United States Securities and Exchange Commission facts for kids

Quick facts for kids
United States Securities and Exchange Commission

Seal of the U.S. Securities and Exchange Commission
U.S. Securities and Exchange Commission headquarters in Washington, D.C.
Agency overview
Formed	June 6, 1934; 91 years ago (1934-06-06)
Jurisdiction	United States federal government
Headquarters	Washington, D.C., U.S.
Employees	4,807 (2022)
Agency executive	Paul S. Atkins, Chairman

The United States Securities and Exchange Commission (SEC) is a special government agency in the United States. It was created after a big stock market crash in 1929. The SEC's main job is to make sure people play fair in the stock market and don't cheat. It helps protect investors and keeps financial markets working smoothly.

The SEC was officially started by a law called the Securities Exchange Act of 1934. It also helps enforce other important laws like the Securities Act of 1933.

What the SEC Does

The SEC has three main goals:

• To protect people who invest their money.
• To keep markets fair, orderly, and efficient.
• To help companies raise money to grow.

Protecting Investors and Fair Markets

To achieve its goals, the SEC makes sure that public companies share important information. Companies must send in quarterly and annual reports. These reports tell investors how the company is doing financially. They also include a "management discussion and analysis" (MD&A). This part explains the company's past performance and its plans for the future.

These reports are very important for investors. They help people make smart choices when they invest in the stock market. Unlike money in a bank, investments in the stock market are not guaranteed by the government. This means you can gain a lot, but you can also lose money. By making companies share information, the SEC helps everyone have the same basic facts. This helps reduce insider trading and fraud.

The SEC also has an online database called EDGAR. Investors can use EDGAR to find all the information companies file with the agency. You can also send tips and complaints to the SEC through this system. This helps the SEC find people who break the rules. The SEC also offers educational materials to help people learn about investing.

History of the SEC

Why the SEC Was Needed

Before the SEC, states had their own laws about selling stocks, called "blue sky laws." These laws were supposed to protect people from fraud. However, they weren't very effective. It was easy for people to get around them, especially by selling stocks across state lines.

How the SEC Started

The SEC's power came from two major laws: the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws were part of President Franklin D. Roosevelt's New Deal program.

The Securities Act of 1933 made sure that companies selling new stocks had to register them. This meant they had to provide financial information so investors could make informed decisions. At first, another agency, the Federal Trade Commission, enforced this law.

Then came the Securities Exchange Act of 1934. This law regulated the buying and selling of stocks between people and companies. It also created the SEC and gave it the job of enforcing both the 1933 and 1934 laws.

Joseph P. Kennedy Sr, the first chairman of the SEC

In 1934, President Roosevelt chose his friend Joseph P. Kennedy to be the first chairman of the SEC. Kennedy was a very successful businessman. He brought in many smart young lawyers to work at the SEC.

Kennedy's team had four main goals:

• To make investors trust the stock market again.
• To stop cheating and bad practices that hurt investors.
• To end insider trading by top company officials.
• To create a clear system for registering stocks sold in America.

The SEC was successful in its mission. Kennedy helped reassure American businesses and ordinary investors. He encouraged people to return to the market, which helped the economy grow.

Since 1994, most of the information filed with the SEC can be found online through the EDGAR system.

The SEC in the 21st Century

In 2019, the SEC Historical Society launched an online gallery. It shows how the U.S. stock market has changed since the 1930s. It includes stories, documents, interviews, photos, and videos.

Leaders of the SEC

The SEC has had many leaders, called chairmen or chairwomen, throughout its history. Here is a list of some of them:

