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What Is The SEC And Its Objectives?

  • The SEC was created as a result of the Securities Exchange Act in 1934, after the Great Depression. 
  • It ensures that investors are protected by having access to honest information. 

The Securities and Exchange Commission (SEC) has recently been in the news after the result of the ongoing lawsuit with Ripple was declared. For the past few years, the SEC has been closely related to the performance of the crypto market. The market is unregulated and volatile, and crypto scams are not new; thus, protecting investors and their money is a major concern. 

In 1929, the US Stock Market crashed, causing the infamous Great Depression, which also led to people losing their trust in the US markets. Congress had a serious discussion to find the reasons and create a solution to prevent such an event in the future. This led to the passing of the Securities Act in 1933 and the Securities Exchange Act in 1934. The SEC was the result of this law. 

The SEC played a major role in handling the aftermath of the Great Recession of 2008, when it charged several institutions that caused financial distress. Nearly 204 entities were held, and through penalties, around $ 4 Billion was collected to refund the investors, with $550 Million being paid by Goldman Sachs itself. 

The Duties of SEC

The work of the SEC can be summed up into three efforts protecting investors, facilitating capital formation, and maintaining order and efficiency in the market. The body ensures that all federal securities laws are followed. It ensures that the investors are aware of all the facts and data related to the stocks and shares they are buying and that the companies selling them are telling the truth. 

Investors know the risks attached and financial advisors, such as brokers and exchanges, give them honest advice and do not keep them in the loop. The US market is considered highly influential in the global economy owing to its depth, dynamics, and high liquidity. Due to them, the market is highly complex and handles more than 100 trillion dollars each year. 

Also, being the hub of innovation, the US market sees continuous development and trends, so the SEC is always on the edge to identify them. Moreover, it needs to consistently modernize its law and adopt new tools to meet the current market trend. It works to provide new and innovative avenues to emerging companies and entrepreneurs, helping them to create more jobs and easily access the American market. It also supports small businesses, which are the major contributors (two-thirds) to creating new jobs. 

The List of Commissioners

The President of the United States appoints five commissioners to the SEC, with their terms lasting for five years. Their tenures are scheduled such that each year on June 5th, a commissioner’s tenure comes to an end. It is also mandatory to follow that no more than three of the five belong to the same political party. Of these five, one is appointed Chairman, which is the highest executive in the SEC. 

The present list includes Gary Gensler as Chairman and Hester M. Peirce, Caroline A. Crenshaw, Mark T. Uyeda, and Jaime Lizarraga as other commissioners. The SEC has five divisions, which are the Division of Corporate Finance, Enforcement, Investment Management, Economic and Risk Analysis, and Trading and Markets. 

Conclusion

The federal government agency has, for 85 years, been an instrumental player in regulating fairness and rebuilding the trust people had in US markets. Although the body is independent and only accountable to Congress, the SEC has seen its share of criticism as well. Since the entry of the SEC, the crypto space has been a hot spot, with the SEC regularly filing lawsuits against crypto exchanges or related companies. 

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