Definition of the SEC or Security Exchange Commission

What is the SEC?

The SEC is the Security Exchange Commission. This is the authority of the financial markets ( AMF ) of the United States. Its role is to monitor the financial markets , control liquidity and issue sanctions in the event of non-compliance with the rules it lays down. These rules serve to protect savers and private investors from possible abuse ( insider trading, etc.). It was created in 1934 in response to the recession that followed the stock market crash of 1929. Since 2012, its director has been Elisse Walter.

SEC Rules

To regulate the financial industry, the SEC has put in place 6 laws that dictate its actions:

• The Securities Act: this law guarantees investors the right to have all significant information on their financial products and condemns insider trading.
• The Securities Exchange Act: this law gives the power of regulation, supervision over the American financial industry as well as the right to require information reports from companies calling on public savings.
• The Trust Indenture Act
• The investment company act: this law regulates hedge funds which are open to public savings, obliging them to provide information on their objectives and structures.
• The investment Advisers act: this law regulates the profession of investment advisers and establishes a list of advisers approved by the SEC.
• The Sarbanes-Oxley Act: this law tends to improve the transparency of financial players and fight against fraud.

Organization and operation of the SEC

The Securities Exchange Commission is based in Washington DC and is headed by 5 commissioners appointed directly by the President of the United States of America. These 5 commissioners (including the chairman of the SEC) each control a division of the SEC:

• The "Finance corporation" in charge of monitoring companies: their official publications, mergers/acquisitions... This division is also in charge of the EDGAR system (similar to company.com) which makes available to all reports and analyzes of all companies on American soil.
• The "Market regulation" division which regulates the stock market
• The "investment management" division which regulates and monitors companies and investment funds.
• The "enforcement" division which investigates and punishes violations of the laws put in place by the SEC
• "Risk, strategy, and financial innovation (RSFI created in September 2009) is a transversal division of the SEC which helps each division to have an always current and enlightened approach and vision via detailed analyzes and studies.

For the sake of neutrality, the commissioners cannot be more than 3 from the same political party and their appointment is for a period of 5 years with a change of commissioner per year.