What is the US Security and Exchange Commission?

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What is the US Security and Exchange Commission?

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The Security and Exchange Commission (SEC) is a U.S. Government Agency. It was established under the Securities Exchange Act of 1934. SEC is somewhat similar to Securities and Exchange Board of India (SEBI) as both of them regulate financial markets in their respective countries, i.e., SEC regulates the financial market in the USA and SEBI regulates the Indian financial market. In this blog post, we will explain what the US security and exchange commission is, and also compare it with SEBI India.

Overview: Security and Exchange Commission of United States

The Securities and Exchange Commission (SEC) is an independent federal agency in charge of the securities industry of the United States of America (USA). It keeps an eye on transactions and activities of financial professionals. By doing so, the SEC maintains fairness, integrity and transparency, prevents fraud and other deceptive practices, and ensures orderly and efficient financial markets. 

It was after the 1929 stock market crash that the SEC was established. The Securities Exchange Act of 1934, which included the agency, was intended to increase trust in the capital markets. It demanded that people and businesses treat one another fairly and honestly and gave trustworthy information to both corporate and retail investors. The SEC has its main office in Washington, D.C., and 11 regional offices across the United States. 

Organizational Structure of SEC

The US Securities and Exchange Commission consists of five commissioners. Each commissioner is appointed by the President of the United States of America. Out of all the commissioners, one is designated as the Chairman of the SEC. 

According to the Securities Exchange Act of 1934 of the US, no more than three commissioners may belong to the same political party. This ensures non-partisanship.

SEC consists of 6 divisions i.e., (i) Division of Corporate Finance, (ii) Division of Trading and Markets, (iii) Division of Investment Management, (iv) Division of Enforcement (v) Division of Economic & Risk Analysis and (vi) Division of Examinations.

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Let’s understand each division one by one.

1. Division of Corporation Finance

This division or department assists the Securities and Exchange Commission in carrying out its mandate to monitor how companies disclose material information to investors. When a corporation sells stock, it must comply with disclosure regulations. Regularly reviewing disclosure documents filed by corporations is the responsibility of the Division of Corporation Finance. It also aids in the interpretation of SEC regulations. Additionally, it provides the SEC with recommendations regarding adoption of new regulations.

2. Division of Enforcement

The enforcement of securities laws falls within the purview of the Enforcement Division of the Securities and Exchange Commission. The Division offers suggestions to the SEC on how to look into possible violations of securities laws. It is also responsible for tackling criminal cases in close collaboration with law enforcement agencies. 

3. Division of Economic and Risk Analysis

The Division of Economic and Risk Analysis is responsible for protecting the investors and making sure the financial markets operate in a fair, orderly and efficient manner. In addition to this, it also provides economic analysis and data analytics, and coordinates with almost all SEC’s divisions and offices.

4. Division of Trading and Markets

The Division of Trading and Markets of SEC oversees the day-to-day operations of major US securities market participants, securities exchanges, securities firms, self-regulatory bodies, transfer agents, credit rating agencies, clearing agencies and securities information processors. Additionally, it develops, implements, and interprets regulations promulgated under the Commodity Exchange Act (CEA), which protect customers, prevent trading and sales practice abuses.

5. Division of Investment Management

The Division of Investment Management creates regulatory policies for investment firms and advisers, including exchange-traded funds, mutual funds, and other assets and products in the asset management sector. It supervises and controls the USA’s investment management sector. It guarantees that retail clients can benefit from disclosures on assets like mutual funds (MFs) and exchange-traded funds (ETFs). Additionally, the division makes sure that the expenses of regulations are kept to a minimum. 

6. Division of Examinations

Through the conduction of on-site exams of different registrants, the Securities and Exchange Commission's Division of Examination maintains an essential presence among market participants. In order to assist businesses in strengthening their systems, policies, and procedures and to remind them of their responsibilities under the federal securities laws, the Division periodically sends out risk alerts. 

SEBI vs SEC: Comparative Analysis Table

SEC and SEBI both are financial market regulators in their respective countries. But how do they differ from each other? We shall compare SEC vs SEBI with the help of the following table:

 

Parameter

SEBI

SEC

Year of Establishment

Established in 1988. However, it was given statutory powers in 1992 under SEBI Act, 1992.

Established in 1934 under the Securities Exchange Act of 1934 

Country

SEBI operates in India

SEC operates in United States

Goal

SEBI aims to protect investors, regulate securities markets, and promote their development.

SEC aims to protect American investors, maintain fair financial markets, and facilitate capital formation.

Headquarters

HQ of SEBI is located in Mumbai, India

SEC’s HQ is located in Washington, D.C., USA

Appointment 

SEBI’s Chairman and Board Members are appointed by the Government of India.

SEC’s Chairman and Commissioners are appointed by the U.S. President and then confirmed by the Senate.

Legislation

SEBI Act, 1992; Companies Act, 2013; Depositories Act, 1996 are the laws which govern SEBI.

Securities Act of 1933; Securities Exchange Act of 1934; Investment Company Act of 1940 are the laws which govern SEC.

After going through the table, you must’ve understood the similarities and differences between SEC vs SEBI.

Must Read: Difference between Investment Advisor vs Research Analyst

Conclusion

The Securities and Exchange Commission is a US agency tasked with monitoring and regulating the financial market. It protects the interests of US financial market investors by overseeing the key players of the industry, including securities exchanges, investment funds, brokers, etc. SEC can be compared to the SEBI in India because of the similarity in their roles. However, they’re governed by different laws because they operate under different countries. Hence, their powers, organizational structure, rules and regulations differ from each other. 

FAQs about US Security and Exchange Commission

Q1. What is the full form of SEC?

A. The full form of SEC is Securities and Exchange Commission. 

Q2. What are SEC Filings?

A. US Securities and Exchange Commission filings refer to the formal documents that are required to be submitted to the SEC by public companies, broker-dealers, and insiders on a regular basis.

 

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