SEC Explained – NerdWallet

What is the SEC?

The Securities and Exchange Commission is an impartial federal company tasked with regulating U.S. securities markets. Its mission includes three targets: defending buyers; making certain the markets stay truthful, orderly and environment friendly; and facilitating capital formation


What does the SEC do?

The SEC strives to take care of public belief within the U.S. markets. To perform its three-part mission, the SEC enforces federal securities legal guidelines, addresses wrongdoing within the markets and screens entities within the securities trade — akin to funding advisors, securities exchanges and broker-dealers — to ensure they’re treating buyers correctly


Much of the SEC’s work is guided by two core ideas:

  • Companies in search of public funding have to be truthful about their enterprise.

  • Those who promote securities and supply funding recommendation have to be truthful and sincere with buyers.

Those beliefs may be traced again to the SEC’s founding in 1934, when it was established by Congress to safeguard buyers from fraudulent and unfair behaviors following the inventory market crash of 1929.

What powers does the SEC have?

Most companies that search public funding are required to register their securities with the SEC and submit common filings about their operations, until their providing qualifies for an exemption. In addition, people and companies that promote securities or supply funding recommendation should register with the SEC or their state securities authorities.

SEC filings and disclosures made by each corporations and people can be found to the general public by means of EDGAR, the SEC’s free database of filings


To defend buyers, the fee investigates attainable wrongdoing and takes civil motion towards potential wrongdoers within the federal courts, administrative proceedings or each


Some frequent violations the SEC is focused on are:

  • Stock value manipulation.

  • Misrepresentation or omission of key details about securities.

  • Ponzi and pyramid schemes, that are types of fraud that focus totally on producing cash by recruiting new members or buyers.

  • Theft or misappropriation of funds or securities.

  • False or deceptive statements about an organization.

  • Bribery of overseas officers.

Although the SEC can’t carry prison prices itself, it will probably work with legislation enforcement companies — such because the Justice Department — which have the ability to take action.

Who reviews SEC violations?

Members of the general public — each whistleblowers and non-whistleblowers — can report suspected fraud or violations of securities legislation to the SEC


And with the safety of the SEC’s whistleblower program, certified people who provide unique info that results in SEC-enforced sanctions exceeding $1 million can obtain between 10% and 30% of the financial sanctions collected. Employers are prohibited from retaliating towards workers who come ahead about attainable violations


How is the SEC structured?


The SEC consists of 5 commissioners, who have to be appointed by the president and confirmed by the Senate


Each commissioner’s time period lasts 5 years, though they’re permitted to remain on for a further 18 months afterward if a substitute isn’t prepared. In an effort to stay nonpartisan, a most of three commissioners can belong to the identical political social gathering.

Organizational construction

The SEC consists of six divisions


In addition, the SEC consists of a number of workplaces, a lot of that are administrative, that assist the company’s work. It additionally has an Office of Inspector General, which is liable for monitoring the SEC’s actions and operations.


The SEC is headquartered in Washington, D.C., and has 11 regional workplaces in California, Colorado, Florida, Georgia, Illinois, Massachusetts, New York, Pennsylvania, Texas and Utah