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1 1 (April 15, 2020)

handle is hein.crs/govcjyy0001 and id is 1 raw text is: FF.ri E~$~ & Updated April 15, 2020 Introduction to Financial Services: The Securities and Exchange Commission (SEC) To help restore confidence in the securities markets in the wake of the stock market crash of 1929, Congress passed the Securities Exchange Act of 1934, which authorized the creation of the Securities and Exchange Commission (SEC). The SEC is an independent, nonpartisan regulatory agency responsible for administering federal securities laws. It has broad regulatory authority over significant parts of the securities industry, including stock exchanges, mutual funds, investment advisers, and brokerage firms. The SEC oversees federal securities laws broadly aimed at (1) protecting investors; (2) maintaining fair, orderly, and efficient markets; and (3) facilitating capital formation. These laws provide clear rules for honest dealing among securities market participants, including antifraud provisions, and disclose information deemed necessary for informed investor decisionmaking. The SEC's budget is set through the congressional appropriations process. The appropriations are offset by sale fees on stock and other securities transactions that the SEC collects from securities exchanges. Annual collections, which tend to exceed the SEC's annual appropriations, go directly to the U.S. Treasury's general fund. Over the last few years, the SEC's enacted annual budget has been in the $1.6 billion to $1.7 billion range. The agency is led by five presidentially appointed commissioners, including a chairman, all of whom require Senate confirmation. Commissioners have five-year staggered terms and no more than three commissioners may belong to the same political party. The SEC oversees an array of securities laws, several of which have been amended over time. Applicable significant securities laws include those described below. Securities Act of 1933 (Securities Act; P.L. 73-22). This act sought to ensure that investors are given salient information on securities offered for public sale and to ban deceit, misrepresentations, and other kinds of fraud in the sale of securities. The act requires issuing companies to disclose information deemed germane to investors as part of the mandatory SEC registration of the securities that those companies offer for sale to the public. Potential investors must be given an offering prospectus containing registration data. Certain offerings are exempt from such registration requirements, including private offerings to financial institutions or to sophisticated institutions. Securities Exchange Act of 1934 (Exchange Act; P.L. 73- 291). In addition to creating the SEC, this act established self-regulatory organizations (SROs) in the securities industry, which are SEC-regulated entities, including stock exchanges, with quasi-governmental authority responsible for policing their members and the attendant securities markets. Under the act, the Financial Industry Regulatory Authority (FINRA), a SEC-regulated SRO, is the principal regulator of broker-dealers. Investment Company Act of 1940 (ICA; P.L. 76-768). This act regulates the organization of investment companies, including mutual funds. Investment companies such as mutual funds are primarily engaged in investing in the securities of other companies. In an attempt to minimize the potential conflicts of interest that may arise due to the operational complexity of investment companies, the act generally requires investment companies to register with the SEC and publicly disclose key data on their investment objectives, structure, operations, and financial status. Investment Advisers Act of 1940 (IAA; P.L. 76-768). Investment advisers are firms or sole practitioners that are compensated for advising others about securities investments, including advisers to mutual funds and hedge funds. In general, under the act, advisers managing a certain amount of assets must register with the SEC and conform to the act's regulations aimed at protecting investors. Sarbanes-Oxley Act of 2002 (SOX; P.L. 107-204). Passed in the aftermath of accounting scandals at firms such as Enron and Worldcom during 2001 and 2002, SOX sought to improve the reliability of financial reporting and the quality of corporate audits at public companies. Among other things, it created the Public Company Accounting Oversight Board (PCAOB) to oversee the quality of corporate accountants and auditors and shifted responsibility for the external corporate auditor from corporate management to independent audit committees. Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act; P.L. 111-203). Enacted in the wake of the 2007-2009 financial crisis, the 2010 Dodd-Frank Act mandated sweeping financial regulatory changes, many of which affected the SEC. The act required the SEC to adopt rules to help ensure that those who securitize certain debt retain a significant interest in assets that they transfer; reformed the regulation of credit rating agencies; required hedge fund advisers to register with the SEC; and created an interagency financial risk monitoring panel, the Financial Stability Oversight Council (FSOC), with the SEC chair as a member. gognpo goo g , q 'M M M 11LULANJILiM,

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