What is Securities and Exchange Commission (SEC)?

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The Securities and Exchange Commission (SEC) is America’s stock market regulator, formed after the 1929 Wall Street crash to protect the market from manipulation.

The SEC draws its mandate from two pieces of legislation. These are the Securities Act of 1933 and Securities Exchange Act of 1934. 

Other laws underpinning the SEC’s functions are:

  • the Trust Indenture Act of 1939, 
  • the Investment Company Act of 1940, 
  • the Investment Advisers Act of 1940, 
  • the Sarbanes–Oxley Act of 2002, 
  • and other statutes

Mandate and Jurisdiction

The Securities Act (1933) gives it federal authority to oversee original security issues across the states. It requires that issuing firms deposit their distributions before sales. This way, investors can access crucial financial information helping them make informed financial decisions.

The Securities Exchange Act(1934), on its part, guides secondary securities interactions between people and firms. Often, these interactions don’t relate to the original issuers of securities. 

In executing its mandate, The SEC seeks to achieve three things:

  1. The protection of investors.
  2. It aims at maintaining markets that are just, organized and streamlined.
  3. It is an enabler for capital formation.

How does The SEC achieve Fairness?

To deliver on its mandate, the SEC requires companies to file their quarterly and annual reports. That’s in addition to other reports time after time. Further, company chiefs must give their narrative accounts.

The narrative accounts are also known as management discussion and analysis (MD&A). They provide insights into a company’s performance in a given year. Additionally, they may shed light on the coming year’s projects and goals.

Driving Transparency

The body maintains an  Electronic Data Gathering, Analysis, and Retrieval system (EDGAR). Any investor can use this system to get info the companies have filed with the SEC.

Besides EDGAR, The SEC undertakes public education on investments through publications. The public can file complaints through the system and become a partner in helping the SEC track and stem violations of the securities laws.

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