US. Securities and Exchange Commission ( SEC ) is an independent body of the United States federal government. The SEC holds the primary responsibility for enforcing federal securities laws, proposing securities regulations, and regulating securities, stock market and state options, and other activities and organizations, including electronic securities markets in the United States.
In addition to the Securities Exchange Act of 1934, which created it, the SEC enacted the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Companies Act of 1940, the Investment Advisory Act of 1940, the Sarbanes-Oxley Act of 2002, others. The SEC was created by Section 4 of the Securities Exchange Act of 1934 (now codified as 15 U.S.C.Ã, Â ± 78d and commonly referred to as the Exchange Act or the 1934 Act).
Video U.S. Securities and Exchange Commission
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The SEC has a three-part mission: to protect investors; maintain a fair, orderly, and efficient market; and facilitate capital formation.
To achieve its mandate, the SEC enforces the legal provisions that public companies and other regulated companies submit quarterly and annual reports, as well as other periodical reports. In addition to the annual financial statements, company executives must provide a narrative account, called "management discussion and analysis" (MD & amp; A), which describes the previous year of operations and describes how the company fared in that time period. MD & A will usually also touch on the coming year, outlining future goals and approaches for new projects. In an effort to equalize the playing field for all investors, the SEC maintains an online database called EDGAR (Online Data Collection, Analysis and Retrieval System) from which investors can access this and other information submitted to agencies.
Quarterly and semi-annual reports from public companies are very important for investors to make good decisions when investing in the stock market. Unlike banks, investment in the stock market is not guaranteed by the federal government. The potential for big profits needs to be weighed against substantial losses. The compulsory disclosure of financial and other information about publishers and security itself provides private individuals and large institutions the same basic facts about the public companies they invest in, thereby enhancing public scrutiny while reducing insider trading and fraud.
The SEC makes the report publicly available through the EDGAR system. The SEC also offers publications on investment related topics for public education. The same online system also takes tips and complaints from investors to help SEC keep track of securities law breakers. The SEC adheres to a strict policy of never commenting on the existence or status of an ongoing investigation.
Maps U.S. Securities and Exchange Commission
History
Prior to the enactment of federal securities laws and the establishment of the SEC, there are so-called blue sky laws. They are enacted and enforced at the state level, and regulate the supply and sale of securities to protect the public from fraud. Although the specific provisions of this law vary between states, they all require registration of all securities offerings and sales, as well as any US stockbrokers and stockbrokers.
However, the law of the blue sky is generally found to be ineffective. For example, the Association of Investment Entrepreneurs told its members as early as 1915 that they could "disregard" the blue sky law by making securities bidding across country lines by post. After holding a hearing on interstate offenses (commonly known as the Pecora Commission), Congress passed the Securities Act of 1933 (15 US, 77A), which regulates the sale of state securities at the federal level. The Securities Exchange Act of 1934 (15 US, 78d) regulates the sale of securities in the secondary market. Part 4 of the 1934 act of creating the US Securities and Exchange Commission to enforce federal securities laws; both laws are considered part of New Deal legislation Franklin D. Roosevelt.
The Securities Act of 1933 is also known as the "Truth in Securities Act" and "Federal Securities Act", or simply "1933 Act". The aim is to increase public confidence in the capital market by requiring uniform disclosure of information about public securities offerings. The principal designers of the 1933 Act are Huston Thompson, former Chairman of the Federal Trade Commission (FTC), and Walter Miller and Ollie Butler, two lawyers in the Department of Commerce's Foreign Service Division, with input from Justice Louis Brandeis. For the first year of enactment of the law, the enactment of the law was in the hands of the Federal Trade Commission, but this power was transferred to the SEC after its formation in 1934.
