The U.S. Securities and Exchange Commission

The U.S. Securities and Exchange Commission

History, purpose, and objectives of the SEC

The U.S. Securities and Exchange Commission (SEC) was created in 1934 after congress passed the Securities Exchange Act of 1933 and 1934. The stock market crash which occurred in 1929 motivated congress to pass the Securities Exchange Act of 1934 to restore public confidence. The findings of the investigation pointed towards this end to ensure that such an occurrence remains under control in the future. The new act required all public companies to inform the investors of the existent risks. At any time, the full business information was also declared as accessible to investors; further, the federal agency intended to protect investors and ensure that the securities industry bulk was regulated. The regulated securities included American stock exchanges, securities markets, options, and electronic exchanges. The securities and trades brokers were also expected to treat all investors honestly and fairly (Investor.gov, 2020).

The SEC’s mission is divided into three elements (SEC.gov, 2020). First, it protects investors from rogue public companies that may fail to disclose the risks associated with their investments. Second, it maintains efficient, orderly, and fair markets where investments are sold and bought. Thirdly, it facilitates the formation of capital (Investor.gov, 2020). To enforce these parts of the mission, the SEC investigates any violations of laws that are related to securities. The prosecution of offenders is done alongside other law enforcement agencies, while civil action is taken in other instances (FOX News Network, LLC., 2016).

The Securities Act of 1933

The Securities Act of 1933 was the first law that Congress passed to govern security markets. Its passing occurred after the 1929 stock market crash. The act is known by several titles, including the Truth in Securities Act, the 1933 Act, and the Federal Securities Act. According to President Roosevelt, the 1933 Act’s main purpose was to correct the wrongs that had led to the public’s exploitation. Some of these wrong acts included selling fraudulent securities, insider trading, and manipulative trading that drove high share prices. These acts led to the individual investors’ disadvantage. Prior to the enactment of the 1933 Act, state laws were used to regulate the securities markets. Its presence boosted the state laws by incorporating a federal law that demanded more disclosure from publicly traded companies.

Its main objectives included promoting transparency, which was expected to facilitate better and more informed decision-making among investors. It also protects the investors from misrepresentation and fraud that may occur. Furthermore, all traded securities must be registered with the SEC. In addition, a prospectus is required from all issuers for marketing to potential investors. Finally, the 1933 Securities Act requires all issuers to provide sufficient information that can support due diligence.

Securities Exchange Act of 1934

The Securities Exchange Act of 1934 followed the 1933 Act. The 1934 Act established the SEC, the federal agency that was responsible for governing the trade of securities. Through the new law, the SEC was mandated to oversee and regulate brokerage companies, self-regulated firms, and clearing, and transfer agents. Self-regulated firms include the New York Stock Exchange, the Chicago Board of Options, the Financial Industry Regulatory Authority (FINRA), and the NASDAQ Stock Market. It also has the authority to penalize or punish offenders. The act ensures that certain types of acts are not conducted in the market. It empowers the SEC to discipline entities that violate the rules (Investor.gov, 2020). The act of 1934 has similar objectives to the 1933 Act.

Investment Advisors Act of 1940

The Investment Advisors Act of 1940 is mandated to regulate investment advisers. An investment adviser who provides investment counsel to other individuals at a fee. The investment advice can be provided directly or in writing and publications. The investment advisors are expected to register. The registration exceptions apply to advisers that deal with insurance companies only, foreign and private advisors, and charitable firms. Based on the amendments made in 2010 and 1996, advisors with at least $100 million worth of assets within their management are required to register with the SEC (Investor.gov, 2020). The act further promotes the protection of investors from fraudulent security market activities.

History and purpose of the Securities Investor Protection Corporation (SIPC)

The SIPC is a non-profit corporation that is committed to protecting investors. The SIPC was formed under the Securities Investor Protection Act of 1970 (SIPA). Its formation took place during the 18^th century when investors’ confidence had dipped significantly. The SIPC protects individual consumers up to $500,000. This amount includes a cash claim of $250,000. Despite being created under SIPA, SIPC lacks the authority to investigate the members who are brokers or dealers. The agency does not also represent the government in any capacity. However, it represents an essential element of the entire system that ensures investors are protected. The focus of SIPC is to restore the client’s cash and securities in case they are abandoned into the management of brokerage entities that have financial challenges (SIPC, 2020).

The roles of the credentialed professionals in the investment process

Different professionals play distinct roles in the process of investment. The Certified Public Accountant (CPA) features in the process of managing finances through bookkeeping, auditing, consultation, planning financial resources, and offering advice. Income management plays a critical role for CPAs, especially when seeking to make investments or increase resources used for the same purpose. The Certified Financial Planner (CFP) can complement the roles of a CPA by offering specialized tax counsel. The CFP can offer guidance on tax, retirement, and education funds. People can rely on CFPs to plan their investments in a manner that meets their goals. CPAs help in this process of goal achievement by reducing the exposure to tax, minimizing costs, and ensuring compliance at the same time.

A Chartered Financial Analyst (CFA) is responsible for offering advice on various investment options. They can provide such advice as a financial organization’s representative. Their advice is based on a thorough analysis of the market, which leads to reliable forecasts. The financial analyst must consider the bigger picture than a CPA does. The CPA would be more concerned with the financial performance of an organization. The Certified Investment Management Analyst (CIMA) also offers advice on investment options. A CIMA operates at a higher level in comparison to other financial planners (Reed, 2019).

References

FOX News Network, LLC. (2016). A Brief History of the Securities and Exchange Commission.

Investor.gov. (2020). The Laws That Govern the Securities Industry. Retrieved from U.S. Securities and Exchange Commission: https://www.investor.gov/introduction-investing/investing-basics/role-sec/laws-govern-securities-industry

Investor.gov. (2020). The Role of the SEC. Retrieved from U.S. Securities and Exchange Commission: https://www.investor.gov/introduction-investing/investing-basics/role-sec

Reed, E. (2019). What Is a Certified Investment Management Analyst (CIMA)?

SEC.gov. (2020). What we do. Retrieved from U.S. Securities and Exchange Commission: https://www.sec.gov/about/what-we-do

SIPC. (2020). Who We Are. Retrieved from SIPC: https://www.sipc.org/about-sipc/

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The purpose of this assignment is to describe the history and purpose of the SEC and various securities acts as well as a comparison of the role of credentialed professionals during the investment process.

Write a paper (750-1,000 words) demonstrating an overview of the history and purpose of regulatory agencies and acts. The paper should contain the following:

Provide an overview of the history and purpose of the SEC, including a summary of the objectives
Describe the history and purpose of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisors Act of 1940.
Provide an overview of the history and purpose of the Securities Investor Protection Corporation (SIPC).
Utilizing the topic Resources, compare the possible roles of the following credentialed professionals in the investment process: Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), and Certified Investment Management Analyst (CIMA ).
Include at least five different sources (e.g., government websites, reliable original material, academic articles, etc.). Wikipedia, Investopedia, and other nonreliable sources may not be used.

Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center.

This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.

You are required to submit this assignment to LopesWrite. A link to the LopesWrite technical support articles is located in Class Resources if you need assistance.