United States Securities and Exchange Commission

Background

Before the enactment of the federal securities laws and the creation of the SEC, securities trading was governed by so-called blue sky laws, a nickname that referred to speculative schemes sold as having nothing behind them but "blue sky." States enacted and enforced these laws, which regulated the offering and sale of securities to protect the public from fraud. Although the specific provisions varied among states, these laws generally required the registration of all securities offerings and sales, as well as every U.S. stockbroker and brokerage firm.^[31] However, blue sky laws were generally considered ineffective. For example, as early as 1915, the Investment Bankers Association told its members that they could circumvent blue sky laws by making securities offerings across state lines through the mail.^[32]

Founding

The SEC's authority was established by the Securities Act of 1933 and Securities Exchange Act of 1934; both laws are considered parts of Franklin D. Roosevelt's New Deal program.^[33]

After the Pecora Commission hearings on abuses and frauds in securities markets, Congress passed the Securities Act of 1933 (15 U.S.C. § 77a), which federally regulates original issues of securities across state lines, primarily by requiring that issuing companies register distributions prior to sale so that investors may access basic financial information and make informed decisions.^[34] For the first year of the law's enactment, the enforcement of the statute rested with the Federal Trade Commission.^[35][36]

Joseph P. Kennedy Sr., first SEC chair (1940).

Kennedy on the cover of Time (1935).

The following year, Congress passed the Securities Exchange Act of 1934 (15 U.S.C. § 78a) to regulate the so-called "secondary market." While the 1933 Act focused on original offerings by issuers in the primary market, the 1934 Act created the SEC and brought exchanges, broker-dealers, and other market participants under federal oversight.^[37][38]

Over time, later laws such as the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Sarbanes–Oxley Act expanded the SEC's authority to regulate mutual funds, investment advisers, and public-company auditing and reporting.^[39][40][41]

In 1934, Roosevelt named his friend Joseph P. Kennedy, a self-made multimillionaire, financier, and leader among the Irish-American community, as chairman of the SEC. Roosevelt chose Kennedy partly based on his experience on Wall Street.^[42] Two of the other five commissioners were James M. Landis and Ferdinand Pecora. Kennedy added a number of intelligent young lawyers to the SEC staff, including William O. Douglas and Abe Fortas, both of whom later became Supreme Court justices.^[42]

Another of Kennedy’s early appointees was David Saperstein, a former associate counsel to the Pecora Commission who helped draft the Securities Exchange Act of 1934. As the SEC’s first Director of the Trading and Exchange Division, Saperstein oversaw the registration of brokers and dealers and helped shape the Commission’s early approach to specialist regulation. A later official study of the securities markets described the 1937 Saperstein Interpretation as the Commission’s principal statement on permissible specialist dealer activity and noted that portions of it were later incorporated into New York Stock Exchange rules.^{[43][44][45][46]}

Historical accounts describe the early SEC under Joseph P. Kennedy as emphasizing securities registration, market oversight, and enforcement against fraud as part of a broader effort to restore investor confidence during the New Deal era.^[47] The early commission sought to stabilize the securities markets through a combination of registration requirements, closer oversight, and enforcement against fraudulent practices. These measures formed part of the federal government’s wider effort to rebuild confidence in the securities markets after the crash and the Pecora hearings.^[47]

Later SEC commissioners and chairmen include William O. Douglas, Jerome Frank, and William J. Casey.

21st century

In the 21st century, Congress expanded the SEC’s authority in response to major corporate scandals and financial crises. After the collapses of Enron and WorldCom, Congress enacted the Sarbanes–Oxley Act of 2002.^[48][49] The legislative act created the Public Company Accounting Oversight Board and strengthened rules guiding auditor oversight, internal controls, and auditor independence.

