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Security and Exchange Commission - History

Security and Exchange Commission - History


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Joseph Kennedy the first head of the SEC

The Security and Exchange Commission was established in 1934 to regulate the selling of stocks. Joseph Kennedy became the first commissioner.


The Securities and Exchange Commission was created to regulate the issuance of securities (stocks). The bill that established the S.E.C. gave it the responsibility to enforce the Securities Act of 1933. It also limited the amount of money that a broker could lend a buyer, and the amount of money a bank could lend a broker. Once the S.E.C. had been created, the next question was who would head the new Commission. Roosevelt’s choice was surprising to many. FDR appointed Joseph Kennedy to be the first head of the S.E.C. Kennedy had been an early supporter of Roosevelt. Though many liberals were astonished Roosevelt had appointed someone known to have been a stock manipulator. However, Roosevelt answered that “it took a thief to capture and thief.” Beyond that, Roosevelt understood that for this father of a future President, his time accumulating money was over. Now it was time for Joe Kennedy to establish a good name for his family. By all accounts, both then, and now in retrospect Kennedy acquitted himself well as the S.E.C. Commissioner– creating the bedrock foundation of an agency that has lasted to this day.


Securities and Exchange Surveillance Commission

The Securities and Exchange Surveillance Commission ( 証券取引等監視委員会 , shouken torihikitou kanshi iinkai, SESC) is a Japanese commission which comes under the authority of the Financial Services Agency. [1] It is responsible for “ensuring fair transactions in both securities and financial futures markets.” [2]

Its current Chairman is Mitsuhiro Hasegawa, who assumed the post in 2017. There are two chairmen, Shinya Fukuda, [3] and Masayuki Yoshida. [4]


Stock market practices

The stock exchange is an organization that gives businesses the ability to find investors. A business offers to sell shares, or stocks, that represent an investment in its company. The company uses the investors' money to improve business. If the business is successful and grows, the stocks become worth more than they cost. Likewise, if many people show an interest in a stock, the price increases. In either situation, investors make money. Investors lose money, however, if a business performs poorly or is unable to attract interest in its stock.

In the early 1900s, the stock market and investment companies were unregulated. As a result, several dishonest practices for manipulating stock prices emerged. Prices of a stock could be driven up by a group of corporate officials and market operators by creating the illusion of great interest in a stock. By buying and selling lots of stock quickly at the same cost, other investors were misled by the apparent frenzy of activity. Prices rose, and the officials sold their stocks at inflated prices to make a profit. The stock would then plummet, leaving other investors with a loss.

Similarly, insider trading was a practice by which business executives used knowledge of corporate performance to position their own investments before making the information public. By doing so, they could sell before the stock prices dropped on bad news or buy before prices soared on good news. Another unregulated practice involved investing in the market on margin, which means using borrowed money. Buying on margin made the market unstable and was a great factor in the Great Depression.


  • No. 1 — Alabama.
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The Securities and Exchange Commission’s Enforcement Division: A History

Two years ago, I was asked to take on an unusual project: to write a history of the Securities and Exchange Commission’s (SEC) Enforcement Division for the SEC Historical Society. The Society is a private organization devoted to preserving the SEC’s legacy. The history would appear not in print, but as an online “gallery” hosted at the Society’s Virtual Museum. The heart of the history would be a written essay, but it would also include links to primary sources, and to prepare it I would need to conduct a series of oral histories with important figures from the Enforcement Division’s past, also to be available on the website. The Virtual Museum is deliberately aimed at a general audience no doubt some professors would see the gallery, but the ideal reader of my essay would be a nonlawyer simply interested in how the securities laws are enforced. The Gallery went online last month here’s a summary of what I learned:

Since its founding in 1934, the SEC has always been charged with enforcing the securities laws. Even before the establishment of a separate Enforcement Division in 1972, SEC lawyers based in Washington and in the Commission’s regional offices investigated market manipulation, accounting fraud, insider trading, and other underhanded activities in the securities markets. Starting in the early 1970s, such activities became national news, as one crisis after another thrust the SEC into the spotlight. In the 1970s it was illegal contributions and bribes that many U.S. companies had been paying to politicians in the US and overseas in the 1980s insider trading occurring amidst the boom in hostile takeovers at the turn of the century the collapse of Enron and other giant firms due to accounting fraud and in 2008 the global financial crisis. Each called for, and received, a strong response from the SEC.

