What Does SEC Stand For: How Does it Affect Cryptocurrency?

The SEC stands for the United States Securities and Exchange Commission. Today, we will tell you what kind of government agency it is, when it appeared, what role it plays in the economy, politics, and crypto sector, and also how powerful it is. Let’s get started!

What Is SEC: History of Appearance

The Commission was created in accordance with the Securities Exchange Act of 1934. In addition to it, the activities of the Commission are governed by the following later laws:

  • Securities Act (1933)
  • Trust Deed Act 1939 (1939)
  • Investment Company Act 1940 (1940)
  • Investment Advisers Act of 1940 (1940)
  • Sarbanes-Oxley Act of 2002 (2002)

The first chairman of the Commission was Joseph Kennedy, father of the future President John F. Kennedy. It is currently led by Gary Gensler, appointed by President Joe Biden, and approved by the US Senate. In total, in the short history of the Commission, there were already 33 chairmen — not much less than presidents in the entire two hundred and fifty years of American history. The average service life is thus less than three years.

The leadership of the Commission is made up of 5 people, of which no more than three can belong to the same party: Democratic or Republican. All of them, like the chairman, are appointed by the President of the United States. In total, the body employs nearly 5,000 people, and its headquarters, like most other federal governments, is located in Washington. There are many regional divisions in Atlanta, Boston, Chicago, Denver, Los Angeles, Miami, New York, Philadelphia, Salt Lake City, San Francisco, and Fort Worth, Texas.

What Does the SEC Do?

The Commission is interested in all transactions with securities in the United States. The main task of the SEC is to ensure the transparency of transactions, counter fraudulent schemes, and maintain investor confidence in the stock market.

To do this, the regulator not only establishes rules for registering securities but also monitors their implementation. It is rare for a government agency to be both rule-making and law enforcement at the same time. The Commission also monitors the circulation of stocks and bonds, the activities of brokers, the trading operations of private investors and investment companies, the emergence of bubbles, and signs of other manipulations.

The Commission also independently investigates violations. Proceedings can be initiated if there are strong suspicions that theft of securities has occurred, contractual transactions or facts of the use of insider information have been revealed, etc.

From year to year, the SEC investigates many offenses. The most frequent of them:

  • concealment (or provision) of implausible and/or misrepresenting information about securities
  • theft of funds or other client’s valuable assets
  • manipulation of market prices
  • accounting fraud
  • insider trading in securities
  • sale of securities with improper registration
  • other illegal actions of brokers in relation to clients

If such violations are detected, the Commission itself has the right to determine the amount of fines, withdraw illegally obtained profits, prohibit individuals and companies from conducting transactions with securities, as well as impose other prohibitions on illegal actions from its point of view. The scale of the SEC investigations can be seen from the following statistics: in the 2018 fiscal year alone, the SEC opened 490 cases, issuing fines totaling $3.95 billion.

When it comes to the need for a criminal prosecution, the SEC joins forces with the US Department of Justice, the FBI, or state attorneys’ offices.

The SEC has undeniable authority in the economic sphere and its own independent judiciary, thanks to which it participates in the most complex legal disputes on the market. Tools and methods that have been used by the regulator for decades to resolve various processes and conflict situations by the beginning of the 21st century have become a kind of standard and example for international and national regulators around the world.

What Data Does the SEC Collect?

The range of data that companies must submit to the SEC is extremely wide:

  • reporting on any newly placed securities
  • annual and quarterly reports
  • information about mergers and acquisitions
  • documentation on the purchase of large blocks of shares
  • materials considered at meetings of shareholders

Who should submit all this? First, all participants in financial markets, namely:

  • all stock and commodity exchanges — NYSE, NASDAQ, NYMEX, ICE, etc.
  • over-the-counter markets
  • all issuers of securities that issue shares, bonds, and derivatives of their enterprises on exchanges or on the over-the-counter market
  • all financial holdings for asset management
  • exchange-traded ETFs that copy investment portfolios of the largest stock indices
  • all hedge funds (like the legendary Buffett and Soros)
  • investment banks
  • regular brokers.

All securities and financial instruments fall within the field of view of the Commission: stocks and options, stock futures and bills, swaps and checks, warrants and investment units, trust, deposit and savings certificates, etc.

Moreover, all investors in the event of the purchase of 5% of the shares of any enterprise on any of the American exchanges are required to register with the SEC. And considering that almost all major world corporations issue securities that are listed on at least one of the US stock exchanges, it turns out that the Commission controls, in fact, all world financial flows.

Examples of the SEC Investigations

In 2018, the Commission fined Elon Musk, the founder of Tesla, the richest man in the world, $20 million for a tweet about ‘wanting to buy back all Tesla shares .’ Shares then instantly jumped in price, and the SEC launched an investigation. As a result, it was found that Musk had neither the financial capacity nor the intention to buy his company entirely from the stock exchange.

In 2020, The Securities and Exchange Commission announced that it had filed an action against Ripple Labs Inc. and two of its executives, who were also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering. According to the SEC’s complaint, Christian Larsen, the company’s co-founder, and Bradley Garlinghouse, the company’s current CEO, raised capital to finance the company’s business.

Recently, The U.S. Securities and Exchange Commission has started investigating whether Coinbase Global Inc improperly let Americans trade digital assets that should have been registered as securities.

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