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Securities and Exchange Commission
The U.S. Securities and Exchange Commission [the SEC] is an independent government agency responsible for regulating the U.S. securities markets. Its mission involves protecting investors, maintaining orderly and efficient markets, and facilitating capital formation. The SEC administers the Securities Act of 1933, the Securities Exchange Act of 1934, and other legislation concerning the sale and trading of securities.
The primary mission of the SEC is to (a) protect investors, (b) maintain the integrity of the securities markets and (c) help facilitate capital formation. SEC rules require that all investors have access to certain basic facts about an investment. 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 if a company's securities are a good investment. It also provides useful information to trade creditors considering whether or not to extend credit to a particular company. The SEC does not tell investors what investments to make, but it can help ensure that investors and others interested in financial performance receive unbiased financial information.
The SEC protects investors and the public by requiring full disclosure of financial information by companies offering securities for sale. Companies offering securities for sale to the public must tell the truth about their business, the securities they are selling, financial performance and the risks involved in investing in the company' stock. SEC rules prohibit misrepresentation, deceit or other fraud in the sale of securities. Federal Securities Laws include:
Securities Act of 1933;
Securities Exchange Act of 1934;
Investment Company Act of 1940;
Investment Advisers Act of 1940; and
Public Utility Holding Company Act of 1935.
The legislation creating the SEC made it a requirement that publicly traded companies comply with what is now called GAAP accounting rules. Publicly traded companies are required to report financial results quarterly, and report special events more quickly Documents that publicly held companies are required to file with the SEC include:
- Registration statements for newly-offered securities;
- Annual and quarterly filings (Forms 10-K and 10-Q);
- Proxy materials sent to shareholders before an annual meeting;
- Annual reports to shareholders;
- Documents concerning tender offers (a tender offer is an offer to buy a large number of shares of a corporation, usually at a premium above the current market price); and
- Filings related to mergers and acquisitions.
© 2011 by Michael C. Dennis. All Rights Reserved.