While there were new challenges every decade, parts of the story never changed. The SEC was always underfunded as compared to its opponents. In its early days, the Enforcement Division had barely 100 lawyers to police all of the world’s largest securities markets. Even today it has only a bit more than 1000. Its work always relied on attorneys willing to forego big law firm salaries to, at least for a few years, wear the “white hat” and go after wrongdoers. (Temple lawyers have played a big role in Enforcement over the years of the dozen lawyers who have served as directors of Enforcement, three are graduates of Temple Law: Bill McLucas ’75, Dick Walker ’75, and Stephanie Avakian ’95.) And the Enforcement Division has always had its enemies in Congress and the corporate world. When corporate and economic crises have struck, its funding would sharply increase, but as soon as the crisis passed politicians, would forget the Division’s vital role, listen only to its critics, and cut its funding, sowing the seeds for the next crisis.

Harwell Wells is the I. Herman Stern Professor of Law Temple University’s Beasley School of Law. He writes extensively in the areas of corporations and legal history. His research areas include corporations and unincorporated business associations.


The Commission originates from the ad hoc, non-statutory Capital Issues Committee established in 1962 as an arm of the Central Bank of Nigeria. The committee became the Security Exchange Commission in 1977, and then the Securities and Exchange Commission was chartered with SEC Decree No. 71 of 1979. The commission is now chartered by the Investments and Securities Act No 45 of 1999. [1]

A second-tier securities market was established in 1985, and the market grew as the government followed a program of privatization of public sector enterprises. With market capitalization of N4.46 billion in 1980, by the end of 1997 the Nigerian securities market had a market capitalization of N281.8 billion. The market appeared to be operating efficiently, although it was depressed by low personal incomes in Nigeria and political instability deterring foreign direct investment. [3]

During the first half of the 2000s, the Central Bank of Nigeria instituted reforms that led to a reduction in the number of banks but a great increase in their size. This and other factors led to a surge in equity market capitalization on the NSE, peaking in March 2008 at US$100 billion, over 60% of which was owned by the banks. [4] When Musa Al-Faki, a stockbroker, was installed Director General in 2004, many thought his appointment had been engineered by Ndi Okereke-Onyiuke, head of the Nigerian Stock Exchange. If so, this may have undermined the authority of the SEC as a supervisor during a period of rampant speculation. [5]

The global financial crisis that began in 2008 caused a severe crisis among Nigerian banks, with several forced to close. After the Central Bank had audited the banks in 2009, the SEC started legal proceedings at the Investments and Securities Tribunal against about 260 individuals and entities, alleging that they were involved in abuse such as insider dealing and share price manipulation. The commission also instituted various reforms including improving regulations so as to encourage development of the bond market, promoting collective investment schemes and reviewing the 2003 Corporate Governance Code. [4]

SEC Director General Al-Faki resigned in April 2009 amid criticism of the SEC role in a share-manipulation scandal involving the African Petroleum stock. He was eventually replaced by Arunma Oteh, who became Director General in January 2010. In August 2010 Oteh dismissed Okereke-Onyiuke from the stock exchange. [5] The President of the Stock Exchange, Alhaji Aliko Dangote, was also dismissed. [2] In September 2010 it was reported that the SEC was considering converting the stock exchange to a private company rather than a mutually owned enterprise. The SEC said its actions were due to problems at the stock exchange that included "inadequate oversight. ongoing litigation, allegations of financial mismanagement, governance challenges". [6]


Securities and Exchange Commission (SEC)

The US Securities and Exchange Commission, or SEC, is an independent agency of the US federal government that is responsible for implementing federal securities laws Sarbanes Oxley Act The Sarbanes-Oxley Act is a U.S. federal law that aimed to protect investors by making corporate disclosures more reliable and accurate. and proposing securities rules. It is also in charge of maintaining the securities industry and stock and options exchanges Types of Markets - Dealers, Brokers, Exchanges Markets include brokers, dealers, and exchange markets. Each market operates under different trading mechanisms, which affect liquidity and control. The different types of markets allow for different trading characteristics, outlined in this guide , as well as regulating electronic securities markets and other activities in the country.

