How SEC regulates stock market?

Securities and Exchange Commission (SEC) is independent U.S federal agency that regulates the stock market. It was created in 1934 by Congress to help restore investor confidence after the 1929 stock market crash. The Securities Exchange Act of 1934 was created by Securities and Exchange Commission. It govern securities transaction on the secondary market relying on Securities Act of 1933 which increased transparency in financial  statements and  established  laws against fraudulent activities. In essence SEC provides transparency by ensuring accurate and consistent information about companies that allows investors to make informed and sound decisions. Without transparency stock market would be vulnerable to market speculation and creation of asset bubbles. 


Securities and Exchange Commission has five commissioners and five different divisions:
Division of corporate finance – review corporate filing requirements ensuring that investors have complete and accurate information on company’s financial health that will help them make the best decision.
Division of investment management – regulates investment companies, variable insurance products and federally registered investment advisers. It also oversees The Securities Investor Protection Corporation (SIPC) that insures investment accounts in case that brokerage firm goes bankrupt.
Division of Enforcement – enforces SEC regulations by investigating and prosecuting violations of securities laws and regulations.
Division of Trading and Market – establishes and maintains standards that regulate the stock market. It oversees securities firms and exchanges as well as industry’s self regulatory organizations.
Division of Economic and Risk Analysis – economic data and risk analysis to other division in order to integrate them in the core mission of SEC. This division predicts how proposed rules would affect market.


United States stock market is one of the most regulated markets in the world with high level of transparency which attracts many business to the United States. SEC’s monitoring of exchanges and all organizations connected with selling of securities has a big role in creating such highly regulated market. It is fairly easy to take your company public in the U.S which helps companies grow larger at a faster rate. By conducting research in financial literacy SEC found out that average investor doesn’t poses enough knowledge about the way market and economy function. That is the reason why SEC is so protective of ordinary, non-accredited investors through its regulations. It makes safe for average investor to buy stocks, bonds or mutual funds by regulating sale of those securities and providing investors with information that will help them make investing decisions.

Benefits of IPO

There are various reasons why a company should consider an IPO.

 

Company will gather a significant amount of funds by opening up to the public and allowing shares to be traded in an organized market.

 

Benefits of IPO:

— Financing
— Liquidity
— Recognition
— Institutionalization
— SPOs
— Credibility

Financing
Public offering primarily provide companies the opportunity to obtain capital through a reliable organized, transparent market structure.

 

Liquidity
The shares offered to the public can be bought and sold in a transparent manner at the prices determined according to the market supply and demand at an arbitrary time, liquidity is provided to the shares and an important opportunity is provided to existing shareholders.

 

Global Recognition
Various information about the companies whose shares are traded on the Exchange are constantly being delivered to the foreign investors through global press, data broadcasting and other visual broadcasting organizations within the framework of the transparency of the Exchange and the function of public disclosure.

 

Institutionalization
Being publicly traded adds to a company’s stature as an institution, which can enhance its competitive position.

 

Secondary Offerings
Companies can create financing opportunities not only with the primary public offering but also with “Secondary Public Offerings” according to the resource requirements arising from their investment and similar needs while restricting the pre-emptive rights of existing partners.

 

Credibility
Listing their shares in the Exchange, companies increases their credibility in banking and money market which enables to obtain loans cheaper and easier.

 

minamargroup.com

investorrelations.mmg@gmail.com