u.s. securities and exchange commission


  • [14] Kennedy’s team defined four missions for the new Commission: (1) to restore investor confidence in the securities market, which had practically collapsed; (2) to restore
    integrity to securities markets by prosecuting and eliminating fraudulent and unsound practices targeting investors; (3) to end million-dollar insider trading by top officials of major corporations; and (4) to establish a complex and universal
    system of registration for securities sold in America, with a clear-cut set of deadlines, rules and guidelines.

  • The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929.

  • [51] According to POGO, in the prior two years, the SEC had taken no action on 27 out of 52 recommended reforms suggested in Inspector General reports, and still had a “pending”
    status on 197 of the 312 recommendations made in audit reports.

  • This office has played a role in such areas as working with the Financial Accounting Standards Board to develop Generally Accepted 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; • The Office of Compliance, Inspections and Examinations,
    which inspects broker-dealers, stock exchanges, credit rating agencies, registered investment companies, including both closed-end and open-end (mutual funds) investment companies, money funds.

  • [60][61] The program began in 2011 with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and allows whistleblowers to be given 10-30% of the penalties
    collected by the SEC and other agencies as a result of the whistleblower’s information.

  • The Securities Exchange Act of 1934 also gave the SEC the power to regulate the solicitation of proxies, though some of the rules the SEC has since proposed (like the universal
    proxy) have been controversial.

  • § 77a), which federally regulates original issues of securities across state lines, primarily by requiring that issuing companies register distributions prior to sale so that
    investors may access basic financial information and make informed decisions.

  • [47] On September 26, 2016, Democratic senator Mark Warner sent a letter to the SEC, asking them to evaluate whether the current disclosure regime was adequate, citing the
    low number of companies’ disclosures to date.

  • This division’s responsibilities include:[20] • assisting the Commission in interpreting laws and regulations for the public and SEC inspection and enforcement staff; • responding
    to no-action requests and requests for exemptive relief; • reviewing investment company and investment adviser filings; • assisting the Commission in enforcement matters involving investment companies and advisers; and • advising the commission
    on adapting SEC rules to new circumstances.

  • In addition to annual financial reports, company executives must provide a narrative account, called the “management discussion and analysis” (MD&A), that outlines the previous
    year of operations and explains how the company fared in that time period.

  • For example, as early as 1915, the Investment Bankers Association told its members that they could circumvent blue sky laws by making securities offerings across state lines
    through the mail.

  • [25] • The SEC Office of the Whistleblower provides assistance and information from a whistleblower who knows of possible securities law violations: this can be among the
    most powerful weapons in the law enforcement arsenal of the Securities and Exchange Commission.

  • [61][66] As part of the program, the SEC issues a report to Congress each year and the 2021 report is available here.

  • [10] Founding[edit] See also: Securities Act of 1933 and Securities Exchange Act of 1934 The SEC’s authority was established by the Securities Act of 1933 and Securities Exchange
    Act of 1934; both laws are considered parts of Franklin D. Roosevelt’s New Deal program.

  • Freedom of Information Act processing performance[edit] I In the latest Center for Effective Government analysis of 15 federal agencies which receive the most Freedom of Information
    Act (FOIA) requests published in 2015 (using 2012 and 2013 data, the most recent years available), the SEC was among the 5 lowest performers, earned a D− by scoring 61 out of a possible 100 points, i.e.

  • [27] Section 21F directs the commission to make monetary awards to eligible individuals who voluntarily provide original information that leads to successful Commission enforcement
    actions resulting in the imposition of monetary sanctions over $1,000,000, and certain successful related actions.

  • [56] Destruction of documents[edit] According to former SEC employee and whistleblower Darcy Flynn, also reported by Taibbi, the agency routinely destroyed thousands of documents
    related to preliminary investigations of alleged crimes committed by Deutsche Bank, Goldman Sachs, Lehman Brothers, SAC Capital, and other financial companies involved in the Great Recession that the SEC was supposed to have been regulating.

  • The SEC’s divisions are:[4] • Corporation Finance • Trading and Markets • Investment Management • Enforcement • Economic and Risk Analysis Corporation Finance is the division
    that oversees the disclosure made by public companies, as well as the registration of transactions, such as mergers, made by companies.

