You want to buy shares of a foreign company. Especially in the United States, such as Apple, Microsoft or Google? If yes, then you need to understand what the US Securities and Exchange Commission (SEC) is and what role it plays in the capital market in Uncle Sam.

What is the SEC?

The United States Securities and Exchange Commission (SEC) is an independent United States agency whose job it is to protect investors from fraud. Maintain stock market performance and facilitating the establishment of funds

Including his duties are overseeing the flow of funds in the stock market and taking care of players in the capital market. From investors to financial services companies, the SEC has a role that is almost similar to the Financial Services Authority (OJK) in Indonesia.

in general Stocks to be sold to the public whether in a state or federal state of the United States Must be registered with the SEC before being officially released. likewise Financial firms such as brokerage firms or asset management firms It must be registered with the SEC before it will be officially available to the public.

Almost similar to the OJK SEC, through a service known as the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR), it also provides a wide range of information needed by investors. From monthly and quarterly company financial reports to everything else. The goal is that investors can be free from criminal fraud.

In addition, the SEC also uses the program Whistleblower since 2010. In this program, the SEC provides protection for anyone who dares to report fraud by their company. (whistleblower) not only Journalists also earn 10%-30% of the profits of all fraud committed by the company. It aims to prevent the same fraud and greed that led to the 2007-08 financial crisis.

The SEC is led by a five-member commission elected by the president for five-year terms to prevent siding with any one political party (there are only two political parties in the US). Three out of five people cannot be from the same political party. As of 2021, the institute is led by Gary Gensler and has 5 departments and 23 offices across the United States.

SEC History

The United States Securities and Exchange Commission (SEC) is one true testament to Franklin D. Roosevelt’s involvement in the response. Great Depression In 1929, the institution was first established in 1933 through the Securities Act 1933 and the Securities Exchange Act 1934.

In the Securities Act of 1933, the United States federal government requires companies to Must register and submit necessary documents for investors to have access to basic information. Including the company’s financial reports. Management reviews, etc.

This is because the results of the investigation into the causes of the 1928 crisis indicated that before the crisis, offenders violated the rules many times. capital marketFrom tax evasion to underwriting problems with unreliable bank loan payments, etc.

In the Securities Exchange Act of 1934, law in the United States began requiring all capital market participants to since the investor Securities companies and investment management companies and stock exchange companies must be regulated since the application of this law The Securities and Exchange Commission (SEC) was founded by Joseph Patrick Kennedy Sr. (Father of J.F. Kennedy) was the first director.

Kennedy then defined the SEC’s initial mission as:

  1. restore public confidence in the capital market which was inadvertently destroyed at that time
  2. Restoring the integrity of the US capital markets by monitoring fraud and other unhealthy practices of the capital markets.
  3. Stop Insider Trading
  4. Supervise and establish a more established capital market registration system in the United States.

Currently, the SEC is an agency that helps retail investors and companies. To verify investors or other companies Usually, the issues the institution deals with are financial-related issues, such as the misappropriation of company financial books. spreading misinformation to trading securities using inside information

follow Investopedia In 2008, as a result of the financial crisis The company has penalized 204 companies with fines totaling $4 billion. One of the firms hit by the sanctions, Goldman Sachs, one of the world’s leading financial firms, has been fined $550 million. This amount is the second largest fine by the SEC.

Role of the SEC in the United States

Simply put, the SEC’s role is more or less the same as OJK’s, except that it focuses more on the capital markets and does not regulate the financial and banking industries. Companies that want to issue stocks or other securities In the US stock market, one must first register with these institutions.

In the same way that a financial company wants to conduct a securities rating business. The agent, broker or investment management must also be registered with this institution. So you need to know what you are using the brokerage for. buy foreign stocks to the SEC or not, because of course foreign investors will find it more difficult to file a complaint with the SEC if there is a problem with the broker.

According to recent reports, the SEC is moving to start regulating the crypto market in the country. This is evidenced by the institution launching its latest guide for companies looking to issue this digital currency. This follows the bankruptcy of one of the leading crypto exchanges, FTX, last November.

Besides the SEC, there is another financial regulator in America, the Financial Industry Regulatory Authority (FINRA). Although both institutions regulate finances in the United States, the SEC and FINRA are two different institutions.

The SEC, on the one hand, remains a government agency even though it is independent. (It cannot be influenced by anyone and reports its findings directly to Congress), while FINRA is a not-for-profit corporation. The working area of ​​the SEC is still quite wide compared to FINRA.

The SEC regulates all parties involved in the capital markets industry, while FINRA focuses on brokerage firms and agents that sell financial and capital products. So, in addition to registering with the SEC, make sure your brokerage is also licensed by FINRA.

in the broader economic arena The existence of the Securities and Exchange Commission (SEC) is proof that no matter how freely a country’s economic movements can be, there is still a lot to be desired. The country’s economy still requires active government participation. especially in times of crisis


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