Securities and Exchange Commission
Legal Responsibilities
The US Securities and Exchange Commission (SEC) is an independent agency of the government of the United States that holds the principal responsibility for enforcing the federal securities laws, at the same time regulate the securities industry, the nation’s stock and options exchanges and other aspects that are related to the electronic securities markets. The agency was created by section 4 of the Securities Exchange Act of 1934, commonly known as 1934 Act (Cornell University Law School).
The main mission of the SECT is to protect investors, maintain fair, methodical and well-organized markets, at the same time, smooth the progress of capital formation. The rules and laws that govern the securities industry in the country is based on a simple and straightforward concept, that is, all investors, whether large institutions or private individuals, should have the access to a given basic facts about an investments before buying it, and as long as they hold it. In order to achieve this, the agency requires the public companies to disclose meaningful financial and other information to the public. This offer a common pool of knowledge for all the investors to be used for them judges whether to buy, sell or hold a particular security. This is important because, only through the steady flow of appropriate, complete and precise information can people make sound investment decisions. In addition, SEC also supervise the primary entities in the securities world which include securities exchanges, securities brokers and dealers, investment advisers and mutual funds in order to promote the disclosure of vital market-related information, maintain fair deals, at the same time, protect against fraud (U.S. Securities and Exchange Commission, 2008).
Organization and Leadership
Structure
The agency is consists of 5 presidentially-appointed Commissioners, with staggered five-year terms. One of them is designated by the President as the Chairman of the Commission or the chief executive of the agency. By law, there will be no more than three of the Commissioners can be from the same political party which ensures non-partisan. The functional responsibilities of the agency are organized into four divisions and 19 offices, each of which is headquartered in Washington, DC. The agency’s more or less 3,500 staffs are located in Washington and in other 11 Regional Offices in the entire country.
- Divisions and Offices reporting to the Office of the Chairman
- Four Divisions
- Corporation Finance
- Enforcement
- Investment Management
- Trading and Markets
- Fifteen Offices
- Administrative Law Judges
- Chief Accountant
- Interactive Disclosure
- Compliance Inspections and Examinations
- Economic Analysis
- Equal Employment Opportunity
- Executive Director
- Administrative Services
- Financial Management
- Human Resources
- General Counsel
- Information Technology
- Inspector General
- International Affairs
- Investor Education and Advocacy
- Legislative and Intergovernmental Affairs
- Public Affairs
- Risk Assessment
- Secretary
- Four Divisions
- Regional Offices Reporting to both Division of Enforcement and Office of Compliance Inspections and Examinations
- New York Regional Office
- Boston Regional Office
- Philadelphia Regional Office
- Atlanta Regional Office
- Chicago Regional Office
- Miami Regional Office
- Fort Worth Regional Office
- Denver Regional Office
- Salt Lake City Regional Office
- Los Angeles Regional Office
- San Francisco Regional Office
Leaders
Currently, the agency is being lead by 4 commissioners and 1 chairman. Mary L. Schapiro was appointed by President Barrack Obama on January 27, 2009. She overtook the position from Christopher Cox who served the Commission from August 5, 2005 to January 20, 2009. In addition, Chairman Schapiro is being supported by 4 Commissioners: Kathleen Casey, Elisse Walter, Luis Aguilar and Troy Paredes, who overtook the position of Annette Nazareth, Roel Campos, Paul Atkins and Cynthia Glassman. (To see the historical summary of past chairmen and commissioners: http://www.sec.gov/about/commissioner.shtml) (U.S. Securities and Exchange Commission, 2008).
Laws to Enforce Regulations
SEC enforces the Securities Act of 1933, Securities Exchange Act of 1934, Trust Indenture Act of 1939, Investment Company Act of 1940, Investment Advisers Act of 1940 and Sarbanes-Oxley Act of 2002.
Securities Act of 1933
It is commonly referred to as the truth in securities law which focuses on two primary objectives: first is to require that investors receive financial and other vital information about securities being offered for public sale; and prohibit deceit, misrepresentations and other fraud in the sale of securities. The said goals are being accomplished by disclosure of vital information through registration of securities, which enables investors, not the government, to make informed judgments about whether to avail of the securities of a given company. All of domestic and foreign companies must file their registration statement electronically (U.S. Securities and Exchange Commission, 2008).
Securities Exchange Act of 1934
This act empowers the SEC with broad authority over all aspects of the securities industry which include the power to register, control as well as supervise brokerage firms, transfer agents and clear agencies, at the same time handle the securities self regulatory organizations (SROs) of the nation. In addition, the act also identifies and forbids certain types of conduct in the markets, and offers the Commission with disciplinary powers over regulated entities and persons that are connected with them. Above all, the Act enables the SEC to require periodic reporting of information by different companies with publicly traded securities (U.S. Securities and Exchange Commission, 2008).
Trust Indenture Act of 1939
This Act focuses to the debt securities which include bonds, debentures and notes which are being offered for public sale. Although the said securities can be registered under the Securities Act, they may not be offered for sale to the public except that a formal agreement between the issuer of bonds as well as the bondholder, known as the trust indenture, obey and follow the standards of this Act (U.S. Securities and Exchange Commission, 2008).
Investment Company Act of 1940
This Act controls the organization of companies, particularly the mutual funds that are into investing, reinvesting and trading in securities, and whose own securities are offered to the investing public. The said regulation help to minimize the conflict of interest that can be encountered due to the complex operation by requiring companies to disclose their financial condition and investment policies to investors when stock is initially sold on a regular basis. However, this Act does not permit the SEC to directly control the decisions and activities about investments, or even judge the merits of companies’ investments (U.S. Securities and Exchange Commission, 2008).
Sarbanes-Oxley Act of 2002
President Bush signed into law the Sarbanes-Oxley Act of 2002 on July 30, 2002, which was considered as the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt. The act orders a number of changes and reforms in order to improve the corporate responsibility, improve financial disclosures, at the same time fight corporate and accounting fraud. In addition, the said act created the Public Company Accounting Oversight Board (PCAOB), which is responsible in supervising the activities of auditing profession (U.S. Securities and Exchange Commission, 2008).
Bibliography
Cornell University Law School. (n.d.). Securities and Exchange Commission. Retrieved June 18, 2009, from Cornell University Law School: http://www.law.cornell.edu/uscode/15/78d.html
U.S. Securities and Exchange Commission. (2008, December 17). The Investor’s Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation. Retrieved June 18, 2009, from U.S. Securities and Exchange Commission: http://www.sec.gov/about/whatwedo.shtml
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