Working of securities and exchange commission, Financial Management

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Working of SEC

The SEC supervises the main members in the securities world, including securities brokers and dealers, securities exchanges, investment advisors, and mutual funds. The main concern of SEC is encouraging the disclosure of important market-related information, keeping fair dealing, and shielding against fraud.

Every year, the SEC comes up with hundreds of civil enforcement actions against individuals and companies for violation of the securities laws. Generally, violations include accounting fraud, insider trading, and providing fake or misleading information about securities and the companies that issue them.

Organization of SEC

The SEC consists of five presidentially-appointed commissioners, four divisions and 18 offices. As per the Federal Agency Standards, the organization of SEC is recognized to be small. Having its headquarters in Washington, DC, the SEC has eleven regional offices throughout the country.

The Commissioners

The US President appoints commissioners with the advice and consent of the Senate. Their term of office lasts for five years and are staggered so that each commissioner's term ends on June 5 of each every year. For commission to be unbiased, it is ensured that the commissioners not more than three can be from the same political party. The President also designates one of the commissioners as Chairman, the SEC's top executive.

The commissioners meet to discuss and resolve a variety of issues the staff brings to their attention. At these meetings the commissioners:

  • Interpret federal securities laws;
  • Amend the existing rules;
  • Propose new rules to address the changing market conditions; and/or
  • Enforce rules and laws.

These meetings are open to the public and the news media unless the discussion pertains to confidential subjects, such as whether to begin an enforcement investigation. Divisions of SEC

The four divisions underneath are:

Division of Corporate Finance

It oversees corporate disclosure of important information to the investing public. It also provides companies with assistance interpreting the commission's rules and recommends to the commission new rules for adoption.

Division of Market Regulation

It establishes and maintains standards for fair, orderly, and efficient markets. It does this primarily by regulating the major securities market participants, broker-dealer firms and Self-Regulatory Organizations (SROs). It also oversees the functioning of the Securities Investor Protection Corporation (SIPC).

Securities Investor Protection Corporation

It is a private, non-profit corporation that insures the securities and cash in the customer accounts of member brokerage firms against the failure of those firms. It is important to remember that the SIPC insurance does not cover the investors losses arising from market decline or fraud.

It is made responsible for:

  • carrying out the Commission's financial integrity program for broker-dealers;
  • reviewing and approving proposed new rules and changes to the existing rules filed by the SROs;
  • establishing rules and issuing interpretations on matters affecting the operation of the securities markets; and
  • surveilling the markets.
  • Division of Investment Management

It oversees and regulates the investment management industry and administers the securities laws affecting investment companies (including mutual funds) and investment advisers. In applying the federal securities laws to this industry, the division works to improve disclosure and minimize risks for the investors without imposing undue costs on regulated entities.

The Division works to

  • interpret laws and regulations for the public and SEC inspection and enforcement staff;
  • respond to no-action requests and requests for exemptive relief;
  • review investment company and investment adviser filings;
  • review enforcement matters involving investment companies and advisers; and
  • develop new rules and amendments to adapt regulatory structures to new circumstances.
  • Division of Enforcement

It investigates possible violations of securities laws, recommends the action of the commission when appropriate, either in a federal court or before an administrative law judge, and negotiates settlements on behalf of the commission.

  • Common violations that may lead to SEC investigations include:
  • insider trading: buying or selling a security in breach of a relationship of trust and confidence while in possession of material, non-public information about the security;
  • misrepresentation or omission of important information about securities;
  • manipulating the market prices of securities;
  • stealing customers' funds or securities;
  • violating broker-dealers' responsibility to treat the customers fairly; and
  • sale of securities without proper registration.

Offices

It comprises various offices like:

  • Office of Administrative Law Judges
  • Office of Administrative Services
  • Office of the Chief Accountant
  • Office of Compliance Inspections and Examinations
  • Office of Economic Analysis
  • Office of Equal Employment Opportunity
  • Office of the Executive Director
  • Office of Filings and Information Services
  • Office of Financial Management
  • Office of the General Counsel
  • Office of Human Resources
  • Office of Information Technology
  • Office of the Inspector General
  • Office of International Affairs
  • Office of Investor Education and Assistance
  • Office of Legislative Affairs
  • Office of Public Affairs
  • Office of the Secretary.

 


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