Regulations in the United States – What is the Securities and Exchange Committee (SEC)?

The Securities and Exchange Commission (SEC) was established in 1934 with a mission of protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation. The Securities and Exchange Commission is a U.S. government oversight agency responsible for regulating the securities markets and protecting investors. SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States:

• Protecting investors: Companies offering securities for sale to the public must tell the truth about their business, the securities they are selling, and the investment risks. For example, brokers, dealers, investment advisers, and exchanges – must treat investors fairly and honestly. In that, SEC returned $1.2 billion to harmed investors during past fiscal year as a result of enforcement actions against wrongdoers
• Maintaining fair, orderly and efficient markets: SEC monitors the activities of more than 27,000 entities in the securities industry, including investment advisers, broker-dealers, and securities exchanges. SEC oversees approximately $97 trillion in securities trading on U.S. equity markets annually.
• Facilitating capital formation: In 2019, nearly $4 trillion was raised in public and private securities offerings, promoting economic growth and job creation
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What makes up the SEC?

SEC is organised into five divisions – Corporate Finance, Trading & Markets, Investment Management, Enforcement, and Economic & Risk Analysis. Headquartered in Washington DC, the SEC maintains 11 regional offices across the US. SEC is primarily concerned with monitoring the key participants in the securities industry: securities exchanges, brokers and dealers, investment advisors and mutual funds. It ensures that each discloses important market information to their investors and protects against financial crime including money laundering, terrorism financing, insider trading, and fraud. SEC is responsible for:

• Interpreting and enforcing federal securities laws
• Issuing new – and amending existing – rules and regulations
• Overseeing the inspection of securities firms, brokers, investment advisers, and rating agencies
• Overseeing private regulatory organisations within the securities, accounting, and auditing fields
• Coordinating US securities regulations with federal, state, and foreign authorities
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What does the SEC do?

The SEC Office of Compliance Inspections and Examinations (OCIE) helps to identify key risk, trends, and examination priorities in an effort to promote and improve compliance, identify errors, fraud or misappropriation and protect investors. OCIE’s analytic efforts and examinations remain firmly grounded in its four pillars:

• Promoting compliance
• Preventing fraud
• Identifying and monitoring risk
• Informing policy
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What is the Bank Secrecy Act?

The Bank Secrecy Act requires financial institutions, including broker-dealers and investment companies, to establish anti money laundering (AML) programs. These programs must, among other things

• Include policies and procedures reasonably designed to identify and verify the identity of customers and beneficial owners of legal entity customers
• Perform customer due diligence (as required by the Customer Due Diligence rule),
• Monitor for suspicious activity, and, where appropriate, file SARs with the Financial Crimes Enforcement Network.

Given the importance of above requirements, OCIE will continue to prioritise examining broker-dealers and investment companies for compliance with their AML obligations in order to assess, among other things, whether firms have established appropriate customer identification programs and whether they are satisfying their SAR filing obligations, conducting due diligence on customers, complying with beneficial ownership requirements, and conducting robust and timely independent tests of their AML programs. The goal of these examinations is to ensure that broker-dealers and investment companies have adequate policies and procedures in place that are reasonably designed to identify suspicious activity and illegal money laundering activities.

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