No.	Portrait	Name	State of residency	Term of office			Appointed by
				Term start	Term end	Time in office
1		Kennedy Sr., Joseph P.Joseph P. Kennedy Sr.	Massachusetts	June 30, 1934	September 23, 1935	1 year, 85 days	Roosevelt
2		Landis, James M.James M. Landis	Massachusetts	September 23, 1935	September 15, 1937	1 year, 357 days
3		Douglas, William O.William O. Douglas	Connecticut	August 17, 1937	April 15, 1939	1 year, 241 days
4		Frank, JeromeJerome Frank	Illinois	May 18, 1939	April 9, 1941	1 year, 326 days
5		Eicher, Edward C.Edward C. Eicher	Iowa	April 9, 1941	January 20, 1942	286 days
6		Purcell, GansonGanson Purcell		January 20, 1942	June 30, 1946	4 years, 161 days
7		Caffrey, James J.James J. Caffrey		July 23, 1946	December 31, 1947	1 year, 161 days	Truman
8		Hanrahan, Edmond M.Edmond M. Hanrahan	New York	May 18, 1948	November 3, 1949	1 year, 169 days
9		McDonald, Harry A.Harry A. McDonald		November 4, 1949	February 25, 1952	2 years, 113 days
10		Cook, Donald C.Donald C. Cook	Michigan	February 26, 1952	June 17, 1953	1 year, 111 days
11		Demmler, Ralph H.Ralph H. Demmler	Pennsylvania	June 27, 1953	May 25, 1955	1 year, 332 days	Eisenhower
12		Armstrong, J. SinclairJ. Sinclair Armstrong	New York	May 25, 1955	June 27, 1957	2 years, 33 days
13		Gadsby, Edward N.Edward N. Gadsby	Massachusetts	August 20, 1957	March 26, 1961	3 years, 218 days
14		Cary, William L.William L. Cary		March 27, 1961	August 20, 1964	3 years, 146 days	Kennedy
15		Cohen, Manuel F.Manuel F. Cohen		August 20, 1964	February 22, 1969	4 years, 186 days	Johnson
16		Budge, Hamer H.Hamer H. Budge	Idaho	February 22, 1969	January 2, 1971	1 year, 314 days	Nixon
17		Casey, William J.William J. Casey	New York	April 14, 1971	February 2, 1973	1 year, 294 days
18		Cook, G. BradfordG. Bradford Cook	Nebraska	March 3, 1973	May 16, 1973	74 days
19		Garrett Jr., RayRay Garrett Jr.	Illinois	August 6, 1973	October 28, 1975	2 years, 83 days
20		Hills, Roderick M.Roderick M. Hills	California	October 28, 1975	April 10, 1977	1 year, 164 days	Ford
21		Williams, Harold M.Harold M. Williams	California	April 18, 1977	March 1, 1981	3 years, 317 days	Carter
22		Shad, John S. R.John S. R. Shad		May 6, 1981	June 18, 1987	6 years, 43 days	Reagan
23		Ruder, David SturtevantDavid Sturtevant Ruder	Illinois	August 7, 1987	September 30, 1989	2 years, 54 days
24		Breeden, Richard C.Richard C. Breeden	New York	October 11, 1989	May 7, 1993	3 years, 208 days	Bush Sr.
–		Schapiro, MaryMary Schapiro (acting)	New York	May 7, 1993	July 27, 1993	81 days	Clinton
25		Levitt, ArthurArthur Levitt	New York	July 27, 1993	February 9, 2001	7 years, 227 days
26		Pitt, HarveyHarvey Pitt	New York	August 3, 2001	February 18, 2003	1 year, 199 days	Bush Jr.
27		Donaldson, William H.William H. Donaldson	New York	February 18, 2003	June 30, 2005	2 years, 132 days
28		Cox, ChristopherChristopher Cox	California	August 3, 2005	January 20, 2009	3 years, 170 days
29		Schapiro, MaryMary Schapiro	New York	January 27, 2009	December 14, 2012	3 years, 322 days	Obama
30		Walter, Elisse B.Elisse B. Walter	New York	December 14, 2012	April 10, 2013	117 days
31		White, Mary JoMary Jo White	New York	April 10, 2013	January 20, 2017	3 years, 285 days
–		Piwowar, MichaelMichael Piwowar (acting)	Washington D.C.	January 20, 2017	May 4, 2017	104 days	Trump
32		Clayton, JayJay Clayton	Pennsylvania	May 4, 2017	December 23, 2020	3 years, 233 days
–		Roisman, EladElad Roisman (acting)	Maine	December 24, 2020	January 20, 2021	27 days
–		Lee, AllisonAllison Lee (acting)	Washington D.C.	January 20, 2021	April 17, 2021	87 days	Biden
33		Gensler, GaryGary Gensler	Maryland	April 17, 2021	January 20, 2025	3 years, 278 days
–		Uyeda, MarkMark Uyeda (acting)	California	January 20, 2025	April 21, 2025	91 days	Trump
34		Atkins, Paul S.Paul S. Atkins	Virginia	April 21, 2025	Present	122 days

How the SEC is Organized

Commission Members

The SEC is led by five commissioners. The President of the United States chooses them. No more than three commissioners can be from the same political party. They serve for five years. The President also picks one commissioner to be the chairman, who is the top leader of the SEC.

Current Commissioners

Here are the current leaders of the SEC:

SEC Divisions and Their Jobs

U.S. Securities and Exchange Commission headquarters in Washington, D.C., near Washington Union Station

The SEC has six main divisions, each with a special job. Its main office is in Washington, D.C..

The SEC's divisions are:

• Corporation Finance
• Trading and Markets
• Investment Management
• Enforcement
• Economic and Risk Analysis
• Examinations

Corporation Finance checks the information that public companies share. It also looks at how companies register big deals like mergers. This division also runs the EDGAR system.

The Trading and Markets division watches over stock exchanges like the New York Stock Exchange. It also oversees groups that set rules for brokers and investment firms. This division helps make sure the industry follows the rules.

The Investment Management division oversees companies that manage investments, like mutual funds. It also watches over people who give investment advice. This division helps make sure these groups follow federal laws.