With headquarters in Washington, D.C. and operating in 11 regional offices throughout the US, the SEC aims to provide protection to investors Investing: A Beginner's Guide CFI's Investing for Beginners guide will teach you the basics of investing and how to get started. Learn about different strategies and techniques for trading, and about the different financial markets that you can invest in. and ensure that markets are fair, efficient, and in order. It also strives to create a market environment that people can trust.

History of the Securities and Exchange Commission

Before the creation of the US Securities and Exchange Commission, there were blue sky laws that were enforced at the state level. They were in charge of regulating the sale of securities to protect the investing public against fraud. However, said laws were found to be ineffective.

Congress then passed the Securities Act of 1933 The 1933 Securities Act The 1933 Securities Act was the first major federal securities law passed following the stock market crash of 1929. The law is also referred to as the Truth in Securities Act, the Federal Securities Act, or the 1933 Act. It was enacted on May 27, 1933 during the Great Depression. . the law was aimed at correcting some of the wrongdoings to regulate interstate sale of securities at the federal level, while the Securities Exchange Act of 1934 regulates the sale of securities in the secondary market. The SEC was created by Section 4 of the Securities Exchange Act of 1934, also called the Exchange Act or the 1934 Act, to enforce federal securities laws.

Organizational Setup of the SEC

The Securities and Exchange Commission comprises five Commissioners who are appointed by the US President. One of them is designated as the Chairman of the Commission. The law dictates that no more than three Commissioners may come from the same political party, to ensure non-partisanship.

Here are the five divisions within the SEC:

1. Division of Corporation Finance

This division is responsible for helping the Securities and Exchange Commission in performing its role of overseeing the corporate disclosure of important information to investors. When stock is sold, a corporation is required to adhere to regulations related to disclosure. The Division of Corporation Finance is tasked to review on a regular basis disclosure documents that are filed by corporations. It also helps interpret the rules of the SEC. It likewise gives recommendations related to new adoption rules to the SEC.

2. Division of Trading and Markets

This division assists the SEC in ensuring that markets are fair, orderly, and efficient. It oversees the day-to-day activities of major securities market participants, securities firms, securities exchanges, self-regulatory organizations, clearing agencies, transfer agents, credit rating agencies, as well as securities information processors.

3. Division of Investment Management

The division of Investment Management helps the Securities and Exchange Commission in executing its role of protecting investors and promoting capital formation. It oversees and regulates the country&rsquos investment management industry. It ensures that disclosures about investments such as mutual funds and exchange-traded funds are useful to retail customers. The division also ensures that the regulatory costs are not too high.

4. Division of Enforcement

The division of Enforcement is responsible for the enforcement of securities laws. It gives recommendations on the commencement of investigations of securities law violations. It is also in charge of working closely with law enforcement agencies to take on criminal cases.

5. Division of Economic and Risk Analysis

This division is in charge of protecting investors and keeping markets fair, orderly, and efficient. It also provides economic analyses and data analytics, and interacts with almost all divisions and offices within the Commission.

Related Readings

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  • Fraud Red Flags Fraud Red Flags Fraud red flags refer to undesirable situations or conditions that consistently contribute to fraud, waste, or abuse of resources.
  • Types of SEC Filings Types of SEC Filings The US SEC makes it mandatory for publicly traded companies to submit different types of SEC filings, forms include 10-K, 10-Q, S-1, S-4, see examples. If you are a serious investor or finance professional, knowing and being able to interpret the various types of SEC filings will help you in making informed investment decisions.

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The Securities and Exchange Commission

In 1934 the Securities Exchange Act created the SEC (Securities and Exchange Commission) in response to the stock market crash of 1929 and the Great Depression of the 1930s. It was created to protect U.S. investors against malpractice in securities and financial markets. The purpose of the SEC was and still is to carry out the mandates of the Securities Act of 1933: To protect investors and maintain the integrity of the securities market by amending the current laws, creating new laws and seeing to it that those laws are enforced. During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a "run" on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that "Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing." Secondly, "People who sell and trade securities must treat investors fairly and honestly, putting investors' interests first."2