In 1934 Roosevelt named his friend Joseph P. Kennedy, a self-made multimillionaire investor and a leader among the Irish-American community, as an insider as chairman who knew Wall Street well enough to clean it up. Two of the other five commissioners are James M. Landis (one of the architects of the 1934 Act and other New Deal laws) and Ferdinand Pecora (Chairman of the Senate and Currency Banking Advisory Committee during his investigation of the banking and Wall Street stock traders practice). Kennedy added a number of bright young lawyers, including William O. Douglas and Abe Fortas, both of whom later became judges. Kennedy's team defined the mission and mode of operation for the SEC, making full use of its various legal powers. The SEC has four missions. First and foremost is to restore investor confidence in the securities market, which has practically collapsed due to doubts about its internal integrity, and fear of external threats allegedly caused by anti-business elements within Roosevelt's government. Secondly, in terms of integrity, the SEC must eliminate penny-ante frauds based on false information, fraudulent devices, and unhealthy rich-fast schemes. The unpleasant element must be prosecuted and closed. Third, and far more important than direct fraud, the SEC must put an end to the maneuvers of millions of dollars by high-ranking corporate officials, where insiders with access to much better information about the company's condition know when to buy or sell its own securities. Strong action against insider trading is given high priority. Finally, the SEC must establish a complex registration system for all securities sold in the United States, with clear deadlines, rules and guidelines that everyone should follow. The proper arrangement of rules is a major challenge faced by smart young lawyers. The SEC succeeded in its four missions, as Kennedy convinced the American business community that they were no longer cheated and tricked and exploited by Wall Street. It becomes a cheerleader for ordinary investors to get back into the market and allow the economy to grow again.
The law requires issuers to register securities distribution with the SEC prior to the interstate sale of these securities, so that investors may have access to basic financial information about the issuing company and the risks involved in investing in the securities concerned. Since 1994, most of the registration statements (and related material) filed with the SEC are accessible through the SEC online system, EDGAR.
The Securities Exchange Act of 1934 is also known as "the Exchange Act" or "the 1934 Act". This law regulates secondary trade between individuals and companies that are often unrelated to issuers of real securities. Entities under the SEC's authority include stock exchanges with physical trading floors such as the New York Stock Exchange (NYSE), self-regulatory organizations (SROs) such as the National Association of Securities Dealers (NASD), Municipal Securities Rulemaking Board (MSRB), online trading platforms NASDAQ Stock Market (NASDAQ) and alternative trading system (ATS), and any other person (eg , securities broker) involved in transactions for other party accounts.
Then the SEC commissioner and chairman including William O. Douglas, Jerome Frank (one of the leaders of the legal realism movement), and William J. Casey (who later led the Central Intelligence Agency under President Ronald Reagan).
Organizational structure
Commission Member
Non-partisan, no more than three Commissioners may come from the same political party. The President also appointed one of the Commissioners as the Chair, the SEC's top executives. However, the President has no power to dismiss the designated Commissioners, a provision made to ensure the independence of the SEC. This problem arose during the 2008 presidential election in connection with the subsequent financial crisis.
Currently, SEC Commissioners are:
Division
In the SEC, there are five divisions. Headquartered in Washington, D.C., the SEC has 11 regional offices throughout the US.
The SEC Division is:
- Corporate Finance
- Trade and Markets
- Investment Management
- Enforcement
- Economic and Risk Analysis
Corporate Finance is a division that oversees disclosures made by public companies, as well as transaction registrations, such as mergers, made by companies. This division is also responsible for operating EDGAR.
The Trade and Markets division oversees regulatory organizations such as the Financial Industry Regulatory Authority (FINRA) and the City Security Decision Making Council (MSRB) and all the brokerage and investment houses. The division also interprets proposed changes to regulations and monitors industrial operations. In practice, the SEC delegates most of its enforcement and makes an authority decision to FINRA. In fact, all trading companies not regulated by other SROs must register as FINRA members. Individuals trading securities must pass the exam administered by FINRA to become a registered representative.
