle SEC Policy Stalemates. Bloomberg.
- "The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation". Securities and Exchange Commission.
- EDGAR database info page. Securities and Exchange Commission.
- Investor Information. U.S. Securities and Exchange Commission.
- Members. Alliance for Investor Education.
- Administration Seeks To Bolster SEC's Authority. Yahoo News.
- SEC Names Ombudsman. The Wall Street Journal.