The SEC (Securities and Exchange Commission): What it is and What it Does for You

The 1920's were heady times for the United States. The Roaring 20's as they have been dubbed were a time of high excitement in the economy. Businesses were growing, the rich were getting even richer at an astounding pace and the stock market was reaching incredible all time highs. For people living at the time it seemed an age of never-ending prosperity.

Then, in October of 1929, it all came to a crashing halt. With the collapse of the stock market and the resulting loss of confidence in the economy the United States was plunged into the worst depression that it has ever seen.

President Franklin Delano Roosevelt, as part of his New Deal signed into law the Securities Act of 1933. One of the 15 major pieces of legislation ushered in by Roosevelt in his first 100 days of office. The Securities Act ensured that investors would be given all important information related to the purchase of securities and to prohibit acts of fraud and deceit in the sale of securities.

In 1934 this legislation was followed with the creation of the Securities and Exchange Commission (SEC). Many had sought such an institution for a long time, but they had been challenged by laissez-faire capitalists who felt that the markets were self-regulating and that government interference would damage the markets and chances for prosperity. With the seeming failure of unregulated capitalism in the crash of 1929 and the Great Depression, the institution was formed to enforce honesty and fairness and boost consumer confidence in the markets.

The first chairman of the SEC was Joseph Kennedy, father of future president John F. Kennedy. To him was given the task of building the new institution and enforcing its rules and regulations on a market unaccustomed to government oversight.

What the SEC Does

It is the mission of the Securities and Exchange Commission to oversee the securities industry, ensuring that companies act openly and honestly while at the same time making sure that investors have the opportunity to gain all information they require to make sound investment decisions.

All major companies and corporations are required to register with the SEC and to make regular reports to the organization. The SEC makes these filings available to the public through its EDGAR (Electronic Data Gathering Analysis and Retrieval) database found at the SEC web site. The web site also offers a wealth of other information for investors to become informed about securities and how security markets work.

When individuals or corporations become involved in wrongdoings such as insider trading, manipulating market prices or omitting information in reports, it is the SEC that steps in to enforce their rules and regulations. They are the watchdog of the securities market to enforce corporate responsibility and to ensure that the American securities market works honestly and with integrity.

There are a number of acts and laws that have been passed since the first Securities Act of 1933 which the SEC enforces. Some of the more important of these include the Securities Exchange Act of 1934, which also created the SEC, Public Utilities Holding Act of 1935, Trust Indenture Act of 1939 and the Investment Company and Investment Advisors Acts of 1940.

If you feel that a company or individual has defrauded you or in some way hurt you in the securities market in violation of the laws regulating companies and the markets, the SEC is the organization with which you file complaints. Complaints may be filed directly to the SEC or through their web site.

Organization of the SEC

The Securities and Exchange Commission is headquartered in Washington DC. It is headed by 5 president appointed commissioners. It is then divided into 4 divisions: The Division of Corporate Finance that oversees corporate disclosure of information, the Division of Market Regulation oversees operation of markets, the Division of Investment Management oversees investment companies and advisors, finally the Division of Enforcement investigates violations of SEC regulations and recommends further legal recourse as violations warrant. Among these 4 divisions are 18 offices which each have their own specific purpose.