The Investment Management division oversees registered investment companies, which include mutual funds, as well as registered investment advisors. These entities are subject to extensive regulations under various federal securities laws. The Investment Management Division manages various federal securities laws, in particular the Investment Company Act of 1940 and the Investment Advisor Act of 1940. The responsibilities of this division include:
- assist the Commission in interpreting laws and regulations for public inspection and enforcement staff and the SEC;
- responds to no action request and requests for exception assistance;
- reviewing investment companies and filing investment advisers;
- assisting the Commission in law enforcement issues involving investment and advisory firms; and
- advise the Commission to adapt SEC rules to new circumstances.
The Enforcement division works with three other divisions, and other Commission offices, to investigate violations of securities laws and regulations and to bring action against alleged offenders. The SEC generally conducts individual investigations. SEC staff can search voluntarily for documentation and testimony, or can search for formal orders of inquiry from the SEC, enabling staff to force the creation of documents and witness testimony. The SEC may file a civil suit in the US District Court, or administrative proceedings heard by an independent administrative judge (ALJ). The SEC has no criminal authority, but can refer the matter to state and federal prosecutors. Director of the SEC Enforcement Division Robert Khuzami left office in February 2013.
Among the SEC offices are:
- Office of the General Counsel , acting as an agency's "lawyer" before the federal appeals court and providing legal advice to the Commission and other SEC divisions and offices;
- The Head Accounting Firm , which establishes and enforces the accounting and auditing policies set by the SEC. The Office has played a role in such areas as working with the Financial Accounting Standards Board to develop the General Accounting Principles, the Public Company Accounting Oversight Board in developing audit requirements, and the International Accounting Standards Board in advancing the development of International Financial Reporting Standards;
- Compliance, Inspection and Inspection Office , which checks brokers-dealers, stock exchanges, credit rating agencies, registered investment firms, including closed-ended and corporate (mutual) investments, money funds. and Registered Investment Advisor;
- The Office of International Affairs , which represents the SEC abroad and that negotiates international law enforcement sharing agreements, develops SEC's international regulatory policies in areas such as mutual recognition, and helps develop international regulatory standards through organizations such as The Organization of the International Securities Commission and the Financial Stability Forum;
- Investor Education and Advocacy Office , which helps educate the public about the securities market and warn investors of fraud and stock market fraud;
- The Economic Analysis Office , which helps the SEC estimate the economic costs and benefits of its various rules and regulations; and
- Office of Information Technology , which supports the Commission and staff in information technology, including application development, infrastructure operations. and engineering, user support, IT program management, capital planning, security, and enterprise architecture.
- The Inspector General . The SEC announced in January 2013 that it has appointed Carl Hoecker as the new inspector general. He has 22 staff.
- The SEC Whistleblower Office provides help and information from a whistleblower who knows the possibility of breach of securities law: this can be one of the most powerful weapons in the law enforcement warehouse of the Securities and Exchange Commission.. Created by Section 922 of the Wall Street Dodd-Frank Reform and Consumer Protection Act of Dodd-Frank Wall Street Reform and Consumer Protection Act amended to Act of Exchange Securities in 1934 (the "Exchange Act") by, inter alia, adding Section 21F, entitled "Incentives and Protection of Whistleblower Securities." Section 21F directs the Commission to provide monetary awards to eligible individuals who voluntarily provide genuine information leading to successful Commission enforcement action resulting in the imposition of monetary sanctions of more than $ 1,000,000, and certain successful related acts.
SEC communications
Comment alphabet
The comments letter was issued by the SEC Corporate Finance Division in response to the company's public submission. This letter, initially personal, contains a detailed list of requests from the SEC. Each comment in the letter asks the filer to provide additional information, alter submissions submitted, or change the way they are revealed in the coming filing. Filer must reply to each item in the comment letters. The SEC can then reply with follow-up comments. The correspondence is then published.
In October 2001 the SEC wrote to CA, Inc., which included 15 items, mostly on CA accounting, including 5 on revenue recognition. The CA chief executive officer, to whom the letter was addressed, pleaded guilty to fraud in CA in 2004.
