What Is the Securities and Exchange Commission (SEC)? - dummies

What Is the Securities and Exchange Commission (SEC)?

By Maire Loughran

In response to the stock market crash of 1929 and the ensuing Great Depression, the Securities Exchange Act of 1934 created the SEC. The SEC’s mission is to make sure publicly traded companies tell the truth about their businesses and treat investors fairly by putting the needs of the investors before the needs of the company.

Publicly traded companies are those whose stock is available for sale in an open marketplace, such as the New York Stock Exchange.

The SEC is run by five commissioners, who are appointed to five-year terms by the President of the United States. Their terms are staggered, and no more than three commissioners can be from the same political party at the same time.

These commissioners ride herd over the SEC’s power to license and regulate stock exchanges, the companies whose securities trade on them, and the brokers and dealers who conduct the trading.

The enforcement authority given by Congress allows the SEC to bring civil enforcement against individuals or companies alleged to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses, which include a criminal violation.