Following the financial crisis of 2007–2008, Congress enacted the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, which expanded the SEC’s authority in areas including private-fund advisers, credit-rating agencies, and parts of the derivatives and clearing infrastructure.^[50][51] The law also created the Office of Financial Research within the Treasury Department to support the Financial Stability Oversight Council.^[52]

In the 2020s, the SEC’s agenda increasingly focused on equity-market structure and digital assets, including issues highlighted by the January 2021 GameStop “meme stock” episode revealing how digital platforms, mobile apps, and social media could rapidly reshape trading dynamics and liquidity.^[53] The case drew attention to issues involving brokerage trading restrictions, payment for order flow, dark pools and wholesalers, and short-selling dynamics.^[54] In the years that followed, the SEC adopted or proposed changes involving order-execution disclosure, best execution, and retail order competition as part of a broader market-structure overhaul.^[55][56]

Commission composition and members

The commission has five commissioners who are appointed by the president of the United States with the advice and consent of the Senate. No more than three commissioners may belong to the same political party. Commissioners serve five-year terms, and the terms are staggered so that one expires each year. A commissioner may continue to serve until a successor is appointed and has qualified, but not beyond the expiration of the next session of Congress following the end of the fixed term.^[57] The Securities Exchange Act of 1934 does not expressly provide a presidential removal standard for SEC commissioners, but SEC commissioners have traditionally been understood to be removable only for cause.^[58][59][60]

The current commissioners as of January 7, 2026^[update]:^[61]

The chair position

The president designates one of the commissioners to serve as the agency's chair, the SEC's top executive.^[62] Under the Commission's rules, the chair exercises the Commission's executive and administrative functions, and the SEC's organizational structure places the agency's divisions and offices under the Office of the Chair.^[63][64] Major Commission decisions, orders, and rules are taken by the Commission itself and recorded in published Commission votes.^[65] For additional information, see:

Divisions

Six principal divisions headquartered in Washington, D.C. carry out the SEC's core work: ^[66]

Corporation Finance

Corporation Finance oversees disclosures by public companies and reviews transactions such as mergers and securities offerings. The division also plays a central role in the SEC’s filing-review process and public-company reporting system, including EDGAR.^[67][68]

Trading and Markets

The Division of Trading and Markets regulates major securities-market participants, including broker-dealers, self-regulatory organizations (such as FINRA and the Municipal Securities Rulemaking Board), clearing agencies, and transfer agents. It reviews proposed rule changes filed by self-regulatory organizations and helps the Commission oversee market structure and trading practices.^[69][70] Broker-dealers that conduct securities business with the investing public generally must register with FINRA, although federal law provides limited exemptions for some firms that transact solely on an exchange of which they are members.^[71][72] Individuals associated with member firms who engage in the securities business must qualify and register with FINRA, including by passing the required examinations.^[73]

Investment Management

The Division of Investment Management oversees registered investment companies, including mutual funds and other funds, as well as registered investment advisers. It develops regulatory policy under the Investment Company Act of 1940 and the Investment Advisers Act of 1940 and advises the Commission on rules and forms affecting the asset-management industry.^[74][75][76]

Enforcement

The Enforcement Division investigates violations of the securities laws and regulations to bring legal actions against alleged violators. It is the largest division in terms of both headcount (FTE) and allocated budget^[77], and its resources have been increased by more than 50% since the 2008 financial crisis.^[78] The SEC can bring a civil action in a U.S. District Court, or an administrative proceeding heard by an independent administrative law judge (ALJ). It also works with criminal authorities when parallel or related criminal cases are appropriate.^[79][80]

Economic and Risk Analysis

The Division of Economic and Risk Analysis (DERA) conducts economic, advanced statistics, and econometric analysis. It also provides data science and data analytics across the agency. DERA is staffed by PhD-trained economists, statisticians, and mathematicians. The division's staff conducts advanced empirical and quantitative analysis in support of SEC rulemaking, risk assessment, and law enforcement investigations, including market analysis, economic modeling, and litigation-related work to support rulemaking, examinations, and law enforcement.^[81] DERA also houses the agency's chief economist.^[82]

Examinations

The Division of Examinations conducts the SEC’s National Exam Program. It uses risk-focused strategies intended to improve compliance, prevent fraud, monitor risk, track anti-money laundering (AML) reporting, and inform policy. The results of its examinations are used to support rulemaking, identify and track risks, improve industry practices, and refer potential misconduct for further action.^[83]

Field offices

The SEC maintains 10 regional offices across the United States, which extend the agency’s enforcement and examinations work beyond Washington, D.C.^[84]

The New York Regional Office (NYRO) is the SEC’s largest field office. The New York Regional Office (NYRO) has about 400 staff—mostly enforcement attorneys, accountants, investigators, and examiners—and it covers the biggest group of SEC-registered financial firms in the country.^[85]

The table lists the federal judicial district for each office’s location for reference.