  • [74] The SEC also works with federal and state law enforcement agencies to carry out actions against actors alleged to be in violation of the securities laws.

  • The Division is involved across the entire range of SEC activities, including policy-making, rule-making, enforcement, and examination.

  • Though the specific provisions of these laws varied among states, they all required the registration of all securities offerings and sales, as well as of every U.S. stockbroker
    and brokerage firm.

  • An analysis of regulatory filings in May 2006 over the prior 12 months indicated, that the SEC had not accomplished what it said it would do.

  • [31] In June 2004, the SEC announced that it would publicly post all comment letters, to give investors access to the information in them.

  • NPR quoted University of Denver Sturm College of Law professor Jay Brown as saying: “My initial take on this is it’s a tempest in a teapot,” and Jacob Frenkel, a securities
    lawyer in the Washington, D.C., area, as saying in effect “there’s no allegation the SEC tossed sensitive documents from banks it got under subpoena in high-profile cases that investors and lawmakers care about”.

  • The same online system also takes tips and complaints from investors to help the SEC track down violators of the securities laws.

  • John W. White, the head of the Division of Corporation Finance, told the New York Times in 2006: “We have now resolved the hurdles of posting the information… We expect
    a significant number of new postings in the coming months.

  • [3] List of chairs[edit] See also: List of members of the Securities and Exchange Commission Mary Jo White: April 10, 2013 – January 20, 2017; Jay Clayton: May 4, 2017 – December
    23, 2020; Gary Gensler April 17, 2021 – Incumbent Organizational structure Commission members[edit] Main article: List of members of the Securities and Exchange Commission The commission has five commissioners who are appointed by the President
    of the United States.

  • Mandatory disclosure of financial and other information about the issuer and the security itself gives private individuals as well as large institutions the same basic facts
    about the public companies they invest in, thereby increasing public scrutiny while reducing insider trading and fraud.

  • [32] Operations List of major SEC enforcement actions (2009–12)[edit] Main article: List of major SEC enforcement actions (2009–12) The SEC’s Enforcement Division took a number
    of major actions in 2009–12.

  • The commission also negotiated the largest settlements in the history of the SEC (approximately $51 billion in all) on behalf of investors who purchased auction rate securities
    from six different financial institutions.

  • [11] In 2019, the Securities and Exchange Commission Historical Society introduced an online gallery to illustrate changes in the US securities market structure since the

  • [54] Williams concluded in his 66-page Report that Kotz violated ethics rules by overseeing probes that involved people with whom he had conflicts of interest due to “personal

  • [43] Harry Markopolos complained to the SEC’s Boston office in 2000, telling the SEC staff they should investigate Madoff because it was impossible to legally make the profits
    Madoff claimed using the investment strategies that he said he used.

  • and Registered Investment Advisors; • The Office of International Affairs, which represents the SEC abroad and which negotiates international enforcement information-sharing
    agreements, develops the SEC’s international regulatory policies in areas such as mutual recognition, and helps develop international regulatory standards through organizations such as the International Organization of Securities Commissions
    and the Financial Stability Forum; and • The Office of Information Technology, which supports the commission and staff in information technology, including application development, infrastructure operations.

  • In October 2001 the SEC wrote to CA, Inc., covering 15 items, mostly about CA’s accounting, including 5 about revenue recognition.

  • [26] Created by Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Dodd–Frank Wall Street Reform and Consumer Protection Act amended the Securities
    Exchange Act of 1934 (the “Exchange Act”) by, among other things, adding Section 21F, entitled “Securities Whistleblower Incentives and Protection”.

  • Relationship to other agencies In addition to working with various self-regulatory organizations such as the Financial Industry Regulatory Authority (FINRA), the Securities
    Investor Protection Corporation (SIPC), and Municipal Securities Rulemaking Board (MSRB), the SEC also works with federal agencies, state securities regulators, international securities agencies and law enforcement agencies.

  • However, NSMIA preserves the states’ anti-fraud authority over all securities traded in the state.

  • “[31] No-action letters[edit] No-action letters are letters by the SEC staff indicating that the staff will not recommend to the Commission that the SEC undertake enforcement
    action against a person or company if that entity engages in a particular action.

