Popularly known as SEC, the U.S. Securities and Exchange Commission is responsible for peering over the securities exchange, investment advisors, mutual funds, as well as securities brokers, and dealers to provide a fair deal process, disclose important market information as well as avoid any fraudulent activity. Let’s discuss some more about the Security and Exchange Commission along with its history and how it established itself.
What is the Security And Exchange Commission?
It is a federal government-regulated agency that works independently to protect its investors and maintain an orderly working security market while simultaneously creating and facilitating capital.
The SEC is known to market full disclosure to the public, protect investors from any fraud practices, and also monitor the working of corporate in the United States. They were formed in 1934 by Congress as the pioneer of federal regulators for the securities market.
Book runners that work in underwriting firms also take registration statements that are approved by the SEC. Financial services like brokers/dealers, asset managers, and even firms register with SEC before starting their business.
For example, if you need to exchange stocks, you will need approval from the Security and Exchange Commission. They can even take civil action against lawbreakers and get on board with the justice department for partaking in work on criminal cases.
The main two functions of the SEC in civil suits are to prohibit any future violation by ordering “injunctions” and disgorging illegal profits.
History of the security and exchange commission
In 1929, the US stock market crashed, and so many companies lost all their worth and worked, going into bankruptcy since everybody had false information, and the markets plunged as a result.
Therefore, Congress passed an act known as the Securities Act in the year 1933 and the Security Exchange Act of 1934, which led to the emergence of the SEC. Their main task was to help the companies gain confidence and make statements that were true and honest according to the public. Moreover, brokers and dealers treated their traders/investors fairly.
In 2008, the Great Recession was upon everybody. The SEC was responsible for prosecuting financial companies that led to the crisis and returning money in billion-dollar amounts to the investors.
However, SEC has been criticized for not helping the brokers and managers who were stuck in problems that were not caused by them. However, Wall Street, for example, was jailed for the crimes it committed during the crisis. Other frauds were settled by taking monetary penalties or accepting administrative punishments.
SEC is now responsible for civil enforcement against any fraud firm or individual who does not follow the stipulated rules and regulations and violates them. Some of the many offenses that can be corrected by the SEC include discrediting misleading or false information, finding out the fraudulent activity as well as accounting insider trading practices. This is the major activity carried out by the Securities and Exchange Commission.