The Securities Exchange Act (SEA) created the Securities and Exchange Commission (SEC). The primary purpose of the SEC is to make sure the market is a fair place for investors to put their money in the hope of profitable returns. The SEC uses the authority given to it by the SEA to regulate brokerage firms, transfer agents, clearing agencies, and the nation’s securities self-regulatory organizations, such as the various stock exchanges.

How Does the SEC Regulate These Different Groups?

One way the SEC regulates these groups is by requiring companies with over $10 million in assets and more than 500 owners of securities to make periodic reports to the SEC. The information required for disclosure is generally described in the Securities Act of 1933, and involves things like company balance sheets, budgets, and a description of the business and its objectives.

When a public company is going to have a stockholder vote for the election of a board of directors or any other corporate action, the company must disclose information about the issues to be voted upon to the SEC.

Also, any investor who wants to purchase more than 5% of a company’s shares of stock, considered a controlling interest in the company, must submit information to the SEC.

The purpose of all this disclosure of information to the SEC is to allow the Commission to make sure it is all truthful, and then make the information available to the general public so that investors can make informed decisions about where they want to put their money.

Does the Act Prohibit Any Specific Kinds of Action?

Just like other securities laws, this Act prohibits various types of securities fraud.  In particular, it disallows insider trading. This kind of trading occurs when an investor buys or sells securities based on information about the company or securities not available to the general public.

Who Else Must Disclose Information to the SEC?

In addition to public companies, there are certain market participants who must register with the SEC:

  • Exchanges
  • Brokers and dealers
  • Transfer agents
  • Clearing agencies

Should I Contact a Lawyer If I Am Accused of Securities Fraud?

If you have been accused of securities fraud you should immediately contact a securities attorney with experience is securities law. Your attorney will be able to advise you of your rights and help you develop defenses to fight charges against you, as well as navigate the complex criminal legal system.