Securities and Exchange Commission
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| Securities and Exchange Commission | |
|---|---|
| Name | Securities and Exchange Commission |
| Formed | 1934 |
| Jurisdiction | United States |
| Headquarters | Washington, D.C. |
| Chief1 name | (Chair) |
Securities and Exchange Commission The Securities and Exchange Commission is an independent federal agency created to regulate securities markets and protect investors. It oversees securities exchanges, broker-dealers, investment advisers and public companies, interacting with institutions such as the Federal Reserve System, Department of Justice (United States), Commodity Futures Trading Commission, Internal Revenue Service, and Public Company Accounting Oversight Board. The agency operates within a statutory framework shaped by landmark statutes and events including the Securities Act of 1933, the Securities Exchange Act of 1934, and responses to crises like the Great Depression and the 2008 financial crisis.
History
The agency was established in the aftermath of the Stock Market Crash of 1929 and the Great Depression as part of reforms associated with the New Deal and initiatives led by President Franklin D. Roosevelt. Early commissioners and staff drew on precedents from regulators such as the Federal Trade Commission and legal work by figures tied to the Securities Act of 1933 and the Securities Exchange Act of 1934. Throughout the 20th century the agency adapted to market developments including the rise of NASDAQ, the expansion of mutual fund markets, and the emergence of derivatives trading. Major legislative and regulatory inflection points involved responses to corporate scandals like Enron, policy shifts under administrations of Ronald Reagan, Bill Clinton, George W. Bush, and Barack Obama, and reforms prompted by the 2008 financial crisis and the subsequent Dodd–Frank Wall Street Reform and Consumer Protection Act.
Organization and Structure
The agency's leadership includes a Chair and Commissioners appointed by the President and confirmed by the United States Senate, paralleling appointment structures seen at the Federal Communications Commission and the Federal Trade Commission. Its internal divisions and offices mirror counterparts such as the Division of Corporation Finance, the Division of Enforcement, the Division of Trading and Markets, and the Office of the Chief Accountant, comparable in function to units within the Public Company Accounting Oversight Board and the Office of the Comptroller of the Currency. The headquarters in Washington, D.C. coordinates with regional offices and staff who interact with market venues like the New York Stock Exchange, NASDAQ, and the Chicago Board Options Exchange. Administrative law and litigation are handled alongside external parties including law firms that represented clients in cases involving Goldman Sachs, Morgan Stanley, J.P. Morgan, and Citigroup.
Powers and Functions
Statutory authority derives from the Securities Exchange Act of 1934 and related statutes, enabling the agency to register securities, require periodic disclosures from issuers such as those listed on the New York Stock Exchange and NASDAQ, and oversee intermediaries like broker-dealers and investment advisers. It administers disclosure frameworks tied to forms and reporting obligations that affect corporations like General Electric, Apple Inc., and Microsoft. The agency sets rules on market conduct, listing standards, proxy solicitation procedures involving entities like Institutional Shareholder Services and Glass Lewis, and governs registration of mutual funds and exchange-traded funds managed by firms including Vanguard and BlackRock.
Enforcement and Investigations
Enforcement staff conduct investigations into alleged violations such as insider trading, accounting fraud, market manipulation, and failures in disclosure, often coordinating with the Department of Justice (United States) and state attorneys general like those of New York and California. High-profile enforcement actions have targeted defendants including Enron, WorldCom, Madoff Investment Securities, Theranos, Bernie Madoff, and financial institutions such as Goldman Sachs and Bank of America. The commission employs administrative proceedings, civil litigation in federal courts such as the United States District Court for the Southern District of New York, and settlement mechanisms exemplified by deferred prosecution agreements used by the Department of Justice (United States) and consent decrees involving multinational banks.
Rulemaking and Regulation
The agency promulgates rules under notice-and-comment procedures established by the Administrative Procedure Act and collaborates with regulatory counterparts like the Financial Industry Regulatory Authority and the Commodity Futures Trading Commission. Rulemakings have addressed topics including Regulation Fair Disclosure, Regulation Best Interest, market structure reforms such as those affecting tick size and Regulation NMS, and transparency initiatives bearing on venue operators like the New York Stock Exchange and NASDAQ. Regulatory debates have involved standards for accounting tied to the Financial Accounting Standards Board and enforcement of auditing rules through interaction with the Public Company Accounting Oversight Board.
Notable Actions and Controversies
Notable enforcement and regulatory episodes include the agency's involvement in actions against Bernie Madoff's Ponzi scheme, scrutiny of accounting scandals at Enron and WorldCom, and examinations of disclosure failures at Theranos. Controversies have involved criticisms over responses to early warnings about Madoff Investment Securities, debates over the adequacy of measures during the 2008 financial crisis, and disputes about the balance between investor protection and market innovation highlighted during matters involving cryptocurrency firms and initial coin offerings. Congressional oversight from committees such as the House Financial Services Committee and the United States Senate Committee on Banking, Housing, and Urban Affairs has frequently shaped public debates and reform proposals.
International Cooperation and Influence
The agency engages in bilateral and multilateral cooperation with counterparts including the European Securities and Markets Authority, the Financial Conduct Authority (United Kingdom), the International Organization of Securities Commissions, and the Basel Committee on Banking Supervision to address cross-border fraud, market fragmentation, and harmonization of disclosure standards. It negotiates enforcement cooperation through memoranda with foreign regulators in jurisdictions such as United Kingdom, Japan, China, and Canada, and participates in international forums responding to crises like the 2008 financial crisis and systemic risks involving institutions linked to Lehman Brothers and AIG.