Specialized offices

In addition to its operating divisions, the SEC includes specialized offices. These include:

• The Office of General Counsel, which represents the agency in federal appellate courts and provides legal advice to the commission and other SEC divisions and offices;
• The Office of the Chief Accountant, which serves as the commission's principal adviser on accounting and auditing matters and helps establish and interpret the SEC's accounting and auditing policy;
• The Office of International Affairs, which represents the SEC abroad, negotiates international enforcement information-sharing agreements, develops the SEC's international regulatory policies in areas such as mutual recognition, and helps develop international regulatory standards through organizations such as the International Organization of Securities Commissions and the Financial Stability Board;
• The Office of Information Technology, which supports the commission and staff in information technology, including application development, infrastructure operations and engineering, user support, IT program management, capital planning, security, and enterprise architecture;
• The Office of Inspector General; and
• The SEC Office of the Whistleblower, which administers the SEC's whistleblower program and provides information to individuals who report possible securities law violations.

Communications

Whistleblower program

The SEC runs a whistleblower rewards program, which rewards individuals who report violations of securities laws to the SEC.^[95][96] The program began in 2011 with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act and allows whistleblowers to receive 10–30% of the monetary sanctions collected in actions where the sanctions exceed $1 million.^[97] As of the end of fiscal year 2023, the SEC had awarded almost $2 billion to nearly 400 whistleblowers through the program. In fiscal year 2025 alone, the Commission awarded more than $60 million to 48 individual whistleblowers.^[98][99]As part of the program, the SEC issues a report to Congress each year and the 2021 report is available online.^[100]

Relationship to other agencies

The SEC often works with criminal authorities, like the U.S. Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) in parallel matters. A 2007 Government Accountability Office report described interagency forums in which securities regulators, federal law-enforcement authorities, self-regulatory organizations, and the Public Company Accounting Oversight Board exchanged information on securities and commodities fraud, while GAO testimony in 2002 noted that tax-related and internet-fraud initiatives had also involved coordination among the SEC, the Department of Justice, and the Internal Revenue Service.^[101][102] The SEC reported roughly 500 investigations per year from fiscal years 2013 through 2017 in which the agency granted other criminal authorities access to investigative information from the SEC's own investigation on a matter; the number went down to 442 in fiscal year 2018.^[103] SEC also reports an annual count of "follow-on" administrative proceedings based on criminal convictions, civil injunctions, or other orders. That count measure captures how often the SEC piggybacks on an already-won criminal, civil, or regulatory case by another federal agency as the SEC seeks a bar or a suspension from the securities industry; for that measure, the annual count is: 143 in fiscal year 2021, 169 in fiscal year 2022, 162 in fiscal year 2023, and 93 in fiscal year 2024.^{[104][105][106][107][108][109][110]}

The SEC also coordinates with other U.S. federal financial agencies, especially in other financial sectors. GAO has reported that federal financial agencies communicate across sectors through formal and informal channels, and that the Federal Reserve relies on functional regulators such as the SEC in supervising broker-dealer subsidiaries and other nonbank activities within holding companies.^[111] In 1988, Executive Order 12631 established the president's Working Group on Financial Markets. The Working Group is chaired by the secretary of the treasury and includes the chairman of the SEC, the chairman of the Federal Reserve and the chairman of the Commodity Futures Trading Commission. The goal of the Working Group is to enhance the integrity, efficiency, orderliness, and competitiveness of the financial markets while maintaining investor confidence.^[112]

Within the securities sector, the SEC works closely with self-regulatory organizations, especially FINRA. GAO reported in 2024 that FINRA regulates more than 3,300 securities firms doing business with the public and that the SEC oversees FINRA through program inspections and ongoing monitoring.^[113] Another SRO under SEC's oversight is the Municipal Securities Rulemaking Board (MSRB). MSRB was established in 1975 by Congress to develop rules for companies involved in underwriting and trading municipal securities. The MSRB is monitored by the SEC, but the MSRB does not have the authority to enforce its rules.

