1. Reason for the Agency Securities and Exchange Commission Agency plays an important role in providing regulations which govern securities market functioning as well as protecting investors’ welfare in these markets. Nevertheless, this agency monitors the corporate takeovers in the United States. In general, Securities and Exchange Commission is the U.S overall agency whose main agenda is to enforce laws and regulations related to federal securities, stock and options exchanges. This agency was established by the congress in 1934 following the crash of the stock market crash which saw the American economy decline in 1929 (Graham, 1993). Following its creation, Securities and Exchange Commission has been the key player in addressing all the matters concerning stock regulation and investor protection. The agency requires all organization which deals with stock purchase and sale to provide accurate and precise information regarding to its operations. Through this Securities and Exchange Commission is able to ensure efficiency in the running of stock market as well as protecting investors from stock related irregularities.
As part of its work, Security and Exchange Commission agency prohibits investors from taking part in the purchase of the stock without adequate funds. In addition, it strongly prohibits organization dealing stock from biased use of nonpublic information regarding the stock trading. Moreover, this agency has been strongly attached to the orientation of all parties which play part in Security markets namely investment advisors, security brokers and dealers. The key concern in this exercise is to protect the investors from fraud, ensure fair stock undertakings and providing them with stock market related information. The agency comes up with various regulations every year with an aim of enhancing efficiency in the security market. In ensuring all this, the Securities and Exchange Commission works hand in hand with several other bodies which include federal departments, congress, and self-regulatory organization just mentioned but a few (Graham, 1993).
2. In light of the perceived economic, social, or other problem, what are the regulatory options? Identify and discuss them. Do you think the executive branch or Congress chose the most efficient regulatory option? Explain your reasoning. The regulatory options for SEC which exists in light of the perceived economic, social or other problem are those which address issues concerning investor protection as well as addressing all matters concerned with stock and security market. All its regulations are directed towards reducing frauds in the stock market, guiding investors in making concrete decisions pertaining stock market transactions. For instance, the regulation option that organization should provide accurate and precise information regarding their financial obligations is a key contributor to high SEC efficiency in security market. Nevertheless, the option which prohibits investors from participating in purchase of securities without enough money is a key success in the protection of these investors (Mayer, 1992).
According to my opinion the Congress chose the most efficient regulatory options. This is because the options have been able to assist in addressing all issues related to securities market. With these options, investors have been protected from fraudulent events which take place in the stock market. With a regulation which demands for accurate information disclose SEC has helped investors to get the right information thus preventing them from being taken advantage of. Nevertheless, the options have played a vital role in enhance the efficiency operation of security and stock markets in United States. The SEC has been in the forefront in addressing all matters related to security and stock market efficiency.
Following this contributions from its regulatory option, Securities and Exchange Commission has been able to meet most of its targets. For instance, any investors have focused on investing more in stock and securities without any fear. This is because they have a regulatory backing from the Securities and Exchange Commission. Their regulation option has been able to meet to settle their problems and thus encouraging them to invest more. Organizations on the other hand are improving their investment standards to cover the requirements of SEC.
3. Where are the agency’s principal statues located? What agency conduct do these statutes authorize? The Securities and Exchange Commission principal statues are located in Texas in the U.S. SEC statues authorize the well-functioning of all participants in the stock market. Most of these SEC statues look forward to address matters related compliance to standards required in the securities and stock market. This is implies that all the SEC statues focus on issues pertaining the welfare of organizations and investors in the securities and stock market. Through these statues the Securities and Exchange Commission has been able to ensure efficient functioning of securities and stock markets (Graham, 1993). For example, basing argument on the securities and exchange act of 1934, the congress came up with this body referred to as Securities and Exchange Commission (SEC). The authorization of this act focused on executing powers for registering, regulating and overseeing all matters related to stock brokerage. Nevertheless, the statue offer guidance and authorize insider trading in the stock market.
Great concern in the insider trading is the focus on preventing fraudulent activities associated with offering, purchase and sale of securities. In addition, the statue provides disciplinary measures taken to those who do not comply to this issue of insider trading. Moreover, the statue also comprise of the investment company act of 1940 whose focus is on regulating the conduct of organizations on the use of mutual funds in their investments and trading of stock. As a result, it assists this institutions and Securities and Exchange Commission in reducing increased conflicts regarding the securities and stocks. Holistically, this provision also focus on ensuring that these organizations provide accurate public investment information which would enhance efficiency in the functioning of SEC. Pursuant to this provision is the Investment Advisers act of 1934 which focus on providing guidance and quality advice to organization and investors who take part in the purchase and sale of securities (Mayer, 1992).
4. Where are the agency’s principal regulations located? Are the regulations interpretive or legislative or both? In the case of legislative regulations, what is the character and quality of the Congressional guidance? Again, provide some examples and citations to matters of specific interest to you. SEC regulations are both interpretive as well as legislative. They are legislative because they have been made and amended by the Congress. Legislative implies that SEC regulations have been enacted and authorized by a certain body which the authority to ensure that. SEC involves different parties who are executives of the government of United States. Nevertheless, all SEC regulations are subject to security laws of the United States which have been enacted by the legislature. On the other hand, SEC regulations are interpretive in the sense that the Secretary of treasury takes part in coming up with SEC regulations. Secretary of treasury is one of the Securities and Exchange Commission officers and takes part in amending these regulations.
