The U.S. Securities and Exchange Commission is a federal agency that oversees the enforcement of securities regulations. According to the SEC, its primary function is to monitor securities entities and prevent unfair dealing, promote the disclosure of relevant market information and protect against fraud. The agency enforces a number of federal laws, including the Securities Act, the Securities Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Accounting fraud, the sale of unregistered securities, information misrepresentation and insider trading are examples of common infractions investigated by the SEC. When the agency receives evidence that securities laws may have been violated, its Division of Enforcement will conduct a private investigation. These probes can include witness interviews, a review of trading data and informal inquiries. Formal processes may also be utilized, such as subpoenas to testify and the required production of records and other business documents.
If an investigation produces findings that the Commission deems sufficient, legal action can be initiated through administrative proceedings or in federal court. Administrative actions are overseen by administrative law judges and can result in monetary penalties as well as professional sanctions, such as the revocation of broker-dealer registrations. Civil actions in federal court can result in injunctions, monetary penalties and the required return of any profits made illegally. It is not uncommon for the SEC to initiate both administrative and civil proceedings.
The SEC regularly collaborates with other agencies and institutions. These can include state securities regulators, other federal agencies and stock exchanges. When criminal charges are necessary, the SEC’s Division of Enforcement works with various law enforcement agencies.