The Enforcement division investigates when people or companies might have broken securities laws. It can take legal action against them. This is the largest division at the SEC. It can file lawsuits or hold special hearings. The SEC can also tell other government lawyers about serious cases.

The Economic and Risk Analysis division (DERA) uses economics and data to help the SEC. It helps with making rules, enforcing laws, and checking companies. DERA helps the SEC understand new financial products and risks. It also creates tools to find patterns that might show rule-breaking.

The Division of Examinations checks companies and markets to make sure they are following the rules. This helps protect investors and keeps markets fair. The results of these checks help the SEC make new rules and find risks.

Regional Offices

The SEC has 11 offices across the United States. These offices help the SEC work closer to people and companies in different areas.

The SEC also has other important offices:

• The Office of General Counsel acts as the SEC's lawyer. It gives legal advice to the commission.
• The Office of the Chief Accountant sets and enforces rules for how companies do their accounting.
• The Office of International Affairs works with other countries' financial regulators. This helps deal with financial issues that cross borders.
• The Office of Information Technology helps the SEC with all its computer and technology needs.
• The Inspector General checks if the SEC itself is working well and following its own rules.
• The SEC Office of the Whistleblower helps people who report possible violations of securities laws.

How the SEC Communicates

Comment Letters

The SEC's Corporation Finance division sends "comment letters" to companies. These letters ask companies for more information about their public filings. They might ask the company to change their reports or how they share information in the future. The company must reply to each question. This back-and-forth communication is later made public.

No-Action Letters

Sometimes, the SEC staff sends "no-action letters." These letters say that the SEC staff will not recommend taking action against a company for a specific activity. This happens when the legal rules for an activity are not clear. These letters are made public and help everyone understand what is allowed.

SEC Operations

Important Actions by the SEC

The SEC's Enforcement Division has taken many important actions. For example, in 2008, the SEC made new rules to stop certain types of "naked short selling." This was done to help calm down the stock market during a difficult time. The SEC also investigates people who try to trick the market by spreading false rumors.

Working with Cryptocurrency

The SEC has been very active in the world of cryptocurrencies. In 2023, the SEC filed charges against major crypto companies like Binance and Coinbase. The SEC believes that many crypto assets are like traditional stocks and bonds, which are called "securities."

The SEC uses a test called the Howey Test to decide if something is a security. This test comes from a 1946 Supreme Court decision. It says a security is "an investment of money in a common enterprise with profits to come solely from the efforts of others." The SEC says many crypto assets fit this definition. However, some people in the crypto world think this test is old and doesn't fit new digital currencies.

Cybersecurity Rules

On July 26, 2023, the SEC made a new rule about cybersecurity. This rule, called the Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure rule, encourages public companies to be open about their cybersecurity risks. It also helps them manage these risks better.

Climate Disclosure Rule

In 2024, the SEC created a new rule about climate change. It's called "The Enhancement and Standardization of Climate-Related Disclosures for Investors." This rule asks companies to share information about how climate change might affect their business. It also asks about their greenhouse gas emissions.

Whistleblower Program

The SEC has a program that rewards people who report violations of securities laws. This "whistleblower" program started in 2011. If a whistleblower's information leads to a successful enforcement action where the SEC collects over $1,000,000, the whistleblower can receive 10-30% of the money collected. By 2021, the SEC had recovered $4.8 billion because of this program. It had paid out over $1 billion to whistleblowers.

Working with Other Agencies

The SEC works with many other groups and government agencies. These include:

• Self-regulatory organizations like the Financial Industry Regulatory Authority (FINRA).
• Federal agencies.
• State securities regulators.
• International securities agencies.
• Law enforcement agencies.

In 1988, a group called the Working Group on Financial Markets was created. It includes the head of the SEC, the head of the Federal Reserve, and the head of the Commodity Futures Trading Commission. Their goal is to keep financial markets strong and fair.

The SEC also works with state securities regulators. While the SEC handles national rules, states can also have their own "blue sky laws." However, a law passed in 1996 made it so that nationally traded stocks don't need to register in every state. Still, states can still fight fraud.

The SEC is also part of the International Organization of Securities Commissions (IOSCO). This helps the SEC work with other countries to stop financial misconduct that crosses borders.

Related Laws

Here are some important laws that relate to the SEC's work:

• 1933: Securities Act of 1933
• 1934: Securities Exchange Act of 1934
• 1939: Trust Indenture Act of 1939
• 1940: Investment Advisers Act of 1940
• 1940: Investment Company Act of 1940
• 2002: Sarbanes–Oxley Act
• 2010: Dodd–Frank Wall Street Reform and Consumer Protection Act
• 2023: SEC Cybersecurity Rules

See also

In Spanish: Comisión de Bolsa y Valores para niños

• Financial regulation
• Financial risk management
• Risk management
• United States securities regulation

SEC Forms

Companies use special forms to file information with the SEC. Some common forms include:

• Form 8-K
• Form 10-K (annual report)
• Form 10-Q (quarterly report)