Securities and Exchange Commission (SEC)

The US Securities and Exchange Commission (SEC) has primary responsibility for enforcing the federal securities laws and regulating the securities industry, formed as a result of the Securities Exchange Act of 1934 (often referred to simply as the Exchange Act). The SEC enforces various laws such as the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940 and the Sarbanes-Oxley Act of 2002. The SEC is run by five commissioners appointed by the sitting President of the United States. Each commissioner serves a five-year term, and commission terms are staggered.

The mythology of the SEC is that it was established to prevent the kind of corporate and white-collar crime that had been responsible for the Great Depression. The SEC is empowered to bring civil enforcement actions against individuals or companies alleged to have committed accounting fraud and other violations of securities law. The formation of the SEC generated the so-called public company with reporting requirements above and beyond a privately held company. A public company that has more than 99 shareholders must file a good deal of documentation with the SEC.

In reality, the SEC is an almost entirely useless operation. The reporting requirements have not helped a whit with the cyclical booms and busts of Western economies. Anyone who believes investing is "fairer" because the SEC monitors the financial industry and prosecutes insider trading is naïve in the extreme. Most, if not all, of what the SEC does cannot be justified economically. And the rest is merely window dressing.

The main thing the SEC DOES do is provide regulatory cover for Wall Street's largest financial entities. In addition, the SEC provides Wall Street's main players with a level of regulatory capture that raises the barrier to entry for smaller entities. By mandating the SEC to enforce complex and expensive legislative acts, Congress has virtually empowered the very firms that politicians love to rail against.

In almost every way, the SEC fails its mandate; it is an enabler of the very abuses that it is supposed to cure and dampens the very competition that it is supposed to encourage in the name of fairness. Regulation and regulators simply don't work. The cycles repeat themselves over and over and after every disaster, regulators such as the SEC receive more power and do even more damage to the free market with that power. The end result of such regulation will be an SEC with the power to do anything it wishes to the single remaining Super-Firm that has not gone out of business due to regulatory overkill and the costs associated with it.

Securities and Exchange Commission (SEC): Site Contributions

News & Analysis

Editorials

View All Contributions for Securities and Exchange Commission (SEC)