In June 2004, the SEC announced that it would publish all comment letters, to give investors access to the information inside. The regulatory archiving analysis in May 2006 for the previous 12 months indicated that the SEC has not completed what it says it will do. The analysis found 212 companies that have reported receiving a letter of comment from the SEC, but only 21 letters to these companies are posted on the SEC website. John W. White, head of the Financial Corporations Division, told the New York Times in 2006: "We have now completed the barrier of posting information.... We expect a significant number of new posts in the coming months."
No-action letters
A letter without action is a letter by SEC staff indicating that the staff will not recommend to the Commission that the SEC executes law enforcement actions against a person or company if the entity is involved in a particular action. These letters are sent in response to a request made when the legal status of an activity is unclear. These letters are released openly and increase the knowledge of what is and is not allowed. They represent staff interpretations of securities laws and, while persuasive, do not bind courts.
One such use, from 1975 to 2007, was with a nationally recognized statistical rating organization (NRSRO), credit rating agencies that issued credit ratings that the SEC allowed other financial firms to use for specific regulatory purposes.
Performance processing of the Freedom of Information Act
In a recent analysis of the Government's Most Effective Center of 15 federal agencies receiving the most Freedom of Information Act (United States) (FOIA) request published in 2015 (using 2012 and 2013 data, recent years available), the SEC is one of 5 performing players low, obtaining D-by a score of 61 out of a possible 100 points, that is not getting a satisfactory overall score. It has deteriorated from D- in 2013.
Operation
List of major SEC enforcement actions (2009-12)
The SEC's Enforcement Division brought a number of key actions in 2009-12.
Setting actions in credit crunch
The SEC announced on 17 September 2008, strict new rules to ban all forms of "bare short selling" as a measure to reduce volatility in volatile markets.
The SEC investigates cases involving individuals who try to manipulate the market by delivering false rumors about a particular financial institution. The Commission has also investigated trade irregularities and abusive short-selling practices. Hedge fund managers, broker-dealers, and institutional investors are also required to disclose under oath certain information relating to their position in credit default swaps. The Commission also negotiated the largest settlements in the history of the SEC (about $ 51 billion entirely) on behalf of investors who bought auction-level securities from six different financial institutions.
Regulatory failures
The SEC has been criticized "for being too 'tentative and fearful' in the face of errors on Wall Street," and for doing "a very bad job of being responsible to the executive".
Christopher Cox, former chairman of the SEC, has acknowledged several organizational failures in relation to Bernard Madoff's fraud. Beginning with an investigation in 1992 into Madoff's only investment fund with Madoff, and which, according to the SEC, promised a "very stable" return, the SEC did not investigate any indication that something was wrong at Madoff's investment firm. The SEC has been accused of losing many red flags and ignoring tipping tips about Madoff's alleged fraud.
As a result, Cox said that the investigation would continue to "all staff contact and relationships with Madoff's family and company, and the impact, if any, on decisions by staff regarding the company". SEC's Assistant Director Eric Swanson's Compliance Investigation Office has met Madoff's nephew, Shana Madoff, when Swanson did the SEC check whether Bernard Madoff was running the Ponzi scheme because he was a corporate compliance lawyer. The investigation closes, and Swanson later leaves the SEC, and marries Shana Madoff.
About 45 percent of institutional investors think that better supervision by the SEC could prevent Madoff's fraud. Harry Markopolos complained to the SEC office in Boston in 2000, telling SEC staff that they should investigate Madoff because it is impossible to legally make a profit that Madoff claimed used his investment strategy.
A similar failure occurred in the case of Allen Stanford, who sold fake deposit certificates to tens of thousands of people, many of them retired working class. In 1997, the SEC inspectors themselves saw the fraud and warned about it. But the Enforcement division will not pursue Stanford, despite repeated warnings by SEC inspectors over the years. After Madoff's fraud appeared, the SEC finally took action against Stanford in 2009.
