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Finance Dictionary and Glossary of Investment Terms
Securities and Exchange Commission (SEC)
The federal agency charged with regulating the securities markets.A creature of the Depression, the SEC was born in 1934 amid the devastation left by the Great Crash, and since then has functioned as top cop for America''s securities markets. In keeping with the free markets whose functioning it seeks to preserve, the agency''s approach is heavily weighted toward disclosure. That is, a company might have John Dillinger as chief executive, Willie Sutton as chief financial officer and a business plan focused on selling bikinis in the Yukon, and it''s all perfectly all right with the SEC -- as long as these facts are clearly disclosed. Dillinger and Sutton would have to disclose their backgrounds as well. In fact, any material information that would affect an investment decision would have to be disclosed -- in the company''s initial public offering document, its annual 10-K and perhaps in its proxy statement as well (the latter tells you how much John and Willie are being paid). The theory is that investors are big boys and girls who can be relied on to make their own decisions as long as they have all the facts. The system seems to work; America''s securities markets are models of efficiency and integrity (not necessarily in any absolute sense, but compared to those of many other countries), and the SEC plays an important role in keeping them that way.
The federal agency created by the Securities Exchange Act of 1934 to administer that act and the Securities Act of 1933. The statutes administered by the SEC are designed to promote full public disclosure and protect the investing public against fraudulent and manipulative practices in the securities markets. Generally, most issues of securities offered in interstate commerce or through the mails must be registered with the SEC. (See Maloney Act, Securities Acts Amendments of 1975, Securities Exchange Act of 1934)