Securities Law

9 Pages 2270 Words

The U.S. Securities and Exchange Commission’s (SEC’s) primary duty is to protect investors and maintain the integrity of the securities markets. The laws and rules that govern the securities industry in the United States derive from a simple concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it. The SEC requires public companies to disclose meaningful financial and other information to the public.
The SEC also oversees stock exchanges, brokers, investment advisors, mutual funds, and public utility holding companies. Their primary concern here is promoting disclosure of important information, enforcing the securities laws, and protecting investors.
The effectiveness of the SEC hinges upon its enforcement authority. Each year the SEC brings between 400-500 civil enforcement actions against individuals and companies that break the securities laws. Some of the typical infractions include insider trading, accounting fraud, and providing false or misleading information about securities and the companies that issue them.
Congress established the Securities and Exchange Commission in 1934. Its purpose was to enforce the newly passed securities laws, to promote stability in the markets and, most importantly, to protect investors.
Before the Great Crash of 1929, there was not much support for federal regulation of the securities markets. Proposals that the federal government require financial disclosure and prevent the fraudulent sale of stock were never seriously pursued.
During the 1920s, post-war prosperity enveloped the nation. Approximately 20 million large and small investors took advantage of this fact and set out to make their fortunes in the stock market. It is estimated that of the $50 billion in new securities offered during this period, half became worthless. This all came to fruition when, in October 1929, t...