Organization of the SEC The SEC consists of five presidentially-appointed Commissioners, four Divisions and 18 Offices.
With approximately 3,100 staff, the SEC is small by federal agency standards. Headquartered in Washington, DC, the SEC has 11 regional and district Offices throughout the country. The Commissioners The Securities and Exchange Commission has five Commissioners who are appointed by the President of the United States with the advice and consent of the Senate. Their terms last five years and are staggered so that one Commissioner's term ends on June 5 of each year. To ensure that the Commission remains non-partisan, no more than three Commissioners may belong to the same political party. The President also designates one of the Commissioners as Chairman, the SEC's top executive. The Commissioners meet to discuss and resolve a variety of issues the staff brings to their attention. At these meetings the Commissioners:
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interpret federal securities laws; amend existing rules; propose new rules to address changing market conditions; and/or enforce rules and laws.
These meetings are open to the public and the news media unless the discussion pertains to confidential subjects, such as whether to begin an enforcement investigation. Divisions Division of Corporation Finance The Division of Corporation Finance oversees corporate disclosure of important information to the investing public. Corporations are required to comply with regulations pertaining to disclosure that must be made when stock is initially sold and then on a continuing and periodic basis. The Division's staff routinely reviews the disclosure documents filed by companies. The staff also provides companies with assistance interpreting the Commission's rules and recommends to the Commission new rules for
adoption. The Division of Corporation Finance reviews documents that publicly-held companies are required to file with the Commission. The documents include:
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registration statements for newly-offered securities; annual and quarterly filings (Forms 10-K and 10-Q); proxy materials sent to shareholders before an annual meeting; annual reports to shareholders; documents concerning tender offers (a tender offer is an offer to buy a large number of shares of a corporation, usually at a premium above the current market price); and filings related to mergers and acquisitions.
These documents disclose information about the companies' financial condition and business practices to help investors make informed investment decisions. Through the Division's review process, the staff checks to see if publicly-held companies are meeting their disclosure requirements and seeks to improve the quality of the disclosure. To meet the SEC's requirements for disclosure, a company issuing securities or whose securities are publicly traded must make available all information, whether
and recommends regulations to implement these statutes. A company seeks a noaction letter from the staff of the SEC when it plans to enter uncharted legal territory in the securities industry. and the public to help them comply with the law. or hold the security. The Division's staff provides guidance and counseling to registrants. if a company wants to try a new marketing or financial technique. sell. For example. that result in the formulation of generally accepted accounting principles (GAAP). prospective registrants. it can ask the staff to write a letter indicating whether it would or would not recommend that the Commission take action against the company for engaging in its new practice. a company might ask whether the offering of a particular security requires registration with the SEC. the Division monitors the activities of the accounting profession.it is positive or negative.
. that might be relevant to an investor's decision to buy. particularly the Financial Accounting Standards Board (FASB). Corporation Finance provides administrative interpretations of the Securities Act of 1933. For example. The Division uses no-action letters to issue guidance in a more formal manner. and the Trust Indenture Act of 1939. Working closely with the Office of the Chief Accountant. the Securities Exchange Act of 1934. Corporation Finance would share its interpretation of the relevant securities regulations with the company and give it advice on compliance with the appropriate disclosure requirement.
If adopted. which are overseen by the SEC. Rulemaking can involve several steps: concept release. and securities information processors. establishing basic principles and objectives. Municipal Securities Rulemaking Board (MSRB). the staff of the SEC presents a final rule to the full Commission for its consideration. Rule Adoption: Finally. the Securities Exchange Act of 1934. regulatory approach is appropriate. the rule proposal is presented to the public for a specified period of time. is appropriate. which include the stock exchanges and the National Association of Securities Dealers (NASD). the measure becomes part of the official rules that govern the securities industry. followed by a series of questions that seek the views of the public on the issue. The public's feedback is taken into consideration as the Commission decides which approach. self-regulatory organizations (SROs). orderly. and offer new products and services. typically between 30 and 60 days for review and comment. provide the framework for the SEC's oversight of the securities markets.)
