Regulatory Entities, Agencies and Market Participants
1.1 Regulatory Entities, Agencies and Market Participants
1.1.1 The Securities and Exchange Commission (SEC)
Ø The high-level purpose and mission of securities regulation
The high-level purpose and mission of securities regulation is to ensure fairness, transparency, and integrity in financial markets, protecting investors and maintaining the stability of the financial system.
Real-World Example:
Think about the stock market, where companies like Apple or Tesla sell shares to the public. Securities regulation ensures that companies provide accurate and timely information to investors, such as financial statements, risks, and business operations. This prevents fraud (e.g., misleading investors about a company’s performance) and ensures everyone has access to the same information to make informed investment decisions.
For instance, if Tesla releases misleading information about its earnings, securities regulation (like the Securities Exchange Act in the U.S.) could intervene, leading to investigations, penalties, or even criminal charges. This helps maintain investor confidence and keeps the financial markets functioning properly.
In essence, securities regulation helps make sure that no one can unfairly manipulate the system, protecting investors and ensuring that markets run smoothly.
Ø Definition, jurisdiction and authority of the SEC
The Securities and Exchange Commission (SEC) is a U.S. government agency responsible for regulating the securities industry, including the stock market, to ensure fair and efficient markets and protect investors from fraud and manipulation.
Real-World Example:
If a company like Facebook (now Meta) wants to go public by issuing stocks, it must file detailed documents with the SEC, such as a prospectus (information about the company, its business, and financials) so that investors can make informed decisions.
Jurisdiction of the SEC: The SEC’s jurisdiction covers:
• U.S. securities markets, including public companies, brokers, and investment advisers.
• It governs activities such as buying/selling stocks, mergers and acquisitions, and public offerings within the U.S.
Real-World Example:
The SEC has jurisdiction over NASDAQ or New York Stock Exchange (NYSE) activities. If an American company like Tesla is listed, any trade of its shares is subject to SEC rules and oversight.
Authority of the SEC: The SEC has the authority to:
• Regulate and enforce securities laws.
• Investigate and take legal action against individuals or companies for violating securities laws.
• Approve or reject certain market activities like IPOs or mergers.
Real-World Example:
If a company like Enron (before its collapse) misleads investors by falsifying financial reports, the SEC can investigate the company, file lawsuits, and even take enforcement actions (fines, sanctions) against the executives involved.
In summary, the SEC ensures market integrity, has jurisdiction over U.S. securities markets, and has the authority to enforce securities laws to protect investors.
You can buy the entire printed book on Amazon using this link.
https://www.amazon.com/dp/B0F2ZCQP5T?ref_=pe_93986420_774957520
I have a small request. Please enroll in this free trading strategy simulator to support this wiki. It will only take a couple of minutes.
https://collective2.com/details/149633684
Please do not forget to subscribe to this wiki so that you will get a new notification when a new bite is posted and it will also help us grow our community :)
"Rome was not built in a day neither will you pass Securities Industry Essentials (SIE) Exam by studying for one day"