Securities Exchange Commission

The Securities Exchange Commission (“SEC”) is the government agency charged with the oversight of all aspects of the financial markets.

According to its website, “the mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The SEC strives to promote a market environment that is worthy of the public’s trust.”

The SEC’s creation arose after the Great Crash of 1929. Before that, there was little interest in government regulation of thee sale of securities.

During the 1920s, approximately 20 million large and small shareholders took advantage of post-war prosperity and set out to make their fortunes in the stock market. It is estimated that of the $50 billion in new securities offered during this period, half became worthless.

When the stock market crashed in October 1929, public confidence in the markets plummeted. Investors large and small, as well as the banks who had loaned money to those investors, lost great sums of money in the ensuing Great Depression. There was a consensus that for the economy to recover, the public’s faith in the capital markets needed to be restored. Congress held hearings to identify the problems and search for solutions.

Based on the findings in these hearings, Congress — during the peak year of the Depression — passed the Securities Act of 1933. This law, together with the Securities Exchange Act of 1934, which created the SEC, was designed to restore investor confidence in our capital markets by providing investors and the markets with more reliable information and clear rules of honest dealing.

Today, the securities industry is one of the most heavily regulated industries in the country.

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