Franklin Delano Roosevelt defeated Herbert Hoover in a landslide in the 1932 election and began to work on his "New Deal". In the New Deal four key regulatory bodies were established: The National Labor Relations Board, Civil Aeronautics Authority, Federal Communications Commission, and the Securities and Exchange Commission. Wall Street was not enamored with the coming regulation, but Congress was confident that the Street was seen as an easy target for the Crash and the Depression that followed. In response, the SEC was created by Congress on June 6, 1934 for the purpose of protecting the public and the individual investors against malpractice in the financial markets. Commenting on the creation of the SEC, Texas Congressman and future Speaker Sam Rayburn admitted3 "he didn't know whether the legislation passed so readily because it was so good or so incomprehensible." However, historian David Kennedy viewed the SEC as "ingeniously simple". In his book Freedom From Fear he states that "For all the complexity of its enabling legislation, the power of the SEC resided principally in just two provisions, both of them ingeniously simple. The first mandated detailed information, such as balance sheets, profit and loss statements, and the names and compensation of corporate officers, about firms whose securities were publicly traded." The second "required verification of that information by independent auditors using standardized accounting procedures." These two simple concepts ended the monopoly enjoyed by the House of Morgan and their like on investment information. Wall Street was saturated with data that was relevant, accessible, and comparable across firms and transactions. "The SEC's regulations unarguably imposed new reporting requirements on businesses. They also gave a huge boost to the status of the accounting profession. But they hardly constituted a wholesale assault on the theory or practice of free- market capitalism. The SEC's regulations dramatically improved the economic efficiency of the financial markets by making buy and sell decisions well-informed decisions, provided that the contracting parties.


Cited: Kenneth S. Davis, FDR: The New Deal Years (1933-1937) (New York: Random House,1986) 362.


Securities and Exchange Commission

This reference report provides an overview of the electronic records of the Securities and Exchange Commission (SEC) in NARA's custody. Full descriptions of the series and data files listed in this report are in the National Archives Catalog. Users can search the Catalog by title, National Archives Identifier, type of archival material, or keyword.

Some of the series and files listed in this report are accessible online:

  • Download - This is a link for downloading the files and documentation from the Catalog. For more details on downloading files, please review the frequently asked questions (FAQs).
  • Search - This is a link for searching the records via the Access to Archival Databases (AAD) resource.

All of the files are also available for a cost-recovery fee. For more information see: Ordering Information for Electronic Records.

Record Group 266: Records of the Securities and Exchange Commission

  • Broker Dealer Directory System (BDD) Files
    National Archives Identifier:596295
    Online Access:Download

    Corporation Index System (CIN) Files
    National Archives Identifier:634590
    Online Access: Download

This series contains records of the appointments, charter, presentations and meetings of the Advisory Committee on Small and Emerging Companies, including meeting agendas, minutes and recommendations.

Files: 76 data files
Technical Documentation: varies per data file (1,294 pages total) supplemental documentation including reports and recommendations from the study

    Investment Advisers Directory System (IA) Files
    National Archives Identifier:596316
    Online Access: Download

    Investment Trust Company Files (IVT)
    National Archives Identifier:614738
    Online Access:Download

    Records on Trading of Securities by Corporate Insiders (ORS)
    National Archives Identifier:572696
    Online Access: DownloadSearch

  • July 11, 1978 - December 10, 1986 101 data files (separate monthly data files)
  • July 11, 1986 - April 10, 1991 1 data file
  • April 11, 1991 - January 10, 1994 33 data files (separate monthly data files)
  • January 11, 1994 - October 10, 1997 1 data file
  • October 11, 1997 - January 10, 1998 1 data file
  • January 11, 1998 - March 12, 2001 1 data file

    Records About the Proposed Sale of Unregistered Securities by Individuals (PSS)
    National Archives Identifier:567822
    Online Access: DownloadSearch

  • January 4, 1972 - December 30, 1993 (History File) (few records for 1983 and 1985 no records for 1986 or 1987)
  • 1972-1984 (overlaps with the History File excludes most of 1983 data)
  • January 3, 1994 - January 31, 1994
  • May 11, 1994 - September 30, 1999
  • January 3, 1999 - September 29, 2000

    Registered Offering Statistics (ROS) File
    National Archives Identifier:597825
    Online Access: Download

The SEC's dissemination contractor, Thomson Reuters, offers reference services for more recent releases of data. The telephone number is 1-800-638-8241. This information is meant to assist researchers and implies no endorsement of their services by NARA.

