Securities and Exchange Commission (SEC), an independent federal agency, administers and enforces federal laws governing the purchase and sale of securities. A security is an investment that can be bought and sold in a financial market. Securities include stocks, bonds, and options. Stocks are secured (backed) by ownership in a company. Bonds are secured by the promise of a borrower to pay a debt in the future. Options represent a choice to buy or sell something at a future date. Laws enforced by the SEC protect people who invest money in securities. Companies with stock for public sale must disclose information on company finances as long as their securities are offered to the public.
The SEC investigates complaints and possible violations of federal securities laws. It regulates national stock exchanges. It also registers brokerage firms, investment advisers, and mutual funds, and establishes rules of conduct for them. The SEC was established in 1934.
See also Insider trading; Investment banking; Securities Exchange Act; Stock exchange.
