Securities and Exchange Commission (SEC)

In researching which companies to invest your money in, have you ever come across references to the SEC and wondered: what does the SEC stand for? The Securities and Exchange Commission (SEC) is an independent agency of the US federal government. It was created at the height of the Great Depression in 1934, to protect US investors and maintain market transparency.

Where have you heard of the Securities and Exchange Commission (SEC)?

You may have heard of the Securities and Exchange Commission in the news. The SEC gets involved when there are public accusations that a company has engaged in fraudulent activity. You could also come across the SEC because public companies, broker-dealers and certain private companies must file their quarterly and annual financial reports with the commission. These filings are usually linked in the investor relations sections of the company websites.

What do you need to know about the Securities and Exchange Commission (SEC)?

The Securities and Exchange Commission regulates US entities that sell and trade securities and offer advice to investors – exchanges, brokers, dealers, investment advisors, and mutual funds – to prevent fraud and ensure that important market-relevant information is disclosed. In fulfilling its role, what is the Securities and Exchange Commission required to do? According to the SEC website, it has a three-part role: protecting investors, facilitating access to capital, and maintaining orderly markets.

• Protecting investors

The Securities and Exchange Commission provides investor education and resources. It requires market participants to regularly disclose significant financial and other information so that investors have the information they need to make informed decisions about their investments.

The SEC enforces federal securities laws to hold wrongdoers accountable and deter misconduct. it conducts investigations into complaints or other indications of securities violations.

• Facilitating capital formation

The SEC’s regulatory regime facilitates ways for companies and entrepreneurs to raise capital such as through public offerings. Its independent Office of the Advocate for Small Business Capital Formation started operations in January 2019 to help small businesses gain access to capital and interact with the SEC.

• Maintaining fair, orderly, and efficient markets

The Securities and Exchange Commission monitors more than 27,000 entities in the industry and, as the regulator, adjusts and modernises its rules, regulations and oversight activities as needed.

What are SEC filings?

Regulations require public companies to file their annual financial reports on Form 10-K and their quarterly reports on Form 10-Q with the SEC. The company’s chief executive officer and chief financial officer must certify the information contained in the reports.

Companies are also required to file reports on Form 8-K to announce certain events within four business days. According to the SEC website, examples of events that come under regulation include:

• completion of an acquisition or disposition of assets

• entry and termination of a material definitive agreement

• unregistered sales of equity securities

• material changes to the rights of security holders

• exchange delisting or failure to satisfy a continued listing rule

• changes to the company's certifying accountant

• changes in the control of the company

• election of company directors, appointment of principal officers and the departure of directors and principal officers

• amendments to company charter and bylaws

A private company is required to submit filings if it has more than $10m in total assets and a class of equity securities that are held by either 2,000 or more individuals or 500 or more individuals who are not accredited investors.

Filings are submitted electronically through the SEC’s system, and immediately become publicly available.