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What is the Securities and Exchange Commission?

The Securities and Exchange Commission is commonly known as the SEC.  It was founded in the year 1934 under section 4 of the Securities Exchange Act, 1934. The purpose of forming the SEC was to regulate the securities industry, and to protect the investors from fraud. Furthermore, it was also meant to enforce federal securities laws. It came into being as a response to the stock market crash of the 1929 and the great depression that ensued. Their actual aim is to make the publicly traded companies reveal the truth regarding their business transactions and treat investors in a fair manner by clearly putting forth their needs to the company.

The commission functions under a board of five commissioners. These commissioners are appointed for 5 years by the President of the United States of America. There are certain conditions which are taken into consideration when these commissioners are appointed. No more than three commissioners in the board can be from the same political party.

The SEC, as it possess the enforcement power, permits it to bring about civil enforcement against those individuals or companies on whom there is an allegation of fraud, falsifying information and being involved in insider trading or other law violations. The SEC also works in collaboration with the law enforcement agencies. Therefore, it is able to prosecute the guilty individuals and companies for the offenses proven to be made by them.

Federal Securities Laws enforced by the SEC

Following are some of the federal securities laws that have been enforced by the SEC:

  • The securities act of 1933

  • securities and exchange commissionThe trust indenture act of 1939

  • The investment company act of 1940

  • The investment advisers act of 1940

  • The Sarbanes-Oxley act of 2002

Under the Securities and Exchange Commission, all public companies in the Unites States of America are required to periodically file a number of different financial reports with the commission. Besides filing the reports with the commission, the public companies are also required to make these financial reports accessible to the general public for consumption. These reports are used by the investors in order to understand and determine how sound the potential investments in the company could be. Following are some of the major SEC filing types:

  • F-1

  • F-4

  • S-1

  • POS AM

  • 13D

  • 144

  • 20-F

  • ARS

  • 6-K

  • 10-Q

  • 10-K

  • 8-K

These financial reports include:

  • Proposed sales of securities

  • Transfers of ownership and management

  • Quarterly and annual reports

Securities and Exchange Commission and the U.S. economy

SEC plays an important role in the U.S. economy. By increasing transparency and trust in the US stock market, it makes a significant difference. The transparent handling of the business in the stock market attracts business owners to invest in the U.S. – through its financial agencies like banks and legal firms.

Its functioning also makes it an easy task for the companies to go public at the time they have grown big enough to sell their stock so that they are financed in the later phases of development. This makes it easier for the companies in the United States to grow bigger by having larger investments, unlike other countries where markets are not as developed as that of the U.S. Not only does the functioning of SEC benefit the U.S. economy but it also helps us in a number of ways. It makes it safe for us to buy stocks, bonds and mutual funds.

The laws and regulations assembled for public corporations is very strict and rightfully so.

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