As a response to the stock market crash of 1929 (Great Depression), the US Securities Act of 1933 and the Securities and Exchange Act of 1934 brought about an agency meant to bring civil actions against lawbreakers (and work with the Justice Department on related criminal cases). The Securities and Exchange Commission, or SEC for short, is an independent federal government regulatory agency that is tasked with protecting investors and regulating the securities markets. As a government oversight agency, it facilitates capital formation and maintains fair and orderly functioning of the securities markets.
In general, issues of securities offered in interstate commerce (through mail or the Internet) must be registered with the SEC before being sold to investors. The commission, for example, is responsible for approving any formal bitcoin exchange. Financial services firms, such as asset managers, broker-dealers, advisory firms, and professional representatives must likewise register with the SEC to conduct business.
To know more about these things, it is best to consult with experienced syndication attorneys at Moschetti Law.
SEC Regulations and Compliance
The Securities and Exchange Commission promotes full public disclosure, monitors corporate takeover actions in the United States, protects investors against fraudulent and manipulative practices in the market, registers statements for bookrunners among underwriting firms. Given the nature of these roles, SEC regulations are strict, thorough, and highly demanding. Trying to comply with new regulations and rules, financial statement requirements, procedural and technical filing conditions, and published guidance and unofficial interpretations can be quite challenging. As such, our hands-on syndication lawyers can help.
In simple terms, SEC compliance is adherence to the rules and regulations that the Securities and Exchange Commission makes and enforces. The government agency carefully monitors the actions of various professionals at the civil, criminal, federal, state, regulatory, and self-regulatory levels. They cover those who work or operate in the securities industry, which includes brokers, mutual funds, municipal advisers, investment advisers and companies, and the members or participants of Systems Compliance and Integrity entities.
The rigidness associated with the SEC is not surprising, however, since it was meant to facilitate the formation of capital required to support economic growth, protect investors from fraud, and ensure that the securities markets remain efficient, orderly, and fair.
The Office of Compliance Inspections and Examinations (OCIE)
Through the OCIE examinations, the SEC can identify and monitor risks, improve industry practices, inform rule-making initiatives and pursue misconduct. The National Examination Program (NEP) makes use of modern quantitative techniques to collect and analyze data about all registrants, which helps select registrants for on-site examination.
The NEP is primarily conducted to utilize risk-based strategies that ensure market integrity, support the responsible formation of capital, and protect investors. It encourages compliance with securities laws and regulations through examinations, publications, outreach programs, or referrals to the Division of Enforcement. These examination programs under the NEP include:
Clearance and Settlement
This is responsible for the examination of clearing agencies and the coordination of transfer agents.
This is meant to conduct risk-based examinations of SROs and securities exchanges to ensure that they and their participants comply with securities and SRO requirements.
This examines broker-dealers to ensure that they comply with relevant securities laws. Additionally, it coordinates with the NASDAQ Stock Market, New York Stock Exchange, and other SROs on regulatory issues involving broker-dealers.
Investment Adviser-Investment Company
This is meant to ensure compliance of investment advisers and companies with securities laws, particularly the Investment Advisers Act and Investment Company Act.
The SEC consists of five divisions and 24 offices. Part of their mandate is to interpret and take enforcement actions on securities laws, provide oversight of securities institutions, issue new rules, and coordinate regulation among different levels of government. The respective roles of the five divisions include the following:
Division of Trading and Markets
Establishes and maintains standards for fair, orderly, and efficient markets
Division of Economic and Risk Analysis
Integrates economics and data analytics into the core mission of the SEC
Division of Investment Management
Regulates investment companies, variable insurance products, and federally registered investment advisors
Division of Enforcement
Enforces SEC regulations by investigating cases and prosecuting civil suits and administrative proceedings
Division of Corporate Finance
Ensures investors are provided with material information (relevant to a company’s financial prospects or stock price) to make informed investment decisions
Behind the various laws and regulations that the SEC approves and enforces is the idea that all investors should have access to basic facts about the investments that they make before they buy. Under these rules, public companies must disclose meaningful financial and other details to the public, which provides common knowledge that all investors can use to decide for themselves whether or not to buy, hold or sell certain bonds, futures, stocks, or other securities.
If you have clarifications on the different laws and regulations that are meant to promote disclosure of information, maintain fair dealing, and protect investors, call our business law firm in Calabasas. Contact us at Moschetti Law and consult with seasoned Calabasas business attorneys.