Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) is the body that regulates and oversees the US stock market and  options market  . It is an independent institution, of great importance worldwide.

It was created in 1974 by the Securities Exchange Act  and its main mission is to protect investors and ensure the proper functioning of the stock market.

The SEC is an institution that fights for free and transparent financial information between companies and investors. This body, given the existence of bad stock market practices, has the power to impose fines, but it does not have punitive power, although it can report and raise the cases it considers to the Department of Justice for its deliberation.

In turn, this institution fights against the fraud of all the economic agents that intervene in the market, such as financial entities, dealers ,  brokers , securities companies, insurance brokerages and  investment funds.

Currently, fines against individuals are limited to a maximum of approximately $ 200,000 and to companies with a limit of $ 800,000.

The most important cases such as the example of Fannie Mae, Freddie Mac or Aig during the crisis, among some of them, have been raised to higher levels. It is important to highlight that this institution controls some 31,000 institutions, with this figure we can realize the importance of this institution.

SEC Functions

Through the Dodd Frank Act, the SEC’s functions are much more strict and specific, since they aim to supervise speculation and regulation in  unorganized markets (OTC)  and avoid the counterparty risk of market makers or market makers , thanks to the existence of  central clearing houses (CCPs) .

Therefore, its most notable functions are the following:

  • Control of the information provided by financial companiesthrough more periodic audits.
  • Avoid price manipulation,due to the existence of positions that can be swept by a large number of investors and that involve extremely high investment volumes.
  • Control unorganized markets and their valuation. Limit the market and regulate it through the Dodd Frank Act and the existence of central clearing houses where there are account entries that may be visible in both parts of the operation (buyer and seller) and their movements are regulated, as well as  Collateral is 
  • Promote transparency in price formation.
  • Hardening of fines in order to avoid fraud, as well as to take civil actions against people in the event that they break the laws.
  • Monitor organized markets.
  • Control of the operations of insidersor company managers for the use of privileged information.

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