U.S. Securities and Exchange Commission

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U.S. Securities and Exchange Commission (SEC)
Sec logo.png
Founded 1934
Headquarters Washington, D.C.
Products U.S. government securities regulation
Twitter ID SEC_news
Web site www.sec.gov

The U.S. Securities and Exchange Commission (SEC) is the U.S. regulatory agency charged with the oversight of securities markets and market participants in the U.S. Its mission is to protect investors, to maintain fair, orderly, and efficient markets, and to facilitate capital formation. Mary L. Schapiro is the current chairman of the SEC.[1]

For more background on the SEC, see the SEC MarketsWiki page.

Open Meetings Related to the Dodd-Frank Act

Duties Related to the Dodd-Frank Act

The Dodd-Frank Act authorizes or requires the SEC to establish rules in the following general areas:[2]

Rulemaking Process

The SEC's rulemaking process follows these steps:[3]

  • Concept Release: A description of an area of interest detailing the SEC's concerns and possible solutions to the identified problem. The concept release seeks public feedback, which is considered before a rule proposal is issued. This step is only applied to unique or particularly complicated issues.
  • Rule Proposal: Most often the first step in the rulemaking process, the SEC publishes a formal rule proposal for public comment. The proposal will detail specific issues and solutions. A typical public comment period is between 30 and 60 days.
  • Rule Adoption: The SEC considers knowledge obtained in the previous steps and agrees on the details of a final rule. When adopted by a by vote of the full Commission, it is added to the official rules that regulate the securities industry.

Organizational Study and Reform

New Investor Advisory Committee, April 9, 2012

As required by the Dodd-Frank Act, the SEC announced the formation of its new Investor Advisory Committee on April 9, 2012. According to the press release, section 911 of Dodd-Frank established the committee "to advise the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace." [4]

Formation of Advisory Committee on Small and Emerging Companies - September 13, 2011

The SEC announced the formation of a new advisory committee that will focus on the interests of small private companies and publicly traded companies with less than $250 million in public market capitalization.

The committee will provide the SEC with advice regarding:

  • "capital raising through private placements and public securities offerings;
  • trading in the securities of small and emerging and small publicly traded companies; and
  • public reporting requirements of such companies."[5][6]

Link to SEC Notice

Report on the Implementation of SEC Organizational Reform Recommendations - September 9, 2011

In the study, the SEC summarizes the Boston Consulting Group's (BCG) assessment of the Commission's organization and operations, which began in October 2010. BCG identifies 16 initiatives for bettering the SEC's structure and procedure, a part of four separate recommendations:

  • "Reprioritizing regulatory activities. Acknowledging that the SEC is making—and will continue to need to make—difficult tradeoffs in allocating resources to highest priority needs, the study recommends that the SEC engage in a rigorous assessment to better prioritize its needs and reallocate resources accordingly;
  • Reshaping the organization. The study recommends several initiatives by which the SEC can reshape its organizational structure, roles and governance to maximize efficiency, effectiveness and collaboration and drive continuous improvement;
  • Investing in enabling infrastructure. The study concludes that significant new investment is needed in the SEC’s key enabling infrastructure, specifically technology, human resources, risk management and high-priority staff skills; and
  • Enhancing engagement with SROs. The study concludes that the SEC can improve both its oversight of, and engagement with, SROs."[7]

Link to SEC Report

Boston Consulting Group - March 10, 2011

In accordance with a mandate from the Dodd-Frank Act, the U.S. Securities and Exchange Commission (SEC) was required to hire an independent consultant to examine the exchange's structure and operations, and make assessments of areas in need of reform. The SEC selected Boston Consulting Group (BCG) to conduct the study. In BCG's 425 discussions with present and former exchange officials, regulators, and industry groups, the consultant presented its results on March 10, 2010. The study focused on four areas of concern:

  • Organizational structure;
  • Personnel and personnel resources;
  • Technology and technology resources; and
  • Relationships with self-regulating organizations (SROs).[8]

BCG recommends significant changes within the organization in areas such as technology and human resources, but recognizes the funding constraints with which the organization is faced. As SEC Chairman Mary Schapiro remarked in a statement released in response to the Study's recommendations, "the report of the independent consultant confirms the concerns I have been expressing that the SEC does not have the resources to perform all the activities expected of us."[9]

