The SEC: Then, Now and the Future
The SEC (Securities and Exchange Commission) is an important governmental agency for any individual or business involved in finance in the United States. Institutional investors such as banks, insurance companies, and mutual funds are closely regulated by both the administrative rules developed by the SEC and the laws that it is responsible for enforcing. Individuals who function in an advisory role as an investment adviser or security trader will need to have a license through SEC. Consumers and other individuals are also directly regulated by the SEC when selling shares of stock in public companies and other significant transactions. Below is a full overview of the SEC’s history, its importance in the modern world, and its significance for the future.
History of the SEC The SEC was originally created in 1934 under the Securities Exchange Act of 1934, which was created to regulate the securities offered by publicly traded companies. The powers of the SEC were subsequently expanded in 1939 with the passage of the Trust Indenture Act and the Investment Company Act of 1940. These laws established a framework that the SEC used to develop its administrative rules that now govern most transactions. However, the SEC’s influence has grown even more in recent years with the passage of the Sarbanes-Oxley Act in 2002 and Dodd-Frank in 2010. These new rules give the SEC more authority over how companies state earnings to the public and how shares can be sold on electronic exchanges.
Significant SEC Cases
One of the most famous cases that the SEC has managed was the case of Bernie Madoff, who was indited in 2008 for stealing almost 65 billion dollars from investors through his Ponzi scheme. Madoff had been a trusted adviser to many wealthy individuals around the world, who found their fortunes worthless overnight when his fraud was uncovered by the SEC. Another famous case was Martha Stewart, who was prosecuted by the SEC in 2003 for her role in an insider trading scheme. There have also been thousands of executives, entrepreneurs, and notable money managers who were prosecuted by the SEC over the years.
Future of the SEC The SEC will only grow in the coming years as electronic currency and stock exchanges become more accessible to everyday consumers. The SEC is also reviewing rules that make crowd-funding difficult to some businesses, since prohibitive SEC rules require all private equity investors to be qualified with at least two million dollars in assets or an income of over 200,000 dollars per year. SEC guidelines may become more lenient in the years ahead, but its importance in the finance industry will only grow in the 21st century.
Jonah Engler is an entrepreneur based in New York City. Follow him on Tumblr or connect with him on social media.