In June 2010, the SEC resolved a false suspension lawsuit with former SEC lawyer lawyer Gary J. Aguirre, who was dismissed in September 2005 following his attempts to call Wall Street the figure of John J. Mack in an insider trading case involving hedge funds Pequot Capital Management ; Mary Jo White, who at that time represented Morgan Stanley later nominated as chairman of the SEC, was involved in the case. While an insider's case was dropped at the time, a month before the SEC's settlement with Aguirre, the SEC filed a lawsuit against Pequot. The Senate released a report in August 2007 detailing the issue and calling for SEC reforms.
On September 26, democratic senator Mark Warner in a letter asked the SEC to evaluate whether the current disclosure regime is adequate, citing the low number of corporate disclosures to date.
Others criticize the SEC for using a regulatory over-regulation approach and rule enforcement, rather than approaches that emphasize security and learning across the industry and thereby ensure the reliability of national securities trading systems.
Inspector General office failure
In 2009, the Government Oversight Project, the government watchdog group, sent a letter to Congress criticizing the SEC for failing to apply more than half of the recommendations made by the Inspector General. According to POGO, in the preceding two years, the SEC has not taken action against 27 of the 52 suggested reforms recommended in the Inspector General's report, and still has a "pending" status in 197 of the 312 recommendations made in the audit report. Some recommendations include forcing disciplinary action on SEC employees who receive inappropriate gifts or other assistance from financial companies, and investigate and report the cause of failure to detect Madoff's poncho scheme.
In a 2011 article by Matt Taibbi at Rolling Stone, a former SEC employee was interviewed and commented negatively on the Office of the SEC Inspector General (OIG). Going to OIG "is famous as a career killer".
Due to concerns raised by David P. Weber, former SEC Chief Investigator, of the conduct of the SEC Inspector General H. David Kotz, Inspector General David C. Williams of the US Postal Service was brought in for an independent investigation, unexpectedly Kotz's behavior not true in 2012. Williams concluded in his 66-page Report that Kotz violated ethical rules by overseeing an examination involving people with whom he had a conflict of interest because of "personal relationships." The report questioned Kotz's work on Madoff's investigations, inter alia, because Kotz was a "very good friend" with Markopolos. It concludes that while it is not clear when Kotz and Markopolos became friends, it would violate US ethical rules if their relationship started before or during Madoff Kotz's investigation. The report also found that Kotz himself "appears to have a conflict of interest" and should not open his Standford investigation, as he is friends with a female lawyer representing the victim of fraud.
Document destruction
According to former SEC employee and whistleblower Darcy Flynn, also reported by Taibbi, the agency routinely destroyed thousands of documents related to a preliminary investigation into alleged crimes committed by Deutsche Bank, Goldman Sachs, Lehman Brothers, SAC Capital and other financial firms involved in the Great Recession that should be governed by the SEC. Documents include those related to "Matters Under Inquiry", or MUI, names given by the SEC in the first phase of the investigation process. The tradition of destruction began as early as the 1990s. This SEC activity eventually led to a conflict with the National Archives and Archives Administration when it was revealed to them in 2010 by Flynn. Flynn also described a meeting at the SEC where top staff discussed refusing to recognize the destruction that had occurred, as it was probably illegal.
Iowa Republican Senator Charles Grassley, among other things, notes Flynn's request for protection as a disclosure of facts, and the story of agency document handling procedures. The SEC issued a statement defending its procedure. NPR quoted a professor at the University of Denver Sturm College of Law, Jay Brown, saying: "At first I thought this was a tempest in a teapot," and Jacob Frenkel, a securities lawyer in Washington, DC, said "there is no accusation that the SEC threw documents sensitive banks that get subpoena in high-profile cases that investors and lawmakers care about ". NPR concluded its report:
The debate boils down to this: What does an investigative record mean for Congress? And the court? Under the law, an investigation record should be kept for 25 years. But federal officials say no judge has ruled that a paper related to an initial SEC investigation is an investigative record. The SEC's Inspector General said he was conducting a thorough investigation into the allegations. [Kotz] told NPR that he would issue a report by the end of September.