. Following approval by the Commission. and efficient markets. but sometimes an issue is so unique and/or complicated that the Commission seeks out public input on which. (A self-regulatory organization is a member organization that creates and enforces rules for its members based on the federal securities laws. Input once again is considered as a final rule is crafted. Concept Release: The rulemaking process usually begins with a rule proposal. If the rule is a major rule. It does this primarily by regulating the major securities market participants: broker-dealer firms. if any. Major pieces of legislation. and the Investment Company Act of 1940. if any. Rule Proposal: The staff of the SEC drafts a detailed formal rule proposal and presents it to the full Commission. transfer agents (parties that maintain records of stock and bond owners). such as the Securities Act of 1933. are the front line in regulating broker-dealers. and rule adoption. and clearing agencies (SROs that help facilitate trade settlement). it may be subject to congressional review and veto prior to becoming effective. the SEC engages in rulemaking to maintain fair and orderly markets and to protect investors by altering regulations or creating new ones. Unlike a concept release. A concept release is issued describing the area of interest and the Commission's concerns and usually identifying different approaches to addressing the problem. Then.How the SEC Rulemaking Process Works Rulemaking is the process by which federal agencies implement legislation passed by Congress and signed into law by the President. SROs. expand in size. rule proposal. as the securities markets evolve technologically. These statutes are broadly drafted. a rule proposal is specific in its objectives and methods for achieving its goals.
Division of Market Regulation
The Division of Market Regulation establishes and maintains standards for fair.
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interprets laws and regulations for the public and SEC inspection and enforcement staff. The Division obtains evidence of possible violations of the securities laws from many sources. In applying the federal securities laws to this industry. responds to no-action requests and requests for exemptive relief. Facts are developed to the fullest extent possible through informal inquiry. examines annual and periodic reports of holding companies and their subsidiaries. Market Regulation's responsibilities include:
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carrying out the Commission's financial integrity program for broker-dealers. recommends Commission action when appropriate. All SEC investigations are conducted privately.
Division of Investment Management The Division of Investment Management oversees and regulates the $15 trillion investment management industry and administers the securities laws affecting investment companies (including mutual funds) and investment advisers. and surveilling the markets. and other relevant documents. examining brokerage records. the Division also exercises oversight of registered and exempt utility holding companies under the Public Utility Holding Company Act of 1935. While the SEC has civil enforcement authority only. It is important to remember that SIPC insurance does not cover investor losses arising from market declines or fraud. The Commission can authorize the staff to file a case in federal court or bring an administrative action. and investor complaints. while others contest the charges. and negotiates settlements on behalf of the Commission. either in a federal court or before an administrative law judge. interviewing witnesses.
. other Divisions of the SEC. which is a private. and other methods. and develops new rules and amendments to adapt regulatory structures to new circumstances. Once the Commission issues a formal order of investigation. non-profit corporation that insures the securities and cash in the customer accounts of member brokerage firms against the failure of those firms. press reports. the Division:
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reviews proposals and applications and proposes new rules and amendments under the Act. the self-regulatory organizations and other securities industry sources. market-driven industry. SEC staff present their findings to the Commission for its review. records.
Division of Enforcement The Division of Enforcement investigates possible violations of securities laws. the Division works to improve disclosure and minimize risk for investors without imposing undue costs on regulated entities. Individuals and companies charged sometimes choose to settle the case.
As the utility industry evolves from a regulated monopoly to a competitive. reviews enforcement matters involving investment companies and advisers. it works closely with various criminal law enforcement agencies throughout the country to develop and bring criminal cases when the misconduct warrants more severe action. reviewing trading data. the Division's staff may compel witnesses by subpoena to testify and produce books. Following an investigation.The Division also oversees the Securities Investor Protection Corporation (SIPC). establishing rules and issuing interpretations on matters affecting the operation of the securities markets. and participates in audits of these companies. reviewing and approving proposed new rules and proposed changes to existing rules filed by the SROs. In this area. including its own surveillance activities. reviews investment company and investment adviser filings.
