How Does the SEC Work?

In the 1920s, the Stock Market crashed, and many people in the United States lost their savings. President Franklin Roosevelt had to fix the aftermath and retain the trust of the investors. The stock market crash led to the US Securities and Exchange Commission’s creation under the Securities Exchange Act of 1934.

How Does the SEC Work

The SEC is tasked with protecting investors and coming up with regulations to control the stock market. However, some companies break the rules and regulations, and most of their actions are revealed by whistleblowers. Law firms like Meissner Associates represent SEC whistleblowers and protect their rights.

The SEC carries out several functions in the U.S:

Protecting the Investors

After the confidence of investors fell during the stock market crash in the 1920s, the commission was created to protect the investors and the banking industry. 

The SEC protects investors by enforcing laws such as the Trust Indenture Act, Investment Company Act of 1940, and the Securities Exchange Act of 1934. The SEC requires all companies trading in the US to be truthful about all their dealings.

Fair Trading Practices

Companies trading in the U.S want to have stocks with the best value in the stock market. Companies with the best stocks attract a lot of business. Some companies will use unfair trading practices to provide false information to the public to raise their stock value. The SEC ensures that all companies use legal and ethical trading practices.  

Recommend Rules and Regulations

Companies are always looking for ways to stay ahead of their competitors in the stock market. Many companies will devise new legal methods to gain an advantage against their competitors in the market and identify the methods that are illegal. The SEC will give recommendations on how to improve the laws governing the stock market exchange. 

Watchdog for the Stock Market

The SEC has to maintain efficient, transparent, and effective markets. Every company that wants to trade shall provide all the information required by law to the SEC. Without the SEC, smaller companies will have trouble trading in the market. It will be survival for the fittest, and very few companies will survive without the SEC monitoring the stock market. 

Investigating Rule Breakers

The SEC has an enforcement department that deals with lawbreakers. Once the SEC gets information about a company not following regulations, the enforcement department will investigate and recommend the necessary cause of action. 

If the enforcement department finds a company has been breaking the rules, it will send a recommendation to the SEC to bring a civil action against that company in a federal court. The enforcement department will prosecute the cases on behalf of the SEC.

Violations that Might Lead to an Investigation

They are several reasons why the SEC might begin investigating a company:

  1. Giving false information or declining to give information about its securities
  2. Manipulating the securities’ market prices
  3. Selling unregistered securities; all companies have to register their securities with the commission before they start trading
  4. Insider trading
  5. Stealing customers’ money

Most of the time, the SEC will receive information about an illegal activity through a whistleblower. The whistleblower will provide all the information they have, and the commission will investigate the information. Whistleblowing has helped the SEC uncover fraudulent deals at their earliest stage and save investors from financial losses. 

Contact an SEC Attorney

Do you have any credible information about an individual or company breaking securities laws in the United States? You can contact an experienced SEC attorney who will review your information and forward it to the SEC. You could win an award, and they will also protect you from lawsuits brought by the company.