Congress through the use of legislative regulations plays a vital role in offering guidance to Securities and Exchange Commission. The congress offers quality legislative regulatory guidance to the SEC which plays a great role in enhancing it efficiency. The congress enacts laws and regulation for the Securities and Exchange Commission which guide it on how to execute their operations. For example, the Sarbanes-Oxley legislative of 2002 has been a guide to the SEC in addressing matters related to organization reformation and investor protection. This is because it guides it on best ways to carry out quality auditing using the financial information. In so doing, Securities and Exchange Commission have been able to minimize the increased scandals involving investors.
5. How is the agency managed? Who appoints the agency’s head or principal executives? Can the president hire and fire the agency head’s or its principal executives? If the president cannot who can? Securities and Exchange Commission agencies are managed by the commissioners who are appointed by the president to lead for five years. This commission oversees all the activities performed by the agency and thus serves as the overall management. To ensure efficiency in the management of Securities and Exchange Commission, the agency is divided into various departments. To start with is the division of corporate finance whose responsibility is to oversee matters related to provision of essential information to the investors in the public. More specifically, this division deal with the review of documents containing financial obligation for business operations which further help investors to make quality investment decisions. In addition, is the division of trading and markets whose main responsibility is to ensure organized, reasonable and efficient markets. Nevertheless, it oversees all matters involving Securities Investor Protection Corporation. Moreover, this division is also responsible for ensuring efficient operation of securities and stock markets.
The third division is the division of Investment management whose work is to ensure investor protection and all other matters with investment of securities. Furthermore, is the division of enforcement whose primary responsibility is to ensure the enforcement of laws and all other matters related with securities law violation. Finally, is the division of risk, strategy and financial innovation which deal with identification of risks associated with securities and also comes up with various strategies to overcome these risks and suggest the way forward in development of financial innovations (Mayer, 1992). The heads or the principals of Securities and Exchange Commission are appointed by the president of United States of America. However, for the president to do his appointments, he is advised and given the consent by the senate. This is to mean that before appointing the principals of the agency the president has to work hand in hand with the senate. Upon his appointment, the president also entitles one of the principal as the chairman of the commission. This is to mean that the president with the advice and consent of the senate has the power to hire and dismiss the heads or principals of Securities and Exchange Commission.
6. What are the some of the critical regulatory issues that currently confront your agency? Currently, there are various regulatory issues which affect Security and exchange Commission. To start with is the selective disclosure of nonpublic information concerning the securities by issuers. With advancement in technology, issue of disclosing nonpublic information concerning securities has been compromised. Several frauds have come up following poor disclosure of the information. The Security and Exchange commission has been unable to get accurate and precise information regarding the same. As a result, it faces challenge in protecting investors and other market participants. Following this the SEC is looking forward to come up with new regulations to address the same (Mayer, 1992).
In addition, SEC is facing the challenge of reining in high-efficiency trading. Following the development and the use of automated and computerized trading, SEC has been faced by the challenge of reining in high-frequency traders or investors. As a result, this has enhanced decline in the efficiency of security market thus promoting frauds. There has been much criticism towards SEC and many other bodies which take part in security investment. Securities and Exchange Commission is in focus of coming up with new regulation to improve the oversight of high-frequency trading. Nevertheless, there is increased non conformity of regulations by investors and other participants in security and stock markets. This has been a serious regulatory issue currently confronting the functionality of the Securities and Exchange Commission. The noncompliance occurs when these participants do not meet the requirements by the SEC in undertaking their transactions.
For example, SEC requires all investors not to engage in purchase of any stock without enough funds but you find many of this investors not adhering to this. As a result, these leads to increased frauds in securities and stock markets hence posing a big challenge to SEC. In addition, many organizations have failed to deliver precise information to SEC to assist it in carry its function. Following this, Securities and Exchange Commission has been unable to carry out its operations efficiently (Hamilton, 1998). In conclusion, Securities and Exchange Commission agency needs to consider the organization and investors goals and objectives towards the purchase and sale of securities when making its regulations. This will enhance a good relationship between this parties something will help foster increased efficiency in its functionality. On the other hand, investors and all institution involved in securities market need to comply with SEC regulation provisions. This will help minimize confrontations facing SEC which arise from fraudulent transactions in the securities market.
References
Graham, J. W. (1993). The U.S. Securities and Exchange Commission: a research and information guide. New York: Garland Pub.
Hamilton, J. (1998). Year 2000: SEC disclosure. Chicago: CCH Inc..
Mayer, M. (1992). Stealing the market: how the giant brokerage firms, with help from the SEC, stole the stock market from investors. New York, NY: Basic Books.
Report of special study of securities markets of the Securities and Exchange Commission. (196364). Washington: U.S. Govt. Print. Off.
