Securities and Exchange Commission (SEC): What It Is and What It Does

The Securities and Exchange Commission (SEC) is a U.S. federal agency that regulates the securities markets and protects investors. The SEC was created by the Securities Act of 1933 and the Securities Exchange Act of 1934, which were passed in response to the stock market crash of 1929 and the Great Depression. The SEC’s mission is to promote fair and efficient markets, facilitate capital formation, and enforce federal securities laws.

The SEC has five commissioners who are appointed by the president and confirmed by the Senate. One of them is designated as the chair, who is the head of the agency. The commissioners serve staggered five-year terms and no more than three of them can belong to the same political party. The current chair is Gary Gensler, who took office in April 2021. The SEC has four main divisions and 23 offices that carry out its functions. The divisions are:

Division of Corporation Finance: This division oversees the disclosure and registration of securities offerings, such as initial public offerings (IPOs), mergers and acquisitions, and periodic reports by public companies.

Division of Trading and Markets: This division regulates the activities of broker-dealers, exchanges, clearing agencies, transfer agents, and other market participants. It also sets standards for market integrity, investor protection and fair competition.

Division of Investment Management: This division regulates the investment management industry, including mutual funds, exchange-traded funds (ETFs), investment advisers, and other investment products and services.

Division of Enforcement: This division investigates and prosecutes violations of federal securities laws, such as fraud, insider trading, market manipulation, and accounting irregularities. It can bring civil actions in federal courts or administrative proceedings before an administrative law judge. It can also refer cases to the Department of Justice for criminal prosecution.

The SEC also has several offices that provide support and guidance to the divisions and the public. Some of these offices are:

Office of the General Counsel: This office serves as the chief legal adviser to the SEC and represents the agency in litigation and other legal matters.

Office of Compliance Inspections and Examinations: This office conducts examinations of registered entities, such as broker-dealers, investment advisers, and mutual funds, to assess their compliance with federal securities laws and regulations.

Office of Investor Education and Advocacy: This office provides information and assistance to investors and responds to their complaints and inquiries. It also conducts outreach programs to educate investors about their rights and responsibilities.

Office of Economic Analysis: This office provides economic analysis and research to support the SEC’s rulemaking, enforcement, and examination activities. It also evaluates the economic impact of SEC actions on the markets and investors.

The SEC plays a vital role in maintaining the stability and efficiency of the US exchange and security market, the latest fiasco with major crypto exchanges and protocols is generating intense criticism from crypto enthusiasts and policy makers as this scenario will determine crypto usage in the United States.