The SEC also communicates with state securities regulators and foreign counterparts. While most violations of securities laws are enforced by the SEC and the various SROs it monitors, state securities regulators can also enforce statewide securities blue sky laws.^[31] States may require securities to be registered in the state before they can be sold there. National Securities Markets Improvement Act of 1996 (NSMIA) addressed this dual system of federal-state regulation by amending Section 18 of the 1933 Act to exempt nationally traded securities from state registration, thereby pre-empting state law in this area. The SEC also works with its foreign counterparts or international law enforcement bodies. The SEC is a member of International Organization of Securities Commissions (IOSCO), and uses the IOSCO Multilateral Memorandum of Understanding as well as direct bilateral agreements with other countries' securities commissions to deal with cross-border misconduct in securities markets.

The SEC also benefits from information exchange synergies with members of the United States Intelligence Community. Although briefings on sensitive topics between federal agencies are either non-public or classified in nature, public reporting about such information-sharing exchanges exists in the media. In 1977, a declassified CIA record indicates that the CIA's Rome station chief met SEC Chairman Roderick M. Hills to warn that disclosure of Lockheed bribery recipients could damage U.S.–Italian relations.^[114] Since the 2010s, the SEC Chairman Christopher Cox noted that the SEC had begun receiving monthly CIA briefings on terrorists and other criminals active in global stock markets.^[115]

Emergency market measures during the 2008 financial crisis

During the 2008 financial crisis, the SEC responded through a mix of emergency market measures, crisis-related investigations, and large investor settlements. On September 19, 2008, the Commission temporarily banned short selling in 799 financial stocks, describing the order as a measure intended to restore "equilibrium" and curb "panic-driven" price declines.^[116][117] At the same time, it investigated suspected market manipulation through false rumors about financial institutions, examined trading irregularities and abusive short-selling practices, and required hedge fund managers, broker-dealers, and institutional investors to provide sworn information about positions in credit default swaps. The SEC also pursued large crisis-era settlements on behalf of investors in auction rate securities, obtaining roughly $51 billion in relief from six financial institutions.

Selected enforcement actions (2009–2012)

From 2009 to 2012, the SEC brought a large number of high-profile cases tied to the financial crisis of 2007–2008 and its aftermath.^[118] Many of these actions focused on mortgage lending, structured products, and crisis-era disclosures, including cases involving Countrywide Financial, Bank of America, Goldman Sachs, Citigroup, State Street Bank, Wachovia, J.P. Morgan, Mizuho Financial Group, Option One Mortgage, and former executives at Fannie Mae and Freddie Mac.^[119][120]

During the period, SEC's enforcement expanded crisis-related actions involving auction-rate securities, municipal bond reinvestment transactions, asset-backed products, and allegedly misleading public statements about loan quality, risk exposure, and the pricing or composition of complex financial instruments.^[121]

The agency also targeted wrongdoing related to insider trading, investment adviser misconduct, Ponzi schemes, Foreign Corrupt Practices Act cases, and market-structure violations. Major insider-trading matters included the Galleon Group investigation, actions against Raj Rajaratnam and Rajat Gupta, the expert-network cases, and later cases involving hedge funds, consultants, physicians, and corporate insiders.^[122][123] Other actions targeted cross-border accounting fraud, bribery and pay-to-play schemes, abusive short-selling and spoofing practices, misconduct by exchanges and alternative trading systems, and large retail and affinity-fraud schemes such as Operation Broken Trust and several major Ponzi cases.^[124]

Digital assets and tokenized securities

Disclosure rulemaking

Regulatory failures