SEC - the main American regulator of the stock market

In today's article, we will look at the SEC. The abbreviation of this shortcut is United States Securities and Exchange Commission. You can compare it to equivalent to the Polish Securities Commission.

The Securities and Exchange Commission of the United States has many key functions that shape regulations in the markets. Its basic task is to enforce federal law regarding trading in securities. He also supervises and controls the securities market, stock exchanges and options. Therefore, it has a wide influence not only on the enforcement of regulations on these levels, but also on their shaping. The SEC is based on three main values ​​that create its operation. It is the protection of investors, supporting them in building capital and maintaining the integrity and efficiency of stock market trading.

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A brief history of the SEC

The US Securities and Exchange Commission was created by the American Congress in 1934. As in most of the history of domestic regulators, it was established to regulate trading in shares, bonds and other securities. One of the main motivators for its creation was the period after the stock market crash of 29 October 1929. The study of the causes of the beginning of the crisis prompted the Securities and Exchange Commission to take appropriate changes in the trading system. Controls on issues and trading in securities have practically never existed before. It was an area where it was practically possible  any way and on a large scale allow fraud and manipulation on the securities market.

Prior to the adoption of the Securities Exchange Act of 1934 in the United States, so-called blue sky laws. It was only a very general set of rules whose task was to regulate the public offer of companies. In addition, the sale of securities came under control. These rights were intended to reduce the risk of manipulation, fraud and abuse in the stock market. Very soon it turned out that they are practically ineffective. Only the Act on Securities Trading of 1934 contributed to the creation of the SEC. Regulatory  the stock exchange, brokers, brokerage houses and, what is more important, also the over-the-counter markets were to be subject to. A law was also introduced that allowed for the control of reports and financial information that generated companies for investors.

Jurisdictions of the Securities and Exchange Commission

The SEC's main office is in Washington, United States. In addition, there are 11 regional offices, which are located in Chicago, Los Angeles, Philadelphia, Boston, Fort Worth, New York, San Francisco, Atlanta, Denver, Miami and Salt Lake City. In addition, the SEC has designated four major divisions.

The Trade and Markets Division is responsible for the supervision of entities such as the Financial Industry Regulatory Authority (FINRA, Financial Sector Authority) or Municipal Securities Rulemaking Board (MSRB). Additionally, they are subject to her  all brokerage companies  and investment houses.

The investment management division is a "department" that deals with the control of registered investment companies. This also applies to investment funds as well as registered investment advisers. This division is responsible for federal securities regulations, with a strong emphasis on the law on investment funds. Apart from the above-mentioned responsibilities, the main tasks of investment management are interpreting regulations and regulations for public use. In addition, he deals with personnel inspection, control of investment company documents and investment advisors.

The SEC Finance Corporation is primarily responsible for overseeing public companies. Her duties are broadly understood here. We mean in particular the monitoring of their financial statements and the registration of transactions (eg mergers) carried out by public enterprises.

The last division of the so-called executive. There are not strictly defined tasks like previous divisions. Works with the other three pillars. Thanks to this disclosure of the violation related to the stock exchange. He deals with the preparation of proceedings allowing to enter the court path leading to bringing to justice the people who violate the law. The SEC has the right to prosecute in two modes: civil action or administrative proceedings.

Awards for helping with the "Whistleblow" program

The commission has a special mandate from Congress to reward people who help track crime. Messages delivered to the SEC must be relevant enough to lead to enforcement actions by the authority and facilitate the investigation to a significant extent. The commission pays rewards to informers in the range of 10-30% of the awarded penalty, the monetization of which exceeds $ 1 million. A record was set in 2018. The award for the "Whistleblow" program was over 88 million. In contrast, the highest financial penalty ever awarded by the SEC was $ 550 million and was imposed on one of the companies listed on Wall Street.

Summation

The SEC is undoubtedly a very influential institution if we refer to the creation of market conditions in which the American stock market turns every day. It is therefore worth knowing not only its main decision-making bodies, but also the way in which they are responsible for shaping the regulations.