Law designed to ensure that investors are provided with material information about new issues of securities offered for sale to the public.
Securities and Exchange Commission (SEC)
The 1934 Act created the SEC, a federal agency that oversees and regulates the securities industry. In that role, the SEC aims “to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation.” SEC oversight of “securities exchanges, securities brokers and dealers, investment advisors and mutual funds” helps eliminate fraud, insider trading and other federal securities laws violations. The SEC is also responsible for the interpretation of federal securities laws, the issuance of new rules and amendments to existing federal securities law, inspections of Rating Agencies, oversight of private regulatory organizations in the accounting, auditing and securities industries and the coordination of U.S. securities regulation with federal, state and foreign authorities.
The SEC is composed of five commissioners, five divisions and twenty-five offices (excluding the regional offices). The commissioners are presidentially appointed with various term lengths.
Overview of SEC Offices
The SEC’s Division of Enforcement was created in 1972 to consolidate all of the SEC’s enforcement functions, which previously were handled between various divisions within the SEC. Accordingly, the Division of Enforcement is responsible for the investigation of potential federal securities laws violations, administrative proceedings involving these alleged violations, as well as any civil suits filed in federal courts due to the violations.
Representative SEC Enforcement Actions
Key areas examined by the SEC in recent enforcement actions under Rule 10b-5 and Section 17(a) include: (i) the responsibility to present accurate statements about compliance with continuing disclosure obligations; (ii) the responsibility of Issuers to present accurate and complete information in financial statements; (iii) the responsibility of Issuer officials that authorize Offering Documents to ensure that such documents are accurate and complete; (iv) the degree and manner in which Issuers may rely on staff, third-party experts and attorneys in the drafting and review of Offering Documents; (v) the responsibilities of Underwriters to ensure the accuracy of Official Statements; and (vi) the levying of financial penalties against Issuers, Borrowers, Underwriters, Municipal Advisors and other professionals. These areas do not constitute the entire universe of enforcement actions in the municipal Securities market. For a complete listing of enforcement actions, including the text of certain SEC orders, visit the webpage of OMS.
The SEC’s involvement in the municipal Securities market is handled by OMS. OMS coordinates the SEC’s municipal Securities activities and administers the SEC’s rules pertaining to municipal Securities brokers and dealers, Municipal Advisors, investors in municipal Securities and municipal Issuers. OMS advises the SEC on policy matters relating to the municipal Securities market and is responsible for policy development, coordination and implementation of SEC initiatives to improve the municipal Securities market. In addition, OMS provides technical assistance to the Division of Enforcement and the Office of Compliance Inspections and Examinations. OMS works with outside agencies as well because it is the SEC’s liaison with the MSRB, FINRA, the Internal Revenue Service’s Office of Tax-Exempt Bonds and other investor and industry groups and regulators with interests in municipal Securities. Additionally, OMS actively works within the municipal Securities market to educate officials of Issuers and Borrowers on applicable SEC rules.
Dive Deeper on State Law Matters
Learn more about the various aspects of state laws and how they intersect with municipal securities.
Law designed to govern the trading of securities in the secondary market.
A self-regulatory organization charged with rulemaking authority over municipal securities dealers and municipal advisors.