What is the Purpose of the SEC?


What is the SEC?

The U.S. Securities and Exchange Commission is a governmental agency that serves the purpose of protecting investors from fraud and maintaining fairness and efficiency of the U.S. market. One of the main goals of the SEC is to mandate disclosures about all kinds of investments to both small and big businesses. This is driven by the principle that when an investor is about to make an investment, he has to be provided with all the necessary and valid information about that investment. This disclosure principle is crucial to the workings of a fair and prosperous market because it allows all investors the opportunity to make a well-informed investment decision with every investment they make.
The SEC was created in 1934 to enforce the 1933 Securities Act. The SEC was established, in large, to fill in the role of a federal regulatory entity that would oversee the U.S. stock markets at a time of great financial instability. The SEC soon expanded to include the enforcing of the 1940 Investment Advisers Acts as well. The SEC is composed of 5 Commissioners that are appointed by the President and each serve 5-year terms. Today, the agency enforces and amends federal securities’ laws as well as coordinates U.S. securities regulations with state and foreign authorities.

How does the SEC Influence the Economy?

The SEC influences the economy by providing transparency and confidence to investors. The SEC regulates and prosecutes insider-trading, fraud, manipulation of stocks and bonds, etc. The SEC typically works alongside the Justice Department to bring criminal cases but can bring civil cases on its own against certain entities.
For example, many attributes the popularity of the New York Stock Exchange to the transparency that it provides to its investors – something that the existence of the SEC ensures.
A SEC website – “Investor.gov.” provides inexperienced investors with useful knowledge and certain educational online tools relating to how the market works to help develop financial and investment literacy in the United States.

How is SEC Funded?

The SEC is funded as a federal agency by the government and also by annual registration fees. To obtain federal agency funding, the SEC goes through the federal appropriations process. The annual fees are paid to the Commission by investment advisers upon their initial registration with the agency as well as annually after that. These fees are typically calculated based on the investment adviser firms’ assets under management and usually exceed the federal funding of the SEC.

What Might the SEC Investigate?

The SEC’s main purpose is to provide disclosure to potential investors. Therefore, providing any misleading information would most likely attract a SEC’s investigation. Selling unregistered securities or manipulating them would also not go unnoticed by the SEC. Finally, stealing funds from consumers or engaging in fraud would be an illegal activity that the SEC actively investigates.
The SEC can both bring a civil action against an entity and also can engage in administrative sanctioning of the entity. A SEC administrative sanction is appealable.

EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

Share this post

Eric Gros-Dubois

Eric P. Gros-Dubois founded EPGD Business Law in 2013 and is the current head of the firm’s corporate, estate planning, and tax practice, and manages the firm’s Washington D.C. office. With a JD and MBA, and a specialization in finance, Eric is able to step back and view the legal world through a commercial lens while also acting as a trusted business advisor for his clients. He does his best to be solutions oriented, and tries to think like a business owner, not just a lawyer.


*The following comments are not intended to be treated as legal advice. The answer to your question is limited to the basic facts presented. Additional details may heavily alter our assessment and change the answer provided. For a more thorough review of your question please contact our office for a consultation.

Leave a Reply

Your email address will not be published. Required fields are marked *



Contact Us

"*" indicates required fields