This blog post originally appeared on RealMoney Silver on Feb. 27 at 8:27 a.m. EST.
The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. As more and more first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college, our investor protection mission is more compelling than ever. As our nation's securities exchanges mature into global for-profit competitors, there is even greater need for sound market regulation. And the common interest of all Americans in a growing economy that produces jobs, improves our standard of living, and protects the value of our savings means that all of the SEC's actions must be taken with an eye toward promoting the capital formation that is necessary to sustain economic growth. The world of investing is fascinating and complex, and it can be very fruitful. But unlike the banking world, where deposits are guaranteed by the federal government, stocks, bonds and other securities can lose value. There are no guarantees. That's why investing is not a spectator sport. By far the best way for investors to protect the money they put into the securities markets is to do research and ask questions.... It is the responsibility of the Commission to:Most investors (who are long-biased), and indeed the very U.S. stock market as a whole, are disadvantaged in a market dominated by momentum-based quant funds and by ultra bear ETFs, both of which prey on a weakening hedge fund industry riddled by redemptions and by a community of individual investors whose confidence is badly broken. These quant funds and ultra bear ETFs, which bypass Federal Reserve Regulation T margin rules governing the extension of credit by securities dealers and brokers in the U.S., wreak havoc in a market that needs all the regulatory support it can get. Today's investors no longer walk tall as they have seen their portfolios shrivel up. For several years, institutional and individual investors have been competing on an uneven playing field dominated by the powerful quant funds and ultra bear ETFs that not only have a disproportionate role in total NYSE trading but, more importantly, have had an undue influence on pushing stocks lower during the course of the bear market. The pages of RealMoney have included an extensive and effective discourse on the effect of the ultra bear ETFs on the market, so I won't spend much time repeating what others on the site have written. In 2009, investors are not only facing an unprecedented economic, credit and financial outlook coupled with the uncertainty of public policy but they are also competing against quant funds and ultra bear ETFs that seem to resemble legendary basketball player Wilt Chamberlain, who dominated the NBA because his 7-foot-plus frame gave him an obvious advantage against the other players.
The Commission convenes regularly at meetings that are open to the public and the news media unless the discussion pertains to confidential subjects, such as whether to begin an enforcement investigation.... The Division of Trading and Markets assists the Commission in executing its responsibility for maintaining fair, orderly, and efficient markets. The staff of the Division provide day-to-day oversight of the major securities market participants: the securities exchanges; securities firms; self-regulatory organizations (SROs) including the Financial Industry Regulatory Authority (FInRA), the Municipal Securities Rulemaking Board (MSRB), clearing agencies that help facilitate trade settlement; transfer agents (parties that maintain records of securities owners); securities information processors; and credit rating agencies.... Common violations that may lead to SEC investigations include:
- interpret federal securities laws;
- issue new rules and amend existing rules;
- oversee the inspection of securities firms, brokers, investment advisers, and ratings agencies;
- oversee private regulatory organizations in the securities, accounting, and auditing fields; and
- coordinate U.S. securities regulation with federal, state, and foreign authorities.
-- SEC mission statement, "The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation" (taken from the SEC Web site)
- misrepresentation or omission of important information about securities;
- manipulating the market prices of securities;
- stealing customers' funds or securities;
- violating broker-dealers' responsibility to treat customers fairly;
- insider trading (violating a trust relationship by trading on material, non-public information about a security); and
- selling unregistered securities.