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April 24, 2002
SEC and the markets
The roaring twenties culminated the great stock market crash of 1929. In a bid to clean up the system Congress passed the Securities Act of 1933. This also led to the estabilishment of the Securities Exchange Commission in 1934. The SEC has 5 commissioners appointed by the president who server 5 year terms (that expire in separate years).
The SEC is made up of several divisions:
The Division of Corporate Finance: is responsible for making sure public companies file their 10-K (annual reports) and 10-Q (Quarterly reports). It also reviews S-1's (applications to go public).
The Division of Investment Management: is responsible for governing the compliance of mutual funds. It also oversees public utilities.
The Division of Market Regulation: liasons with Self Regulation Organizations (SRO) such as NASD to ensure that their constitutions and practices adhere to the rules of federal securities acts.
The Division of Enforcement: investigates and prosecutes violations of securities fraud and crime. For example this division tracked down several instances of touting (making outlandish claims of stock performance without disclosing the financial incentive being paid for making said claims).
The General Counsel and office of compliance inspections support the SEC divisions.
Posted at April 24, 2002 08:21 PM