which can affirm or deny the administrative law judges' rulings or remand the case back for additional hearings. payroll. violating broker-dealers' responsibility to treat customers fairly. The administrative law judge presides over a hearing and considers the evidence presented by the Division staff. Among other actions. and the type of sanction or relief to obtain. conduct hearings and rule on allegations of securities law violations brought by the SEC staff. accounting for frauds. Often. A person who violates the court's order may be found in contempt and be subject to additional fines or imprisonment. such as position management and pay administration. The factors considered by the Commission in deciding how to proceed include: the seriousness of the wrongdoing. Parties may appeal decisions to the Commission. administrative law judges issue subpoenas. employee training and career development. or remand it for additional hearings. District Court that describes the misconduct. called an injunction. and ethics and financial disclosure. such as audits. the Commission asks the court to issue an order. and payment of civil monetary penalties. personnel management evaluation. the Commission will bring both proceedings. such as telecommunications. property management. misrepresentation or omission of important information about securities. the technical nature of the matter.
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insider trading: buying or selling a security in breach of a relationship of trust and confidence while in possession of material. For example. non-public information about the security. procurement and contracting. but an order barring someone from acting as a corporate officer or director must be obtained in federal court. management of official vehicles. The Commission may affirm the decision of the ALJ.
Offices Office of Administrative Law Judges Administrative law judges. After cases are referred to them by the Commission. physical security. the judges conduct hearings in a manner similar to non-jury trials in the federal district courts. tactical considerations.
. and sale of securities without proper registration. The Office develops and executes programs for office services. the parties involved submit proposed findings of fact and conclusions of law. printing and desktop publishing. implements and evaluates the Commission's programs for human resource and personnel management. manipulating the market prices of securities. reverse the decision. emergency preparedness programs. placement. employee relations. Both the Division staff and the defendant may appeal all or any portion of the initial decision to the Commission. and return of illegal profits.Common violations that may lead to SEC investigations include:
Under the securities laws the Commission can bring enforcement actions either in the federal courts or internally before an administrative law judge. A court's order can also require various actions. recruitment.
Civil action: The Commission files a complaint with a U. bars from association with the securities industry. employee benefits and counseling. and staffing. independent judicial officers. performance management and awards. who is independent of the Commission. censures. The courts may also bar or suspend an individual from serving as a corporate officer or director. or special supervisory arrangements. The administrative law judges prepare and file initial decisions including factual findings and legal conclusions. and publications. Following the hearing the ALJ issues an initial decision in which he makes findings of fact and reaches legal conclusions. At the conclusion of hearings. the SEC often seeks civil monetary penalties and the return of illegal profits. safety programs. the processing and maintenance of employee records. when the misconduct warrants it. The initial decision also contains a recommended sanction. the Commission may bar someone from the brokerage industry in an administrative proceeding. mail receipt and distribution. In addition. Administrative action: The Commission can seek a variety of sanctions through the administrative proceeding process. Administrative sanctions include cease and desist orders. Administrative proceedings differ from civil court actions in that they are heard by an administrative law judge (ALJ). space acquisition and management. rule on motions. identifies the laws and rules violated. suspension or revocation of broker-dealer and investment advisor registrations.S. contract and lease administration. stealing customers' funds or securities. as well as any evidence submitted by the subject of the proceeding. that prohibits the acts or practices that violate the law or Commission rules. and rule on the admissibility of evidence. Typically. Office of Administrative and Personnel Management The Office of Administrative and Personnel Management develops. and identifies the sanction or remedial action that is sought. known as disgorgement.
The Office of the Chief Accountant also works closely with domestic and international private-sector accounting and auditing standards-setting bodies (e. and supervision of employees. oversees. The Office also analyzes data on a wide range of market activities that may require attention by the SEC. fee collections. it issues a "deficiency letter" identifying the problems that need to be rectified and monitor the situation until compliance is achieved.g. consults with registrants.
