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1 1 (January 4, 2021)

handle is hein.crs/goveadk0001 and id is 1 raw text is: C rS hSen~ S January 4, 2021 Introduction to Financial Services: The Securities and Exchange Commission (SEC) To help restore confidence in the securities markets in the wake of the stockmarket crashof 1929, Congress passed the Securities ExchangeActof 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 broadregulatory authority over s ignificantp aits of the securities industry, including stock exchanges, mutual funds, investment advisers, andbrokeragefirms. 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. Sale fees on stock and other securities transactions that the SEC collects fromsecurities exchanges offset the appropriations. Annual collections, which historically exceeded the SEC's annual appropriations, go directly to the U.S. Treasury's general fund. Overthe last fewyears, the SEC's enacted annual budgethas been in the $1.6billion to $1.7 billion range. The SEC is led by five presidentially appointed commissioners, including a chair, subject to Senate confirmation. Commissioners havestaggered five-year terms, and no more than three commissioners may belong to the s ame politicalparty. Si nificant Securities Laws Overseen by th SEC The SEC oversees an arrayofsecurities laws, severalof 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 soughtto ensure that investors are given salient information on securities offered for public sale and to ban deceit, misrepresentations, andotherkinds offraud in the sale of securities. The act requires issuing companies to discloseinformation deemed germane to investors as part of the mandatory SEC registration of the securities thatthose companies offer forsale to thepublic. Potential investors must be given an offering prospectus containing registration data. Certain offerings are exempt from such registrationrequirements, including private offerings to financial institutions or to sophisticatedinstitutions. Securities Exchange Act of 1934 (Exchange Act; P.L. 73- 291). In addition to creating the SEC, the act governs https://crs repo securities transactions on the secondary market and gives the agency regulatory oversight over self-regulatory organizations (SROs), including stockexchanges like NASDAQ, that have quasi-governmental authority to police their members and attendant securities markets. Financial Industry Regulatory Authority (FINRA), the principal regulator ofbroker-dealers, is also an SRO. Investment Company Act of 1940 (ICA; P.L. 76-768). This act regulates the organization of investment companies, including mutual funds. Investment companies are primarily engaged in investing in the securities of other companies. In an attempt to minimize the potential conflicts of interestthat may arise due to the operationalcomplexity of investment companies, the act generally requires investment companies to register with the SEC and publicly disclosekey data on their investment objectives, structure, operations, and financial status. Investment Advisers Actof 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 andhedge funds. In general, under the act, advisers managing a certain amount of as sets must register with the SEC and conformto the act's regulations aimed at protecting investors. Sarbanes-OxleyActof 2002 (SOX; P.L.107-204).Passed in the aftermath of accounting scandals at firms such as Enron and Worldcomduring 2001 and 2002, SOX sought to improve the reliability of fmancialreporting andthe quality of corporate audits at public companies. Among other things, it created the Public Company Accounting OversightBoard (PCAOB) to oversee the quality of corporate accountants and auditors and shifted responsibility for the externalcorporate auditor from corporate management to independent audit committees. Dodd-Frank Wall Street Reformand Consumer ProtectionAct (Dodd-Frank Act; P.L.111-203).Enacted in the wake of the 2007-2009 fmancialcris is, the 2010 Dodd-FrankAct 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 s ecuritize certain debt retain a significant interest in as sets that they transfer; reformed the regulation of credit rating agencies; requiredhedge fund advisers to register with the SEC; and created an interagency fmancialriskmonitoring panel, the Financial Stability Oversight Council (FSOC), with the SEC chair as a member. Jumpstart Our Businesses StartupAct (JOBS Act; P.L. 112-106). This 2012 act was broadly aimed at stimulating

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