6/13/2023
The U.S. financial environment is one of the most dynamic and complex in the world. In the midst of its activity is the Securities and Exchange Commission (SEC), whose main task is to create fair conditions for investors. If you want to know a little more about its functions, don't miss the following.
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What is the SEC (Securities and Exchange Commission)?
The U.S. Securities and Exchange Commission is an independent federal agency that belongs to the U.S. government. Its primary purpose includes the fair treatment of American investors and maintaining the integrity of the securities markets as a regulator of these financial activities.
Functions of the Securities and Exchange Commission
The SEC's primary purpose is none other than to regulate the marketplace to protect investors living in the United States. Although it does not work with those who invest, its mission is to regulate stock exchanges and those who sell/trade assets, such as managers, brokers and advisors.
In essence, the Securities and Exchange Commission is there to give confidence to those who use the financial system. Whether you want to achieve certain goals or save for retirement, this agency guarantees your safety and enforces the established rules.
To do so, it requires companies, firms and investment entities to disclose all relevant information so that investors can make their decisions knowing all the facts.
Among its basic functions, we highlight the following:
- Enforce securities laws and regulations.
- Monitor corporate actions of appropriation.
- Protect investors against manipulation and fraud.
- Inform investors with accurate market data and fraud alerts.
- Ensure that public companies follow financial reporting and disclosure laws.
- Regulate the activities of brokers, investment managers and other investment professionals.
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EDGAR System
The Securities and Exchange Commission has a database known as the 'Electronic Data Gathering, Analysis and Retrieval' system. This service can be used free of charge and contains millions of company and individual files. It has the capacity to process 3,000 files per day and handles 40,000 new cases each year.
Through EDGAR, investors can review the public financial information and operations of those companies they are interested in that have a file with the SEC.
This database also includes information provided by mutual funds, such as ETFs, variable annuities and money market funds.
How is the SEC divided?
The Securities and Exchange Commission is headquartered in Washington DC and has 11 regional branches in the United States. To optimize its operation, it is composed of 5 divisions:
Markets and Trading
This department is in charge of overseeing the activities of securities firms, asset exchanges, self-regulatory organizations, credit rating agencies, transfer agents and securities information processors.
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In practice, compliance and rulemaking is handled by FINRA (Financial Industry Regulatory Authority), which also conducts testing for those who want to trade financial assets.
Corporate Finance
This division has the assignment of disclosing a company's stock price and projections to investors. In addition, it oversees corporate agreements and the registration of transactions, such as mergers of public companies. It also manages the use of the EDGAR system.
Economic and Risk Analysis (DERA)
It is known as the SEC's 'think tank' because it provides data analysis and is involved in rulemaking, policymaking, compliance and evaluation of new trends, and strategies or products in the U.S. financial arena.
Investment Management
This department is tasked with regulating and monitoring investment managers, including registered investment firms, endorsed investment advisors and variable underwriting products.
It does this by ensuring that mutual fund and exchange-traded fund publications are useful to retail investors. It is also responsible for compliance and enforcement of SEC rules.
Executive Division
This is the division assigned to enforce SEC laws and works closely with the authorities when there is a criminal case. The most common criminal acts are usually the disclosure of false or misleading information, insider trading or accounting fraud.
It is the department with the largest budget and also has the largest number of staff among all divisions. This is due to the financial crisis of 2007-2008, which prompted the injection of resources to increase oversight and investigation.
Any investor can count on the SEC to invest more safely. Along with this agency, at Busconómico we try to address all the institutions that have an impact on the financial sphere and that are good to know.
Español: ¿Qué es la SEC y cuál es su función?