. manages the administrative support offices. promotes management controls and financial integrity. and oversees the development and implementation of the SEC's automated information systems. transfer agents. investigative. An audit is an examination of a company's financial books and records done to ensure that it keeps fair. and disseminates information on EEO-related policies and procedures. the American Institute of Certified Public Accountants. In particular. and alternative dispute resolution procedures. and the Public Company Accounting Oversight Board). supervises the allocation and use of SEC resources. the International Accounting Standards Board. Office of the Executive Director The Office of the Executive Director develops and executes the management policies of the SEC. In its capacity as liaison between the Commission and the securities industry on diversity issues. consistent documents in accordance with SEC regulations. selection. statisticians. ensures agency compliance with EEO regulatory requirements affecting all employees and applicants. monitors the utilization of agency resources. the Office develops the agency's affirmative employment practices and procedures. the Financial Accounting Standards Board. broker-dealers. These activities include cash management. The Office assists the Executive Director in formulating budget and authorization requests. investment companies. the Office sponsors diversity roundtables and minority symposiums to encourage greater diversity in the securities industry. and assists in addressing problems that may warrant enforcement actions. and develops. clearing agencies. The Office conducts inspections to foster compliance with the securities laws. analysts. auditors. Office of Compliance Inspections and Examinations The Office of Compliance Inspections and Examinations administers the SEC's nationwide examination and inspection program for registered self-regulatory organizations. accounting. The Office is staffed by financial economists. Among the more important goals of the examination program is the quick and informal correction of compliance problems. administers the agency's EEO complaint processing. and computer programmers. The Office analyzes the potential impacts and benefits of proposed regulations. to detect violations of the law. and maintains SEC financial systems.Office of the Chief Accountant
The Chief Accountant is the principal adviser to the Commission on accounting and auditing matters. Office of the Comptroller The Office of the Comptroller administers the financial management and budget functions of the SEC. Office of Economic Analysis The Office of Economic Analysis advises the Commission and its staff on the economic issues associated with the SEC's regulatory and policy activities. Violations that appear too serious for informal correction are referred to the Division of Enforcement. and oversight and budget justification and execution. The Office formulates budget and authorization strategies. When the Office finds deficiencies. and other Commission staff regarding the application of accounting standards and financial disclosure requirements. advancement. and to keep the Commission informed of developments in the regulated community. Office of Equal Employment Opportunity The Office of Equal Employment Opportunity (EEO) develops and recommends policies designed to promote equal opportunity in all aspects of the agency's recruitment. conducts studies on specific rules. compensation. training. travel policy development. and engages in long-term research and policy planning. and investment advisers.
processes.gov or call (800) 732-0330. and the Offices. and improve the efficiency and effectiveness of SEC programs. Primary duties of the Office include representing the SEC in certain civil. the Inspector General seeks to identify and mitigate operational risks. enhance government integrity.
. The Office negotiates and oversees the implementation of information-sharing arrangements for enforcement and regulatory matters. registration statements.sec. DC. which electronically receives. analyze complaints. Office of the General Counsel The General Counsel is the chief legal officer of the Commission. All public documents are available for inspection in the Public Reference Room in Washington. Through its amicus curiae program. The Office also publishes free brochures and other educational materials on numerous investing topics. Office of the Inspector General The Office of the Inspector General conducts internal audits and investigations of SEC programs and operations. conducts a technical-assistance program for countries with emerging securities markets. Office of Investor Education and Assistance The Office of Investor Education and Assistance serves individual investors. ensuring that their problems and concerns are known throughout the SEC and considered when the agency takes action. and achieve financial security. The Office is also responsible for custody and control of the SEC's official records. and providing independent advice and assistance to the Commission. security.gov and on the terminals located in the public reference rooms in the Commission's Offices in New York and Chicago. Office of International Affairs The SEC works extensively in the international arena to promote cooperation and assistance and to encourage the adoption of high regulatory standards worldwide. proxy materials. the Office often intervenes in private appellate litigation involving novel or important interpretations of the securities laws. and ensures that the SEC's interests are furthered through participation in international meetings and organizations. Copies of documents may be obtained for a fee.Office of Filings and Information Services The Office of Filings and Information Services receives