Relationships with other agencies
In addition to working with various self-regulatory organizations such as the Financial Industry Regulatory Authority (FINRA), Securities Investor Protection Company (SIPC), and the City Securities Raising Board (MSRB), the SEC also works with other federal agencies, state securities. regulators, international securities agents and law enforcement agencies.
In 1988, Executive Order 12631 established the Presidential Working Group on Financial Markets. The Working Group is chaired by the Minister of Finance and includes the Chairman of the SEC, Chairman of the Federal Reserve and Chairman of the Commodity Futures Trading Commission. The Working Group's objective is to improve the integrity, efficiency, order and competitiveness of financial markets while maintaining investor confidence.
The Securities Act of 1933 was originally administered by the Federal Trade Commission. The Securities Exchange Act of 1934 transferred this responsibility from the FTC to the SEC. The FTC's primary mission is to promote consumer protection and to combat anticompetitive business practices. The FTC regulates general business practices, while the SEC focuses on the securities market.
The Provisional National Economic Committee was formed by a joint resolution of 52 Stat Congress. 705 on June 16, 1938. It was responsible to report to Congress about the abuse of monopoly power. The committee was bankrupted in 1941, but the record was still under the seal under the SEC command.
The Municipal Securities Retrieval Council (MSRB) was established in 1975 by Congress to develop rules for companies involved in securities and municipal securities trading. MSRB is monitored by the SEC, but MSRB has no authority to enforce its rules.
While most violations of securities laws are enforced by the SEC and the various SROs it monitors, state securities regulators can also enforce blue sky laws across the state. Countries may require securities to be registered in the country before they can be sold there. The National Securities Market Enhancement Act of 1996 (NSMIA) discusses this dual-state regulatory system by altering Section 18 of the 1933 Act to exclude nationally traded securities from state registration, thereby preceding the state law in this area. However, NSMIA maintains the country's anti-fraud authority over all securities traded in the country.
The SEC also works with federal and state law enforcement agencies to take action against actors suspected of violating securities laws.
The SEC is a member of the International Organization of Securities Commission (IOSCO), and uses the IOSCO Multicateral Memorandum of Memorandum as well as direct bilateral agreements with other state securities commissions to deal with cross-border violations in the securities market.
Related Act
- 1933: Securities Act of 1933
- 1934: Securities Exchange Act of 1934
- 1938: Temporary National Economic Committee (establishment)
- 1939: Believe the Indenture Act of 1939
- 1940: Investment Advisory Act of 1940
- 1940: Investment Company Act of 1940
- 1968: Williams Act (Right Disclosure Act)
- 1982: Garn-St. Germain Deposit Insurance Act
- 1999: Gramm-Leach-Bliley Act
- 2000: Modernization of Term Commodities Act of 2000
- 2002: Sarbanes-Oxley Act
- 2003: The Fair and Accurate Credit Accord Act of 2003
- 2006: Loan Agreement Reform Act of 2006
- 2010: Dodd-Frank Wall Street Reform and Consumer Protection Act
- 2012: Volcker Rule (specific section of the Dodd-Frank Act)
- Title 17 of the Federal Regulatory Code
See also
- The Chicago Stock Exchange
- Financial settings
- List of regulatory authorities by country
- Rule D (SEC)
- Securities regulation in the United States
- Securities market participants (United States)
Forms
- SEC archiving
- Form 4 (share ownership and stock ownership and exercise disclosure)
- Form 8-K
- Form 10-K
- Form S-1 (IPO)
References
External links
- Official website
- SEC in the Federal List
- Securities and Exchange Commission Historical Society
- Association of Securities and Exchange Commission (ASECA) Commission
Source of the article : Wikipedia
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