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A Quick Look Inside the U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

The U.S. Securities and Exchange Commission: A Quick Rundown of the Key Components of the Organization

What the SEC Does
The mission of the SEC is to maintain fair and efficient financial markets and to protect the investing public. The organization aims to promote both integrity and transparency within the market environment, and works with other agencies such as the FTC, thePCAOB, and FINRA. The SEC communicates to public companies in two ways: comment letters and no-action letters. Both forms of communication are part of a two-way discussion with each company up for review. As of 2004, comment letters are available for public review.

The mission and aims are accomplished through a variety of specific goals, which are catered to the various roles within the SEC. For example, maintaining compliance and disclosure within the requirements of the federal securities laws is primarily a function of the Division of Corporation Finance. Similarly, the establishment of an effective regulatory environment through investigations is the primary job of the Division of Enforcement. The internal division structure is explained in more detail below.

History and Background Information
The SEC was created after the Great Depression that followed the Crash of 1929. Congress gave the SEC the authority to bring civil enforcement actions against companies and individuals who have committed a violation of the securities laws. The agency also works with criminal enforcement agencies where there is an accompanying criminal violation, but the SEC does not handle solely criminal matters. The SECmaintains an online database called EDGAR where the investing public can view the periodic reporting information filed by company executives.

Organization of the SEC
The SEC includes five Commissioners who are appointed by the President in staggered-year terms. The agency’s chief executive is designated Chair (the current is Chair Mary Jo White, recently sworn in in April by President Obama). The Commissioners must represent both political parties at all times. Side note – I was fortunate enough to get to watch the swearing in of the two newest Commissioners, Kara Stein and Michael Piwowar.

The agency is organized into five divisions and twenty-three offices, all of which have headquarters in Washington, DC.

Divisions * Corporation Finance: oversees disclosure and registration of transactions * Trading and Markets: monitors industry operations and self-regulatory agencies * Investment Management: reviews registered investment companies * Enforcement: privately investigates violations and brings actions * Economic and Risk Analysis: provides detailed economic and statistical analysis of the marketplace

FACE IT: The SEC Core Values
Easy to remember with the acronym “FACE IT,” the main values practiced within theSEC are: * Fairness * Accountability * Commitment to excellence * Effectiveness * Integrity * Teamwork

The most important laws, of note to every business law student, are as follows:

  • The ‘33 Act: 
    Two basic objectives: investors must receive objective information about securities to be offered for public sale, and companies must refrain from fraud and deceit in the sale of securities.
  • The ‘34 Act
    Requires periodic reporting of information by companies whose securities are publically traded.

The Investment Company Act of 1940
Aimed at minimizing conflicts of interest and regulating the disclosure of investment objectives.

  • “SOX” of 2002
    Mandated more corporate responsibility by way of enhanced financial disclosures and a tightening of the auditing profession.
  • “Dodd-Frank” of 2010
    Created to re-shape the regulatory system at large by focusing on consumer protection, corporate governance, and more transparency.
  • “JOBS Act” of 2012 
    Requires a re-working of the registration requirements to foster economic growth through minimizing burdensome regulations that inhibit the growth of small and mid-size businesses.

[Be on the look-out for a follow-up to this article, which will include more about the Division of Corporation Finance, which is where I am working, as well as what I have learned thus far.]

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