Securities and Exchange Commission (SEC)

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The United States Securities and Exchange Commission (SEC) is an agency of the US federal government that is mainly responsible for the regulation of the nation's stock exchange and securities industry, enforcing federal laws on securities. This establishment dates from 1934 and served as a regulatory agency after the stock market crash in 1929. Its main function was to prevent corporate abuse arising from the sale of securities. SEC had the authority to regulate and license stock exchanges, together with the dealers and brokers involved in this trade, and the securities traded on the exchanges. SEC has authorization from the United States Congress to bring civil suits against companies or persons who have provided false information, committed fraud or some other violation of the law on securities. The SEC requires public companies to make quarterly and annual reports available and the so-called narrative accounts detailing the previous year of operations. The management of these companies usually provides some information on their future goals, new projects and other plans in the year to come. All this information is available through an online database for the convenience of investors. This development is very important as investments are not guaranteed by the government.

The Securities and Exchange Commission consists of five commissioners. The US Senate plays a role in their appointment, but the U.S. President makes the final decision. Their mandates last for a period of five years, ending exactly on 5 June of every year. No more than three of them can represent the same political party. The President does not have the authority to dismiss any of the commissioners, a condition ensuring the independence of the organ. This provision has proven rather controversial in recent years.

The SEC enforces a number of federal statutes, these being the Credit Rating Agency Reform Act of 2006, the Sarbanes - Oxley Act of 2002, the Investment Company Act of 1940, the Trust Indenture Act of 1939, and the Securities Act of 1933.

The SEC has four divisions and just under 4000 staff members. The body has eleven offices in the US, together with headquarters in Washington, D.C. The four main divisions are Enforcement, Investment Management, Trading and Markets, and Corporation Finance.
Enforcement cooperates with the other divisions in order to investigate violations of laws on securities and bring actions against perpetrators.

The Investment Management Division administers securities statutes and regulates investment companies, such as advisors and mutual funds. The responsibilities of this division are to respond to requests for exemptions, assist the SEC in interpreting regulations and laws for clients and SEC staff, respond to no-action requests, and review investment adviser filings, among others.

The Trading and Markets division holds authority over all broker and dealer companies, investment firms and self-regulatory organizations. They also interpret planned changes to rules and regulations.

Finally, Corporation Finance operates the online information database and registers corporate transactions like mergers. The division is tasked with providing interpretive assistance with regard to the rules and forms of SEC, reviewing documents that publicly held entities file with the Commission. These include: forms 10-Q and 10-K, annual reports to the shareholders, documentation on tender offers, proxy materials that are sent to shareholders prior to annual meetings, and filings regarding mergers and acquisitions, among others. These documents contain information on the business practices and financial conditions of companies.