SEC
Securities & Exchange Commission
The SEC
(or Securities & Exchange Commission)
was created as a result of the crash
of 1929. Prior to the crash there
was little federal regulation that
governed the securities markets.
During
the early part of the 1900's there
was no need for companies to disclose
financial information and after
World War I the US experienced a
period of prosperity. Citizens reveled
in the new world and were easily
temped by promises of great returns
and the stock market rose to new
heights creating fortunes.
Around
20 million large and small investors
lost an estimated $25 billion in
stock during the stock market crash
of October 1929. The banks were
also sore after the crash since
they had also invested heavily in
the market. This caused additional
panic as people began to fear the
banks may not be able to cover their
deposits and began withdrawing their
cash in mass. Subsequently some
banks began to fail which really
began to exacerbate the situation.
As with
any good crash there is a reliable
depression afterwards and with this
depression the public confidence
in the market was at an all time
low (as well as the banks losing
a lot of money) congress decided
something needed to be done.
In 1933,
Congress passed the Securities
Act. The laws within the act
were intended to restore investor
confidence in the securities market,
create disclosure requirements for
companies as well as creating a
more structured framework for buying
and selling of securities.
Congress
then established the Securities
and Exchange Commission in 1934
to enforce the laws within the Securities
Act of 1933. The Securities
and Exchange Commission is also
required to promote stability in
the markets and most importantly
to protect investors. President
Franklin Delano Roosevelt appointed
Joseph P. Kennedy, President John
F. Kennedy's father, to serve as
the first Chairman of the SEC.
The Securities
and Exchange Commission has 5 Commissioners
who are appointed by the president
(with the advice/consent of the
Senate) and each Commissioner has
a term which lasts 5 years. Also
no more than three Commissioners
may be of the same political affiliation.
The chairman is also appointed by
the president. The Commissioners
have the ability to interpret, amend,
create and enforce rules and laws.
Most meetings are open to the public
except certain enforcement hearings
and such type confidential events.
The Securities
and Exchange Commission is also
divided into 4 primary divisions.
The Division of Market Regulation,
Division of Corporation Finance,
Division of Investment Management
and the Division of Enforcement.
Also
see
Securities Act
of 1933
Securities Exchange
Act of 1934
