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Role of U.S. Securities and Exchange Commission in the US Stock market

The U.S. Securities and Exchange Commission (SEC) was set up in the year 1934 to boost public confidence following the Great Depression of 1929. When the stock market crashed like a pack of cards, big as well as small investors had to lose a lot of money. It was very essential to restore investor’s faith in the capital markets. The SEC plays a vital role in maintaining consumer confidence in the capital markets. Some of the tasks that fall within its purview include the following-

*The SEC reviews requirements pertaining to corporate filings
*Regulates and maintain standards of the stock market
*Investigates and keeps a track that there is no violation of regulations as well as securities laws
*Regulation of mutual funds and companies offering investment management is also taken care of by the U.S Securities and Exchange Commission.

SEC and the stock market
However, the most important role played by SEC is to maintain investor confidence in the stock market which is vital as far as the functioning of the economy in United States is concerned. The underlying concept of the securities industry in the US is that small as well as big investors should have accessibility to facts related to an investment vehicle before investing. And this is made possible by the U.S Securities Exchange and Commission .

SEC believes in transparency and urges U. S firms to maintain the same while dealing with investors. By doing so, investors are able to get a clear picture of the profits earned by a particular company. It makes it easier for the investors to decide as to which company is suitable for investment. An investor is also able to determine the price of a stock. If transparency isn’t maintained, there are chances that the stock market will manifest sudden price shifts of stocks. Such a scenario may adversely affect the economic stability of the country. The SEC also prosecutes offenders if there is non compliance or violation of securities laws.

Unlike the banking sector where the fed guarantee deposits, the value of bonds, stocks and other securities may decline in a stock market. And it is very important that an investor protects his investments. So, the SEC makes it mandatory for the US companies to disclose financial details of the company that may help investors in making safe investments and also to protect investors against fraudulent activities of the securities market.

The U.S Securities and Exchange Commission supervises the following market participants:-

*Securities exchanges
*Investment advisors
*Securities brokers
*Securities dealers
*Mutual funds

SEC helps in the growth of the US economy. It enhances transparency of the stock market in the US. Due to this, the stock exchanges attract brisk business. It helps companies to get listed on the stock exchange or go public so that the proceeds can be used for the betterment of the company.


Disclosure: No positions