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U.S. Securities and Exchange Commission

The U.S. Securities and Exchange Commission (SEC) is a federal agency created by the U.S. Congress on June 6 1934, to protect the investors and control the securities markets in the Federal government of the United States. The agency is mandated to reinforce the federal laws on securities that altogether work for the realization of regulated U.S. options and stock exchanges, securities industries and electronic securities markets.


The History of SEC

The U.S. Securities and Exchange Commission was created by the Congress on June 6 1934, under the section four of the Securities Exchange Act of 1934 that was preceded by the Federal Securities Act of 1933 - a series of legislation that was precipitated by the simulating economic effects of the historic Crash of 1929 and the Great Depression. President Franklin D. Roosevelt then commissioned it as an independent regulatory agency in the same year. To this effect, Joseph P. Kennedy was appointed as the first Chairman of the newly created regulatory agency. The architects behind the conception and formation of SEC, who also served as the pioneering SEC commissioners, include Ferdinand Pecora, James, Landis and William J. Casey.

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Missions of the SEC

The main mission of the SEC is to protect investors in the securities market. The quasi-judicial control agency was given the constitutional mandate to put a stop to the corporate abuses in relation to the corporate misreporting and irregular sales and offering of securities. In its responsibility to regulate the operations within the stock market, SEC serves as the licensing authority that constantly regulates all categories of the interstate companies trading on securities, and also dealers and brokers involved in the trading of securities. Apart from the administration of the major legislations that serve to govern the securities industry, SEC enforces civil action against companies or individuals suspected to have provided false information to the investors, committed accounting and ledger related fraud and were involved in the insider trading.

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Current Patterns of Operations

Hitherto, SEC has made tremendous steps in its concerted efforts to bring sanity in the securities' industry as far as investor protection and regulation of the securities markets is concerned. Other than deregistering several companies and prosecuting individuals that violate the securities laws, SEC has successfully enforced a statutory requirement that obliges all the public companies to submit their financial reports (quarterly, bi-annually, periodically and annually) and the company narrative account to the commission. Updated and accurate financial reports would then form the basis upon which the new investors make investment decisions within the capital market.

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According to Seligman (2012), the Enforcement Division of the SEC filed about 534 and 740 actions in 2010 and 2011 financial years respectively. The report further indicated that the Division acquired $2.8 billion in disgorgement and penalties accrued from the filed actions in the securities markets. Example of a specific case handled by the SEC is that of Franklin Bank's former CFO and CEO in April this year. The duo was charged for their participation in a fraudulent scheme to conceal the bank's ailing loan portfolio during the financial crisis by inflating its reported earnings to lure unsuspecting new investors. The two were sentenced to the three-year jail terms each.

Nevertheless, the role of SEC in the prosecution of the violators of the securities laws has attracted and raised a lot of uproar from the public and different civil groups on the principle that the agency bypasses the law enforcement agencies and federal systems of justice. In the future, SEC should liaise with the Federal Law Enforcement Authorities to prosecute companies and individuals involved in the violation of securities laws.

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