The Securities and Exchange Commission (“SEC”) is an independent government agency created to regulate corporate securities while maintaining fair market practices. The SEC is commanded by a five-member commission who act cooperatively to enforce the rules and regulations that make up the securities market. Their authority is derived from the Securities Act of 1933 and the Securities Exchange Act of 1934.
According to SEC.gov, the five-member commission oversees approximately $82 trillion in securities trading annually on U.S. equity markets and approximately $40 trillion in the U.S. fixed income market. No company is permitted to offer or sell securities unless the securities are registered with the SEC or an exemption from registration is obtainable. Market participants including brokers, dealers and transfer agents are among those who are required to register with the commission and file updated disclosure documents on a routine basis.
Nationally, the SEC oversees 21 national security exchanges such as the New York Stock Exchange and the Nasdaq Stock Market. There are over 26,000 registered market participants at the moment, and the SEC maintains oversight on all of their activities, including the actions of their nearly one million employees.
Who Does the SEC Protect?
The SEC protects against fraudulent activities that may become apparent in the trading market. In order to maintain a fair and equitable marketplace for investors, the commission strictly prohibits insider trading that deals with buying or selling information that has not been disclosed to the public. In addition to insider trading, the sale of any kind of security without proper registration is forbidden, and the misrepresentation or omission of any material information regarding securities is not a permissible practice. So long as investors remain safeguarded against fraudulent and illegal schemes, the market will facilitate investment and prosper a capital market.
What Happens When the SEC Investigates?
If the SEC ever finds the need to conduct an investigation against a market participant, the commission will do so in a confidential manner so that evidence may be preserved, and companies can have their reputations protected while under investigation. Furthermore, the SEC will generally not notify the company that an investigation is underway, nor will they announce the existence of any particular suspicions. The only instance an investigation will become known to the public is when the matter itself becomes public record; this occurs when the SEC has filed an administrative action against the company.
