The Security and Exchange

The Security and Exchange Commission 1. When, Why, and by what authority the SEC was formed The SEC was founded in 1934 in the wake of the Great Depression – The SEC was created by section 4 of the Securities Exchange Act of 1934 (now codified as 15 U. S. C 78d and commonly referred to as the 1934 Act). The SEC was established by the United States Congress as an independent, quasi-judicial regulatory agency during the Great Depression that followed the Crash of 1929. The main reason for the creation of the SEC was to regulate the stock market and prevent corporate abuses relating to the offering and sales of securities and corporate reporting. The SEC was given the power to license and regulate stock exchanges, the companies whose securities traded on them, and the brokers and dealer who conducted the trading 2. The role of the Division of Corporation Finance Corporation Finance assists the commission in executing its responsibility to oversees corporate disclosure of important information to the investing public. Corporations are required to comply with regulations pertaining to disclosure that must be made when stack is initially sold and then on a continuing and periodic basis. The division’s staff routinely reviews the disclosure documents filed by companies. The staff also provides companies with assistance interpreting the Commission’s rules and recommends to the Commission new rules for adoption. This division is also responsible for operating EDGAR 3. The role of the Division of Trading and Markets The Trading and Markets division oversees self-regulatory organizations (SROs) such as FINRA and MSRB, and all broker-dealer firms and investment houses. This division also interprets proposed changes to regulations and monitors operations of the industry. In practice, the SEC delegates most of its enforcement and rulemaking authority to FINRA. In fact, all trading firms not regulated by other SROs must register as a member of FINRA. Individuals trading securities must pass exams administered by FINRA to become registered representatives. 4. The role of the Division of Investment Management The Investment Management Division oversees investment companies including mutual funds and investment advisors. This division administers federal securities laws, in particular the Investment Company Act of 1940 and Investment Advisers Act of 1940. This Division's responsibilities include: •Assisting the Commission in interpreting laws and regulations for the public and SEC inspection and enforcement staff; •Responding to no-action requests and requests for exemptive relief; •Reviewing investment company and investment adviser filings; •Assisting the Commission in enforcement matters involving investment companies and advisers; and advising the Commission on adapting SEC rules to new circumstances. 5. The role of the Division of Enforcement The Enforcement Division works with the other three divisions, and other Commission offices, to investigate violations of the securities laws and regulations and to bring actions against alleged violators. The SEC generally conducts investigations in private. The SEC's staff may seek voluntary production of documents and testimony, or may seek a formal order of investigation from the SEC, which allows the staff to compel the production of documents and witness testimony. The SEC can bring a civil action in a U. S. District Court or an administrative proceeding which is heard by an independent administrative law judge (ALJ). The SEC does not have criminal authority, but may refer matters to state and federal prosecutors. The current director of the SEC's Enforcement Division is Robert Khuzami, a former federal prosecutor. 6. Summary paragraph describing how the SEC protects investors The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions. 7. Description of what is meant by “fair, orderly, and efficient markets” and a summary paragraph on how the SEC maintains markets in such fashion 8. Description of what is meant by “capital formation” and a summary paragraph on how the SEC facilitates capital formation

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