5 Functions of the U.S. Securities and Exchange Commission

Investing is a complex world that can be very intimidating to a beginner. It’s also a world that offers a lot of unique opportunities. Investing can be very financially rewarding for those with a talent for making the right moves at the right time.

The Securities and Exchange Commission (SEC) was created during the Great Depression. In 1934, the passage of the Securities Exchange Act was designed to increase trust in capital markets by providing honest and accurate information for investors. In the modern world, the SEC has a number of important functions, but its overall mission is to protect investors and maintain a fair and orderly market.

1. Looking Toward the Future

Protection continues to become more important as more first-time investors enter the market. The economy is struggling, and many younger people are seeking ways of increasing their wealth and saving for the future. The SEC is working to oversee security transactions while promoting capital formation that can sustain and improve economic growth. The healthier our economy gets, the easier it will be for everyday families to make it.

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2. Creating Fair Markets

The SEC has a special division that’s designed to provide a daily overview of the activities of the market. The major participants, including the clearing agencies, exchanges, credit rating agencies and security firms, are all watched by this division of the SEC. It also helps establish new rules and policies by examining and interpreting matters that affect operations within the securities markets.

3. Ensuring Corporate Disclosure

The Division of Corporation Finance works with the SEC to implement the rules and regulations established in the Securities Act of 1934. The main objective of this division is to make sure that corporations provide investors with honest information regarding securities. Without this protection, there would be a great deal more fraud surrounding transactions. The SEC reviews documents, such as yearly reports that are sent out to shareholders.

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4. Protecting Investors

Along with making sure that corporations provide full disclosure, the SEC also looks after the investors themselves. The Division of Investment Management handles this duty. They regulate businesses that are engaged in investing and protect individual investors with mutual funds by making sure that the information about the investments is fully disclosed.

5. Enforcing the Law

If the SEC obtains evidence of violations, they can bring civil actions in court. The Division of Enforcement handles this type of situation. This division uses intelligence like investor tips, surveillance and information from other divisions to determine the nature of certain situations. When dealing with criminal activities, they will work with other law-enforcement agencies to handle the problem. Such cases often end up in federal court after the initial evidence has been gathered.

The SEC is a regulatory agency. While it does work with law enforcement, it can’t be expected to oversee every unique transaction. If you’re an investor, you will need to do your own research and figure out how to make smart decisions. Investing is and always will be a gamble, but with strong regulations in place, everyone will have a better chance of success.