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This page was last reviewed on May 21, 2021.
Contact us with questions or comments.


Organization

The SEC has five commissioners, appointed by the U.S. president. They have the support of approximately 4,500 staffers located in the Washington, DC headquarters and 11 regional offices across the country.

The SEC is made up of five different divisions:

  1. The Division of Corporation Finance reviews corporate filing requirements. It makes sure companies submit documents that are complete and accurate. That allows investors to understand a company's health.
  2. The Division of Trading and Markets maintains the standards that regulate the stock markets. It oversees the securities exchanges and securities firms. It also maintains surveillance over the industry's self-regulatory organizations. These include the Financial Industry Regulatory Authority (FINRA), the Municipal Securities Rulemaking Board, and clearing agencies that facilitate trade settlement. A subset oversees the Securities Investor Protection Corporation (SIPC). This private, non-profit corporation insures customers' investment accounts in case a brokerage company goes bankrupt.
  3. The Division of Investment Management regulates investment management companies, including mutual funds and variable annuities. It reviews documents submitted under the Sarbanes-Oxley Act of 2002.
  4. The Division of Enforcement investigates and prosecutes violations of securities laws and regulations. It conducts its investigations privately. It can use a formal order of investigation to subpoena witnesses to testify and produce relevant documents. The division presents its findings to the SEC Commission, which allows it to file a case in federal court. Often the Commission settles the case out of court.
  5. The Division of Economic and Risk Analysis provides economic and risk analyses to the other divisions. It predicts how proposed SEC rules would affect the markets and the economy. It reviews the overall risk in the markets. It provides early identification of potentially fraudulent activities.

Securities and Exchange Commission Example Involving Citrus Groves

An example of the Securities and Exchange Commission appearing before the Supreme Court involved citrus groves in the state of Florida. W.J. Howey Co. and Howey-in-the-Hills Service, Inc. were two corporations formed in Florida, where Howey owned several citrus groves. Half of these groves he kept for his own use, while he sold real estate contracts for the other half in order to be able to finance any future developments that needed to be made.

This meant that he would sell a part of the grove to the investor, while also having them enter into a service contract that would allow farming on that particular plot of land. This service contract allowed Howey to continue to enjoy “full and complete” possession of the land due to the investor not participating in the farming in any way whatsoever. This was because those who purchased the land were typically not farmers, nor were they even Florida residents. Instead, they were business people who lacked the necessary experience in agriculture to be able to tend to the land themselves.

The benefit to the investor was that once the land was harvested, the investor would then be credited for the produce that was reaped from the parcel of land that he invested in. Howey, however, was the sole marketer of that produce and marketed the land through a resort hotel owned in the area by his corporation. In Howey’s sales pitch, substantial profits were promised to those who were interested in investing in the citrus groves.

Where Howey got into trouble was in failing to register the SEC-required paperwork in his frequent interstate commerce transactions. The SEC filed a lawsuit seeking an injunction against Howey’s participation in interstate commerce. The grounds for this request was that Howey had violated the Securities Act of 1933 by selling unregistered “securities,” the securities in this case being the plots of land that he had encouraged professionals to invest in.

The trial court denied the SEC’s request, holding that the contract arrangement did not actually provide the sale of those securities. The court of appeals affirmed the lower court’s decision, and so the case was brought before the Supreme Court, where certiorari was granted. The major issue for the court to decide was whether or not the contracts Howey was selling were, in fact, “investment contracts,” as defined by the Securities Act of 1933.

Ultimately, it was decided that yes, Howey did act in such a way that violated the Securities Act of 1933. The Court held that despite the fact that some of Howey’s investors chose to use services other than Howey-in-the-Hills Service, Inc. to tend to the groves, this was irrelevant due to the fact that Section 5 of the Securities Act of 1933 forbids the sale of unregistered securities. Therefore, whatever was done to the land after such a sale did not matter in the eyes of the law.



Comments:

  1. Wes

    I think you are not right. I can prove it.

  2. Aisford

    is curious, and the analog is?



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