and initially handles all public documents filed with the SEC. and enterprise IT architecture. The Office also maintains a very active website that contains a wealth of information about the Commission. are available on the SEC Internet website at www. For more information about investor education. Investor assistance specialists answer questions. network engineering. Most corporate disclosure documents filed since May 1996. and seek informal resolutions. and other reports submitted by SEC filers. the securities industry. prepare for retirement. Through the Office's Public Reference Branch. applications development. and disseminates more than 500. and authentication of all documents produced for administrative or judicial proceedings. IT program management. The Office of International Affairs plays a key role in the development and implementation of the SEC's international enforcement and regulatory initiatives. or appellate proceedings. visit www. The Office operates the Electronic Data Gathering Analysis and Retrieval (EDGAR) system. In addition to handling questions and complaints. Through these audits and investigations. preparing legislative material. private. the public may obtain a wide range of information from quarterly and annual reports. The Office has overall management responsibility for the Commission's IT program including headquarters and regional/district operations support. and also hosts the entire EDGAR financial database for free public access. the Office organizes Investors' Town Meetings in cities throughout the country to help Americans learn how to save and invest wisely. Office of Information Technology
The Office of Information Technology is responsible for organizing and implementing an integrated program designed to support the Commission and staff of the SEC in all aspects of information technology. the Divisions.sec. development and implementation of the records management program.000 financial statements every year.
such as school districts. www. The Office reviews all SEC documents submitted to and approved by the Commission. and Research coordinates SEC media relations and monitors media coverage of issues related to the SEC and the securities industry. The Office is responsible for publishing official documents and releases of Commission actions in the Federal Register and the SEC Docket. States. and maintains records of financial judgments imposed in enforcement proceedings. administers the Commission's seriatim – the process by which the Commission takes collective action without convening a meeting of the Commissioners – and duty-officer process. it receives and tracks documents filed in administrative proceedings. and comment letters on rule proposals. cannot act as a personal lawyer to members of the public engaged in private disputes with the securities industry. The Office works closely with other government agencies regarding legislation that might affect the SEC. Policy Evaluation and Research
Additional Information About the SEC
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Addresses of SEC Offices Across the U. The Office also provides advice to the Commission and the staff on questions of practice and procedure. Useful Telephone Numbers at the SEC SEC Organization Chart 1999 Annual Report of the Commission The SEC News Digest (daily bulletin of SEC business and activities)
The Office of Public Affairs. requests for confidential treatment. Office of the Secretary The Office of the Secretary schedules Commission meetings. These include rulemaking releases.The Office. and prepares and maintains records of Commission actions. SEC enforcement orders and litigation releases. It also cannot force a broker to settle or resolve a private dispute. The Office advises the Commission on legislative strategy. responds to congressional requests. mediation. or private litigation. and other political subdivisions. The Office also monitors compliance with the Government in the Sunshine Act. the Office organizes briefings given to Congress by SEC staff and coordinates the testimony of Commission officials before congressional committees. and it posts them on the SEC Internet website. In addition. Policy Evaluation.
. and provides information about SEC actions to Congress. The Office assists the Division of Enforcement and other Divisions on municipal securities matters. SRO rulemaking notices and orders. The Office also administers internal and external SEC information programs and manages the foreign visitors program. as well as other actions taken by SEC staff pursuant to delegated authority. and the Commission in general. cities.S.sec. The Office works closely with the municipal securities industry to educate state and local officials about risk management issues and foster a thorough understanding of the Commission's policies. The Office also provides technical assistance in the development and implementation of major SEC initiatives in the municipal securities area. Office of Public Affairs. In addition. The Office can assist an investor by explaining how these disputes can be resolved through binding arbitration. supplies information for speeches for the Chairman and Commissioners. issue municipal securities to raise money. and assists in planning and coordinating special initiatives of the SEC. In addition. including the coordination of municipal enforcement actions. Office of Municipal Securities The Office of Municipal Securities coordinates the SEC's municipal securities activities and advises the Commission on policy matters relating to the municipal securities market. the Office provides research support in regulatory and enforcement policy areas. Office of Legislative Affairs The Office of Legislative Affairs serves as the principal liaison between the SEC and Members of Congress and their staffs.gov.