Securities and exchange commission of usa, Financial Management


In the United States, securities industry is regulated by the United States Securities and Exchange Commission (SEC). It is the government body of United States (US). It regulates the securities industry, protects the investors, maintain fair and efficient markets and facilitates capital formation. The SEC was created by the Securities Exchange Act of 1934. President Franklin Delano Roosevelt appointed Joseph P. Kennedy, President John F. Kennedy's father, as the first Chairman of the SEC.

Before the great depression of 1929, the federal regulation of the securities markets neither had support nor encouragement by the public or the federal government. This is the reason why the proposals for financial disclosure by the securities industry and for prevention of the fraudulent sale of stock were never seriously considered.

During the 1920s, around 20 million large and small shareholders aspiring to become rich overnight took the advantage of easy credit ignoring the dangers inherent in uncontrolled market operations. They wanted to take the advantage of post-war prosperity in order to make their fortunes in the stock market. Adding to their woes, it is estimated that nearly 50% of the $50 billion in new securities offered during this period became worthless putting them into a heavy loss. All this happened due to non-regulation of stock markets. This is the great depression/crash of 1929. A country felt the need for regulating the stock markets.

After the great depression of 1929, the US Congress with an intent to regulate the stock markets passed the Securities Act of 1933 and the Securities Exchange Act, 1934. The main purpose of passing these laws was to restore the investor confidence in the securities market by providing strong structure and government supervision. The main purposes of these laws can be reduced to two common-sense notions:

Companies publicly offering securities for investment dollars must tell the public the truth about their businesses, the securities they are selling, and the risks involved in investing.

People who sell and trade securities like brokers and dealers must treat the investors fairly and honestly by putting their interests first.

The congress felt that the legislations alone cannot reform the securities market. There should be some monitoring on the securities market which is a highly coordinated effort. Towards this, Congress established SEC in 1934. The SEC is authorized to work on enforcement of the newly passed securities laws, for promoting stability in the stock markets and for protecting the investors interest.


Posted Date: 9/11/2012 2:42:59 AM | Location : United States

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