  • Entities under the SEC’s authority include securities exchanges with physical trading floors such as the New York Stock Exchange, self-regulatory organizations, the Municipal
    Securities Rulemaking Board, NASDAQ, alternative trading systems, and any other persons engaged in transactions for the accounts of others.

  • History Background[edit] Prior to the enactment of the federal securities laws and the creation of the SEC, securities trading was governed by so-called blue sky laws.

  • [40] As a result, Cox said that an investigation would ensue into “all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions
    by staff regarding the firm”.

  • The SEC makes reports available to the public through the EDGAR system.

  • But federal officials say no judge has ruled that papers related to early-stage SEC inquiries are investigative records.

  • [48][49][50] Inspector General office failures[edit] In 2009, the Project on Government Oversight, a government watchdog group, sent a letter to Congress criticizing the SEC
    for failing to implement more than half of the recommendations made to it by its Inspector General.

  • [19] The Division of Investment Management administers various federal securities laws, in particular, the Investment Company Act of 1940 and Investment Advisers Act of 1940.

  • One such use, from 1975 to 2007, was with the nationally recognized statistical rating organization (NRSRO), a credit rating agency that issues credit ratings that the SEC
    permits other financial firms to use for certain regulatory purposes.

  • National Securities Markets Improvement Act of 1996 (NSMIA) addressed this dual system of federal-state regulation by amending Section 18 of the 1933 Act to exempt nationally
    traded securities from state registration, thereby pre-empting state law in this area.

  • [67] In 1988 Executive Order 12631 established the President’s Working Group on Financial Markets.

  • The SEC does not have criminal authority but may refer matters to state and federal prosecutors.

  • [44] In June 2010, the SEC settled a wrongful termination lawsuit with former SEC enforcement lawyer Gary J. Aguirre, who was terminated in September 2005 following his attempt
    to subpoena Wall Street figure John J. Mack in an insider trading case involving hedge fund Pequot Capital Management;[45] Mary Jo White, who later served as chair of the SEC, was at the time representing Morgan Stanley and was involved in
    this case.

  • Related legislation • 1933: Securities Act of 1933 • 1934: Securities Exchange Act of 1934 • 1938: Temporary National Economic Committee (establishment) • 1939: Trust Indenture
    Act of 1939 • 1940: Investment Advisers Act of 1940 • 1940: Investment Company Act of 1940 • 1968: Williams Act (Securities Disclosure Act) • 1982: Garn–St.

  • Flynn also described a meeting at the SEC in which top staff discussed refusing to admit the destruction had taken place, because it was possibly illegal.

  • Regulatory action in the credit crunch[edit] The SEC announced on September 17, 2008, strict new rules to prohibit all forms of “naked short selling” as a measure to reduce
    volatility in turbulent markets.

  • This SEC activity eventually caused a conflict with the National Archives and Records Administration when it was revealed to them in 2010 by Flynn.

  • [8] To achieve its mandate, the SEC enforces the statutory requirement that public companies and other regulated companies submit quarterly and annual reports, as well as
    other periodic reports.

  • The documents included those relating to “Matters Under Inquiry”, or MUI, the name the SEC gives to the first stages of the investigation process.

  • Under the law, those investigative records must be kept for 25 years.

  • In an attempt to level the playing field for all investors, the SEC maintains an online database called EDGAR (the Electronic Data Gathering, Analysis, and Retrieval system)
    online from which investors can access this and other information filed with the agency.

  • [42] Approximately 45 percent of institutional investors thought that better oversight by the SEC could have prevented the Madoff fraud.

  • [11] For the first year of the law’s enactment, the enforcement of the statute rested with the Federal Trade Commission.

  • These laws were enacted and enforced at the state level and regulated the offering and sale of securities to protect the public from fraud.

  • The Division’s activities include providing detailed, high-quality economic and statistical analyses, and specific subject-matter expertise to the Commission and other Divisions/Offices
    and developing customized, analytic tools and analyses to proactively detect market risks indicative of possible violations of the Federal securities laws.


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Photo credit: https://www.flickr.com/photos/calliope/118974357/’]