Securities and Exchange Commission (SEC)

Intermediate

SEC is the acronym for the US Securities and Exchange Commission. It was created on June 6th, 1934 as an independent governmental agency. The SEC is responsible for regulating and monitoring financial markets, with a focus on the American securities markets (e.g., stocks and bonds).

One of the main goals of the SEC is to prevent and oversee market manipulation and fraud, as stated on their website:

The SEC's mission is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.

The main idea behind the creation of the SEC is that investors and traders should all have equal access to relevant information before buying or trading financial instruments. As such, the work of SEC ensures that brokers, exchanges, and dealers treat investors in a fair and honest manner.

Also, the SEC created laws that force public companies to report all their important financial data to the public. As a result, all kinds of investors are able to access the same set of information prior to making investment decisions.

The SEC publishes educational content and periodic financial reports. Investors can also find quarterly and annual reports submitted by public and regulated companies on the SEC's online database called EDGAR (Electronic Data Gathering, Analysis, and Retrieval system).

Both the SEC and the Commodity Futures Trading Commission (CFTC) are working to deter illegal activities in financial markets, such as Ponzi and pyramid schemes. However, the CFTC is focused on the regulation of derivatives markets, which includes options and futures contracts. Insider trading is among the most common SEC infractions, along with misinformation, and accounting fraud.

The SEC and the CFTC were granted increased authority when the Dodd-Frank Wall Street Reform and Consumer Protection Act was approved by the US president Barack Obama – soon after the 2008 Financial Crisis.

As of January 2025, the SEC is divided into six major operating units:

Division of Corporation Finance
Division of Trading and Markets
Division of Investment Management
Division of Enforcement
Division of Economic and Risk Analysis
Division of Examinations.