The Securities and Exchange Commission SEC

Before 1933 a company could sell stock to the public while saying almost nothing true about its business. The crash of 1929 and the Pecora hearings that followed exposed insider pools, false prospectuses, and banks dumping bad securities on their own customers. The Securities Act of 1933 required disclosure when companies sell securities, and the Securities Exchange Act, signed on June 6, 1934, created the Securities and Exchange Commission to enforce it and to regulate trading. Franklin Roosevelt named Joseph P. Kennedy, a Wall Street speculator, as its first chairman, on the theory that he knew the tricks.

The SEC's central idea is disclosure, not merit review. It does not decide whether a stock is a good investment. It requires companies that sell securities to the public to tell investors the truth about their finances and risks, in registration statements and in annual, quarterly, and current reports filed through its EDGAR database. It registers and oversees stock exchanges, brokers, investment advisers, and mutual funds, approves the rules of the self-regulatory organizations such as FINRA, and sets the accounting standards companies must follow through its oversight of the Financial Accounting Standards Board and the Public Company Accounting Oversight Board.

The commission has five members appointed by the President for staggered five-year terms, no more than three from one party, and the President designates the Chair. Its roughly 5,000 staff include the Division of Enforcement, which brings civil cases for insider trading, accounting fraud, and market manipulation, and refers criminal cases to the Justice Department. Its budget, about 2.4 billion dollars, is offset by fees collected on securities transactions. Its whistleblower program has paid more than two billion dollars in awards to people who reported fraud.

The SEC's reach is constantly tested by new products. Its failure to catch Bernard Madoff despite repeated tips in the 2000s became a symbol of regulatory capture. Cryptocurrency became the central fight of the 2020s: the commission under its 2021 to 2025 chair sued major crypto exchanges, arguing most tokens were securities, while the industry argued existing rules did not fit. In 2025 the new leadership dropped most of those cases, created a crypto task force, and rolled back climate disclosure rules, changes supporters described as ending regulation by enforcement and critics described as abandoning investors.