What Is Sec’s Role in Business Regulations?

What is SEC's Role in Business Regulations?

A. Introduction

"The primary mission of the U.S. Securities and Exchange Commission (SEC) is to protect investors and maintain the integrity of the securities markets. As more and more first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college, these goals are more compelling than ever" ("The Investor's Advocate").

The investing world is a complex environment not easy to understand. Stocks and Bonds are volatile valuables that can loose value rapidly. That's is why the SEC, in Section 10 (b) and 20 of the 1934 Act and Rule, was given power to prohibit executives and companies from engaging in fraudulent actions and to hide relevant financial information that would have a potential harmful affect on the stock price and other relevant financial indicators. In addition, the SEC also encourages companies to disclose all the financial information relevant to the public and potential investors based on the fact that all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it ("The Investor's Advocate").

Before the Great Crash of 1929, there was little support for federal regulation of the securities markets. This was particularly true during the post-World War I surge of securities activity. Proposals that the federal government require financial disclosure and prevent the fraudulent sale of stock were never seriously pursued ("The Investor's Advocate").

During the 1920s, approximately 20 million large and small shareholders took advantage of post-war prosperity and set out to make their fortunes in the stock market. It is estimated that of the $50 billion in new securities, offered during this period, half became