Securities and Exchange Commission (United States)
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| Securities and Exchange Commission (United States) | |
|---|---|
| Name | Securities and Exchange Commission |
| Nativename | SEC |
| Formed | December 1934 |
| Jurisdiction | United States federal government |
| Headquarters | Washington, D.C. |
| Chief1 name | Chair |
| Chief1 position | Chair |
| Parent agency | Independent agency |
Securities and Exchange Commission (United States) is an independent federal agency responsible for enforcing federal securities laws, regulating securities markets, and protecting investors. Established in the wake of the Great Depression and the Stock market crash of 1929, it implements legislative mandates enacted by the United States Congress and interprets statutes such as the Securities Act of 1933 and the Securities Exchange Act of 1934. The agency's actions intersect with financial institutions, public companies, and market participants across the New York Stock Exchange, NASDAQ, and other trading venues.
History
The commission was created by the United States Congress through the Securities Exchange Act of 1934 following investigations like those by the Wheeler Committee and public pressure after the Teapot Dome scandal and speculative excesses culminating in the Stock market crash of 1929. Early chairs such as Joseph P. Kennedy Sr. shaped administrative precedents while interactions with presidents including Franklin D. Roosevelt and later Richard Nixon influenced enforcement priorities. During the Great Depression, the commission coordinated with agencies such as the Federal Reserve System and the Treasury Department; subsequent eras saw major legislative developments like the Investment Company Act of 1940 and the Sarbanes–Oxley Act of 2002 following scandals involving Enron, WorldCom, and Arthur Andersen. The commission's role evolved during financial crises including the Savings and loan crisis and the 2007–2008 financial crisis, prompting rulemaking influenced by actors like the Financial Crisis Inquiry Commission and legislation such as the Dodd–Frank Wall Street Reform and Consumer Protection Act.
Organization and Structure
The agency is led by a multi-member commission headed by a Chair appointed by the President of the United States and confirmed by the United States Senate. Commissioners serve staggered terms to provide continuity similar to structures in the Federal Communications Commission and the Federal Trade Commission. Principal offices include divisions modeled on functional counterparts like the Department of Justice—notably the Division of Enforcement and the Division of Corporation Finance—alongside specialized units such as the Office of the Chief Accountant and the Office of Compliance Inspections and Examinations. Field operations coordinate with regional offices in cities including New York City, Chicago, San Francisco, Los Angeles, and Miami, and engage with self-regulatory organizations like the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board.
Functions and Regulatory Authority
Statutory authority derives from enactments such as the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940, granting powers to register securities, require periodic disclosure by issuers, and regulate brokers and dealers. The commission promulgates rules through administrative proceedings akin to rulemaking at the Environmental Protection Agency, issues interpretive releases, and oversees disclosure standards developed in coordination with the American Institute of Certified Public Accountants and the Public Company Accounting Oversight Board. It supervises national securities exchanges, clears rules for derivatives trading venues in consultation with the Commodity Futures Trading Commission, and administers proxy regulation affecting shareholder votes at firms like Berkshire Hathaway and Apple Inc.. The agency also advances investor education through programs connected to entities such as the North American Securities Administrators Association.
Enforcement and Litigation
Enforcement actions are pursued administratively and through civil litigation in federal courts, often in cooperation with the United States Department of Justice for criminal referrals. The Division of Enforcement investigates alleged violations such as fraud, insider trading, and accounting misconduct, bringing cases that have targeted individuals from firms like Goldman Sachs and Lehman Brothers and auditors from KPMG and Ernst & Young. The agency utilizes tools including subpoenas, cease-and-desist orders, disgorgement, and industry bars; contested matters proceed before administrative law judges or in district courts, with appeals reaching the United States Court of Appeals for the District of Columbia Circuit and the United States Supreme Court. International cooperation occurs via memoranda with counterparts such as the Financial Services Agency (Japan) and European Securities and Markets Authority.
Market Impact and Criticism
The commission's rulemaking and enforcement influence market structure, liquidity, and corporate governance practices across venues like the New York Stock Exchange and alternative trading systems. Proponents credit the agency with enhancing disclosure standards and investor protection after corporate scandals and crises; critics argue that regulatory complexity favors large incumbents such as BlackRock and Vanguard Group. Academic critics from institutions like Harvard University and Columbia University have debated the costs of compliance and the impact on capital formation, while policy analysts at think tanks including the Brookings Institution and the Heritage Foundation have contested policy choices on issues like Regulation Fair Disclosure and tick size. Congressional oversight frequently challenges the commission on enforcement priorities, resource allocation, and rulemaking pace.
Notable Actions and Cases
High-profile actions include administrative and civil proceedings involving corporations such as Enron, WorldCom, Microsoft Corporation (antitrust tangencies), and financial firms like Goldman Sachs during the 2008 financial crisis. Cases against individuals include prosecutions linked to insider trading in events connected to firms like Galleon Group and settlements with auditors implicated in accounting frauds tied to Arthur Andersen. Rulemakings and enforcement related to initial public offerings affected technology firms such as Google and Facebook. The commission's actions in areas like corporate governance and market structure have influenced major transactions overseen by regulators including the Federal Trade Commission and the Department of Justice Antitrust Division.