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What is the U.S. Securities & Exchange Commission?

What is the U.S. Securities & Exchange Commission?

Lawrence Jean-Louis

When the U.S. stock market crashed in October 1929, securities issued by numerous companies became worthless. As an estimated 20 million U.S. investors flocked to the stock market during the Roaring 20s, the combination of an intensely speculative environment and little regulation resulted in rampant stock fraud. From 1920 to 1929 stocks more than quadrupled in value.

The U.S. Securities and Exchange Commission was created by the passage of the U.S. Securities Act of 1933 and the Securities and Exchange Act of 1934 in the wake of the Great Depression in order to protect investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation. Both acts were in response to the 1929 stock market crash which led to the Great Depression and are considered parts of Franklin D. Roosevelt's New Deal program.

The first chairman of the SEC was former president John F. Kennedy's father Joseph P. Kennedy who identified four missions for the new agency, that it:

  • Restore investor confidence in the securities market
  • Eliminate unsound practices and prosecute those perpetrating fraud against investors
  • End insider trading
  • Create a system for registering securities sold in the U.S.

Headquartered in Washington, D.C., and with 11 regional offices around the country, it’s comprised of five divisions and 23 offices. The five divisions and their respective roles are:

  • Division of Corporation Finance: Oversees corporate disclosure of important information to the public, such as annual and quarterly filings, proxy materials, and registration statements.
  • Division of Trading and Markets: Maintains fair, orderly, and efficient markets. This division provides oversight of the major participants in the markets.
  • Division of Investment Management: Regulates and oversees the investment management industry, including mutual funds, analysts, and investment advisors.
  • Division of Enforcement: Decides which securities law violations to investigate, and works closely with U.S. law enforcement agencies.
  • Division of Economic and Risk Analysis: Uses data analytics to assist the SEC in its mission to protect investors.

The SEC provides investors with access to registration statements, periodic financial reports, and other securities forms through its electronic data-gathering, analysis, and retrieval database, known as EDGAR.

Commissioners are appointed to staggered five-year terms by the president and confirmed by the U.S. Senate, but they may serve for an additional 18 months until a replacement is found. In order to ensure that the SEC remains non-partisan, no more than three can belong to the same political party.

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Lawrence Jean-Louis

Lawrence Jean-Louis