Securities and Exchange Commission: Roles and Responsibilities

The Securities and Exchange Commission works to oversee corporate takeovers and to protect investors in the United States. Established by the U.S. government, SEC requires that publicly traded companies disclose their financial information to the general public. Investment advisers are required to specify the volume of managed assets and the services offered. They should disclose their payment schedule, including fund expenses and custody and brokerage fees. Investment advisers must disclose disciplinary information, along with risk assessment and investment strategies, and methods of analysis. In addition, the Commission requires that advisors offer information about their brokerage practices and code of ethics. Finally, they are required to disclose trade aggregation, directed brokerage, client referrals, as well as soft dollar practices.

The Securities and Exchange Commission aims to protect creditors and customers. It requires that brokers comply with liquidity standards and are registered with SEC. According to the Commission’s definition, brokers are professionals who conduct transactions on behalf of others. Their customers are private investors and not banks. Dealers sell and buy securities through brokers or on their own. Broker-dealers are professionals who combine the responsibilities of both. They are required to control and maintain excess margins and fully paid client securities. This should be done each business day.

The goal of the Commission is to offer information to investors and maintain efficient and transparent markets. As part of the efforts toward reform, SEC aims to enforce better control over financial establishments. Lack of regulation puts the financial system at risk. The Commission also requires that hedge fund advisers and other managers register with it.

Main Roles and Responsibilities

The main role of the Securities and Exchange Commission is to enforce regulations for self-regulatory bodies, created to oversee the work of various entities. These include public utility companies, stockbrokers, investment advisers and companies, as well as publicly held companies. There are different self-regulatory bodies, among which FINRA and MSRB. The National Association of Securities Dealers is a non-government organization that regulates NASDAQ. The Financial Industry Regulatory Authority offers information on certifications, designations, and charters. The MSRB or Municipal Securities Rule Making Board is a regulatory body that aims to protect local and state authorities, investors, and the general public. The goal of MSRB is to collect information on price transparency and it seeks input from different parties. The aim of the board is to create and update rules and to ensure that municipal bodies act in compliance with them. MRSB maintains a database to offer reliable, secure, useful, and timely information. The goal is to protect market participants and ensure that the market operates correctly. The Municipal Securities Rule Making Board also engages with policy makers, regulatory agencies, and municipalities. The aim is to protect municipal agencies and investors by promoting fair and transparent practices.

The role of the Securities and Exchange Commission itself is to maintain efficient, transparent, and effective markets. SEC oversees the involvement and operations of organizations and individual investors. The Commission monitors securities companies, self-regulatory organizations, and the stock markets.

SEC aims to establish more robust regulations for the credit bureaus and over-the-counter derivatives. Originators and issuers must retain interest in securitized debt. Finally, the Commission aims to develop better accounting and regulatory standards. SEC has reported improvements in several important areas, including better risk-based evaluations of financial companies. Targeted training and better methods for fraud detection are also improvements. Risk assessment methods and techniques have been developed and implemented in different departments of the agency. The Commission has expanded its task force, hiring professionals with industry expertise.

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