6. What is the “Securities and Exchange Commission” (SEC)?
The Securities and Exchange Commission (SEC) is a semi-independent, administrative agency created in 1934 (as part of the ’34 Act) to regulate the sale or exchange of securities. The commissioners are appointed by the President under the advisement of Congress. The SEC is divided into five main divisions regulating: Corporation Finance, Trading and Markets, Investment Management, Enforcement, and Economic and Risk Analysis. The SEC has quasi-legislative and quasi-executive powers. The SEC develops the regulations to carry out the statutory laws passed by Congress. It has the ability to issue cease and desist orders, issue fines, and bring civil actions against issuers of securities who violate the law.
• Note: Criminal actions for violation of securities laws are referred to the US Attorney’s Office for prosecution.
• Discussion: Why do you think securities law requires a dedicated administrative agency? How do you feel about an independent agency making securities regulations with the force and effect of law?
• Practice Question: What is the role of the Securities and Exchange Commission in the regulation of securities?