SEC Roles and How They Protect the Investor

SEC Roles and How They Protect the Investor
Written by Christina Moore

It’s the SEC’s responsibility to ensure investment advisors that recommend securities are registered.

What is the SEC?

The SEC was launched as part of the 1934 Securities Exchange Act. During the period, people were slowly losing hope in the stock market. The street wall crash of 1929 was a significant reason for the decline in the stock market that left most American citizens broke.

By 1934, congress was convinced that new regulations to focus on the stock securities were important. The stock exchange commission (SEC) was put in place to enforce and oversee these new rules and prevent another crash.

SEC consists of five commissions. The American president is responsible for appointing each commissioner who is in office for five years. SEC has leadership that enforces integrity and justice. Read more about SEC forms insider trading and the nine SEC forms filed electronically.

The five divisions are:

  • The corporate finance division – It is there to ensure the corporate makes proper and timely disclosures.
  • The economic and risk analysis division – The role is to study data and protect investors cash
  • Enforcement division – Works hand in hand with USA law enforcers to prosecute and investigate the securities law violators.
  • The investment management division – Focuses on the investment management industry, advisors, and brokers included.
  • Trading and market division – It ensures the securities market is orderly and fair.

The Purpose of SEC in the Stock Market

The SEC’s primary role is protecting the investors by ensuring transparency and clarity among USA companies. It is achieved by requesting all stock exchange companies to release crucial financial information to the general public. By following these criteria, both individual and institutional investors have the necessary information before deciding on investing.

A good example is the Enron scandal. The commodities and energy company provided the SEC with incorrect information and hid vital data leading to its downfall. The SEC started investigating the company and later prosecuted the company. The SEC is still investigating those companies they term not transparent on their operations.

The SEC is responsible for investigating instances of market manipulation and insider trading. And it’s a requirement for any individual or firm that sells bonds and stock to register and follow the latter’s commission regulation.

The SEC is responsible for a private company called Securities Investor Protection Corporation (SIPC). The SEC forms insider trading safe if a brokerage is bankrupt.

How does the SEC affect the investor?

A lot of first-time traders and investors are not aware of what they are doing. Most of the first-timers are confused and overwhelmed hence leading to poor decision making. The SEC’s primary goal is to ensure that the USA citizens acquire the tools and knowledge needed to decide for their cash.

Its SEC’s responsibility to make mutual funds, bonds, and stocks safer. It’s not the responsibility of the SEC for the trading of commodities. Commodity Future Trading Commission (CFTC) regulates those.

It’s the SEC’s responsibility to ensure investment advisors that recommend securities are registered. Those robo-advisors whose advice is automated are required to register. Investors can quickly check important information about a company, such as the disciplinary history and background, before subscribing to their services.

All USA brokers are required to have registered with the SEC so that the investor can have ample time when evaluating them.

How legit is the SEC?

Just like any other commission, the SEC is controversial. The commission was recently on the spot for failure to request SEC-based brokers who serve as advisors to adhere to their standards. That implies some brokers are not in the position to deliver what their clients desire.

Although the commission shouldn’t be politically biased, under Trump’s reign, the SEC3 was reluctant to pursue companies’ penalties. A study recently showed that in 2017, the corporation had filed fewer cases in five years.

The principal purpose of the SEC is to punish fraud and protect investors. As a new investor, it is your responsibility to make sure you use the internet data before deciding to invest in any corporation.

The SEC is instrumental in the regulation of the stock market. Investors can go ahead to invest without fear. Having discussed the SEC’s rationale on the stock exchange, it is up to you to make a sober decision before planning to invest in the stock exchange market.

Identity Magazine is all about empowering women to get all A’s in the game of life — Accept. Appreciate. Achieve. Every contributor and expert answer the Identity questions in keeping with our theme. Their answers can be random and in the moment or they can be aligned with the above article. As a team, we hope to inspire and motivate ourselves and inspire you to get all A’s.

1. What have you accepted within your life, physically and/or mentally? What are you still working on accepting?

I am still working on accepting that there are people with intolerant minds and that you won’t be able to change everyone’s opinion.

2. What have you learn to appreciate about yourself and/or within your life, physically and mentally? What are you still working on to appreciate?

I’ve learned to appreciate my creative side and work ethic.

3. What is one of your most rewarding achievements in life? What makes YOU most proud? What goals and dreams do you still have?

I’m most proud of what I’ve been able to achieve in my career thus far and I would like to raise it to new heights!

Photo by Markus Spiske on Unsplash

About the author

Christina Moore

Christina Moore is a part time blogger and full time adventurer! Originally from the east coast, she now resides in San Diego. If she's not writing you can find her on the beach soaking up the sun.

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