Securities regulation is intended to protect all participates in the securities market. This includes investors as well as financial professionals, broker-dealers, businesses and the various securities markets. In addition to protection, regulators are designed to maintain market integrity and efficiency. The following is intended to provide an overview of the major regulatory agencies in the United State that oversee and enforce securities laws and regulations.
Securities and Exchange Commission (SEC)
According to the SEC website, “First and foremost, the SEC is a law enforcement agency.” The agency conducts investigations into violations of securities laws and takes the necessary action against violators. While the SEC does not have criminal authority, the agency can take civil action in federal court, or an administrative proceeding before an administrative law judge. For example the SEC may seek an injunction to shut down a business that is defrauding investors, or restitution for misappropriated investor funds. In addition, the agency works closely with other law enforcement agencies and often refers criminals cases to state and federal prosecutors.
The Securities and Exchange Commission (SEC) is an agency of the US Government that was created in accordance with the Securities Exchange Act of 1934. The mission of the SEC is to protect investors from manipulative practices and securities fraud, maintain fair and efficient markets, facilitate capital formation and promote full disclosure. In addition, the Securities Exchange Act of 1943 gave the SEC authority over all aspects of the securities industry, including the regulation and oversight of self-regulatory organizations (SROs) such as the New York Stock Exchange and the Financial Industry Regulatory Authority.
The agency is composed of five Commissioners appointed by the president and approved by the Senate. The functional responsibilities of the SEC are organized into 5 divisions and 23 offices. The divisions consist of:
· Corporation Finance
· Trading and Markets
· Investment Management
· Risk, Strategy, and Financial Innovation
Financial Industry Regulatory Authority (FINRA)
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory agency that acts as the securities industry watchdog. FINRA is dedicated to investor protection and financial market integrity. The agency has a number of functions including admission test necessary to obtain a broker license. In addition to writing and enforcing rules and regulations, FINRA the oversee the compliance of brokers and brokerage firms with federal securities laws and rules of the Municipal Securities Rule making Board. FINRA conducts routine examinations into investor complaints and suspicious activity. FINRA also provides the largest forum in the US to resolve financial disputes between investors and their brokerage firm. FINRA is able to impose fines for violations of securities regulations, they can also suspend and bar brokers form working in the industry, and revoke the license of a brokerage firm forcing them to halt all business activity.
In addition FINRA provides a number of resource and tools to help educate and protect investors. One such tool, BrokerCheck, is an excellent tool that allows you to research the background of your broker or brokerage firm. The information included in a BrokerCheck report will include education, types of license, work history, and disclosure events that may contain customer complaints, regulatory actions, lawsuits, and terminations. Investors are strongly encouraged to utilize BrokerCheck.
Commodities Futures Trading Commission
The Commodities Futures Trading Commission (CFTC) was created by congress as an independent agency in 1974 to regulate the United States’ commodity futures and option markets. According to the CFTC website, at the time the CFTC was created most of the futures trading in the US took place in the agricultural sector. Today, a vast array of highly complex financial futures contracts are available to investors. The mission of the CFTC is to protect the markets and participants from fraud, manipulation, and abusive trading practices, as well as encouraging competitiveness and efficiency within the markets.
Similar to the SEC, the presidents appoints five commissioners with the consent of the Senate to oversee the CFTC. The CFTC is organized into 4 divisions and 8 offices. The divisions include: Clearing and Risk (DCR), Enforcement (DOE), Market Oversight (DMO), and Swap Dealer and Intermediary Oversight.
National Futures Association (NFA)
The National Futures Association (NFA) is the self-regulatory organization for the U.S. commodities and futures market, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives (swaps). Membership with the NFA is mandatory for all participants in the commodities and futures industry. The organization’s focus is on safeguarding market integrity and protecting investors from fraudulent activities.
According to their website, “NFA believes that investor protection begins with investor education.” A variety of online resources are available to investors, including numerous publications and online learning programs. In addition NFA provides a tool very similar to FINRA’s BrokerCheck called BASIC, Background Affiliation Status Information Center. As the name implies, BASIC allows investors to check the CFTC registration and NFA membership status, as well as the disciplinary history, of registered firms and individuals. If you use BASIC and cannot find the individual or firm that is assisting you with your investments in the commodities and futures market, you may want to reconsider who you are doing business with.
North American Securities Administrators Association (NASAA)
The North American Securities Administrators Association (NASAA) is an association of 67 securities regulators which included state regulators from all 50 US States, in addition to provincial and territorial securities regulatory agencies from the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico. Established in 1919, the NASAA is the oldest organization dedicated to investor protection.
According to the NASAA website, “Their fundamental mission is protecting consumers who purchase securities or investment advice, and their jurisdiction extends to a wide variety of issuers and intermediaries who offer and sell securities to the public.” The organization provides a number of tools and resources to educate investors. Contact information for individual state regulators is available on the NASAA website. In addition, the NASAA advocates the pro-investor policy positions and investigates violations in state and provincial law.
Financial Fraud Enforcement Task Force (FFETF)
The Financial Fraud Enforcement Task Force was established by President Obama in 2009 to investigate and hold accountable those who facilitated the last financial crisis. The FFETF is an inter agency task force comprised of more than 20 federal agencies in addition to 94 US Attorneys Offices and state and local partners. According to the FFETF website, “The task force is improving efforts across the government and with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, recover proceeds for victims and address financial discrimination in the lending and financial markets.”
The foregoing information, which is publicly available on the respective regulatory agency website, has been provided by The White Law Group. The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
The firm primarily represents investors in claims against their financial advisor and brokerage firm. For a free consultation with a securities attorney, please contact the securities fraud attorneys of The White Law Group at 312-238-9650.
To learn more on The White Law Group, visit www.WhiteSecuritiesLaw.com.