What is the SEC (U.S. Securities and Exchange Commission)? | Definition and History


The U.S. Securities and Exchange Commission (SEC) is a regulatory body overseeing various aspects of the securities market in the United States. It monitors securities exchanges, investment advisors, mutual funds, brokers, and dealers to ensure fair practices, disclose critical market information, and prevent fraudulent activities.

SEC (U.S. Securities and Exchange Commission) in a nutshell

  • The SEC oversees various aspects of the securities market in the US to ensure fair practices and prevent fraud.
  • It operates independently to protect investors and maintain an orderly market while facilitating capital creation.
  • Registration with the SEC is required for financial services such as brokers, dealers, and asset managers.
  • In the area of binary options trading, the SEC has regulated activities in the USA since 2008 and ensures security and compliance.

Understanding the U.S. Securities And Exchange Commission

The U.S. Securities And Exchange Commission 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 Securities 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.

Does the SEC regulate Binary Options?

Yes, the SEC does regulate binary options trading in the United States, having allowed it on exchanges since 2008. The Chicago Board Options Exchange and Nadex followed this decision by introducing standardized binary options tailored to retail traders.

However, it is important to note that the majority of binary options trading takes place outside the US and does not fall under the scope of US regulators. Therefore, US traders must carefully check whether their chosen broker is regulated by the SEC to ensure both security and compliance.

About the author

Percival Knight
Percival Knight is an experienced Binary Options trader for more than ten years. Mainly, he trades 60-second trades at a very high hit rate. My favorite strategies is by using candlesticks and fake-breakouts

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