Perhaps the most controversial recommendation from the study is one that could delegate many oversight responsibilities to SROs such as the Financial Industry Regulatory Authority (FINRA).[10]

Link to BCG Study
Link to Statement by Chairman Schapiro

Additional Studies Mandated by the Dodd-Frank Act

SEC Staff - Study Regarding Financial Literacy Among Investors
August, 2012

The study identifies investor perceptions and preferences regarding a variety of investment disclosures. The study shows that investors prefer to receive investment disclosures before investing, rather than after, as occurs with many investment products purchased today. The study identifies information that investors find useful and relevant in helping them make informed investment decisions. This includes information about fees, investment objectives, performance, strategy, and risks of an investment product, as well as the professional background, disciplinary history, and conflicts of interest of a financial professional. Investors also favor investment disclosures presented in a visual format, using bullets, charts, and graphs.[11]

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SEC Staff - Study on Investment Advisers and Broker-Dealers
January, 2011

The Dodd-Frank Act required the Securities and Exchange Commission (SEC) to conduct a study to evaluate the effectiveness of existing regulatory standards for investment advice and recommendations to retail customers, and whether there regulatory gaps, shortcomings, or overlaps in these standards. The study outlined the SEC staff findings and made recommendations for potential new rulemaking, guidance, and other policy changes. Staff recommendations include:

  • the adoption of a set of Uniform Fiduciary Standards covering broker-dealer and investment adviser conduct, loyalty, principal trading, investor education, and duty of care; and
  • harmonization of regulations in areas such as advertising and other communications, the use of finders and solicitors by investment advisers and broker-dealers, the use of finders and solicitors by investment advisers and broker-dealers, licensing and continuing education requirements, and book- and record-keeping.
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SEC Staff - Study on Enhancing Investment Adviser Examinations
January, 2011

The Dodd-Frank Act required the Securities and Exchange Commission (SEC) to conduct a study to evaluate the examination and evaluation of investment advisers, dually-registered broker-dealers and investment advisers (“dual registrants”) and registered investment advisers that are affiliated with a broker-dealer, and recommend regulatory steps to address any concerns resulting from the study. The study was organized into five sections:

  • Commission examinations of registered investment advisers;
  • Examinations of registered investment advisers over the past six years;
  • Impact of the Dodd-Frank Act on examinations of registered investment advisers;
  • Options to consider to address capacity constraints concerning examinations; and
  • Three staff recommendations:
    • Authorize the Commission to impose user fees on SEC-registered investment advisers to fund their examinations by the Office of Compliance Inspections and Examinations (OCIE);
    • Authorize one or more self-regulatory agencies (SROs) to examine, subject to SEC oversight, all SEC-registered investment advisers; or
    • Authorize FINRA to examine dual registrants for compliance with the Advisers Act.
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References

  1. "The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation". Securities and Exchange Commission. Retrieved on March 15, 2011.
  2. Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act. SEC. Retrieved on March 11, 2011.
  3. How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation. SEC. Retrieved on March 11, 2011.
  4. SEC Announces Members of New Investor Advisory Committee. Securities and Exchange Commission. Retrieved on April 10, 2012.
  5. U.S. Securities and Exchange Commission: Advisory Committee on Small and Emerging Companies. SEC. Retrieved on September 13, 2011.
  6. SEC Announces Formation of Advisory Committee on Small and Emerging Companies. {{{org}}}. Retrieved on September 13, 2011.
  7. U.S. Securities and Exchange Commission: Report on the Implementation of SEC Organizational Reform Recommendations. SEC. Retrieved on September 9, 2011.
  8. U.S. Securities and Exchange Commission: Organizational Study and Reform, Executive Summary. U.S. Securities and Exchange Commission. Retrieved on March 15, 2011.
  9. Statement From Chairman Schapiro on Independent Consultant Report of SEC Organization and Operations. U.S. Securities and Exchange Commission. Retrieved on March 15, 2011.
  10. Study recommends SEC reorganization. Washington Post. Retrieved on March 15, 2011.
  11. SEC Issues Financial Literacy Study Mandated by the Dodd-Frank Act. Securities and Exchange Commission. Retrieved on October 16, 2012.

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