The Mission of the Securities and Exchange Commission
The SEC, otherwise known as the Securities and Exchange Commission, is an independent organization created by the United States government. Its mission is to bring order and fairness to financial markets to ensure market efficiency and safety for all investors.
There are four primary ways in which the SEC achieves its mission. First, it requires publicly traded companies to release accurate and relevant information to the public. Second, the SEC creates and enforces laws to verify this information and prevent abuses in the market, such as insider trading. Third, they work with Congress, various federal departments, and some private organizations to increase their scope and effectiveness. Finally, the SEC is a catalyst for growing and creating capital.
The financial world offers little to no guarantees to investors, which makes it especially difficult for smaller investors to enter the market. Having access to accurate and reliable information is the key to making informed decisions. The pooling of this information for public use creates a non-exclusive set of data that all investors—big and small—can use to make their own judgments and decisions on what is right for them. The SEC also offers their own compilation of information to the public, ranging from educational material to documents required to be filed by companies.
However, just having relevant information is not enough to create a fair opportunity for everyone. The SEC also creates and enforces laws to protect both investors and companies alike. These laws protect investors from companies releasing inaccurate or intentionally misleading data, such as false press releases and fraudulent accounting. They also protect companies from activities such as insider trading.
The SEC cannot complete everything in its mission alone, so they work with entities that range from private organizations to Congress. The SEC relies on securities fraud whistleblowers from the private sector and various federal institutions to gather and verify relevant information. They also work with Congress to propose laws to ensure their goal of economic fairness.
All of these methods culminate in their final goal of creating and promoting the growth of capital. A recent example of this is the Jumpstart Our Business Startups Act signed in 2010. This act is also referred to as the JOBS Act, which was signed by President Barack Obama in 2012 and designed to encourage the funding of small businesses. The JOBS Act eased many of the securities regulations in place. This also included the Crowdfund Act, which allowed companies to crowdfund in order to issue securities, which wasn’t allowed previously.
This requires the SEC to release studies and documents about capital formation and registration requirements. It allows businesses access to cost-effective capital without redundant regulations.
Understanding the SEC’s Mission
Although it can seem like a bunch of politics that are too complicated to bother with, it’s important to have an idea of the overall purpose of the SEC in the United States. This is just a brief overview, but with the actions taken by the SEC, it is hoped that securities markets will be protected so that they can thrive as part of the fully functioning US economy.