What is the SEC?

The Securities and Exchange Commission (SEC) is a U.S. government agency responsible for regulating securities markets and protecting investors. Essentially, this is an agency designed to make sure there are rules and regulations in place. 

They are created for entities such as brokerage firms, investment funds, and investment advisors with the intention of keeping your investments safe. The SEC helps make sure that investors are treated fairly and know what is happening with their funds. This might seem pretty complex, but let’s break it down by taking a look at the ins and outs of the SEC.

How does the SEC work?

The SEC priority is to protect investors. In fact, their mission has three goals: protecting investors, facilitating capital functioning, and maintaining fair, orderly, and efficient markets. These roles of the SEC are then enforced by different divisions. 

5 divisions of the SEC

Each of the 5 divisions of the SEC has its own set of responsibilities.

Division of Corporate Finance

The responsibility of this division is to ensure that investors are provided with the information they need in order to make informed investment decisions. The Division of Corporate Finance also provides assistance to companies who need help interpreting SEC rules and forms. It also assists with the process of making recommendations to the omission regarding new rules and revisions to existing rules. 

Division of Enforcement

The Division of Enforcement was created to consolidate enforcement activities that were previously handled by the various operating divisions at the commission’s headquarters in Washington. This department is in charge of investigating possible violations of the federal securities laws as well as prosecuting civil suits and administrative proceedings. 

Division of Investment Management

The Division of Investment Management’s primary responsibility is to regulate investment companies and investment advisors. Additionally, they oversee mutual funds and other investment products and services, which investors might want to use when buying a home, sending their kids to college, and preparing for retirement. 

Division of Economic and Risk Analysis

The Division of Economic and Risk Analysis was created in September 2009. This division is involved in a range of SEC activities, including policy-making, rule-making, enforcement, and examinations. It integrates economics and data analytics into the core mission of the SEC. 

Division of Trading and Markets

This division establishes and maintains standards for fair, orderly, and efficient markets. The Division of Trading and Markets also regulates the major securities market participants which include broker-dealers, self-regulatory organizations, and transfer agents. 

Why was the SEC created?

The SEC was created after the stock market crashed in 1929. Congress later passed the Securities Act of 1933 after holding hearings to identify problems and solutions after the stock market crash and increase public confidence. The Securities Exchange Act of 1934 was passed in 1934, and that act is what created the SEC. 

Importance of SEC

The SEC is important because it is designed to protect investors. This means that those who seek your investment dollars and sell you securities are required to tell you the truth about their businesses. They must also treat you fairly and honestly. The SEC rules and regulations protect your investments by enforcing laws and taking actions against those who break them. 

Invest and trust that you’re protected 

The SEC was created to make sure investors feel comfortable. Knowing that the SEC is regulating the securities markets and other entities helps give inventors confidence. 

You can breathe and rest assured that the rules and regulations are set in place to ensure that your information is protected. This means your kids’ college funds and your retirement accounts will be safe thanks to the protection of the 5 divisions of the SEC.

FAQ