The United States Security and Exchange Commission (SEC) is a federal government agency that is independent and whose main responsibility is protecting investors, facilitating the capital information, and maintaining the functioning of the securities markets in an orderly and fair manner. Created in the year 1934, the SEC is considered to be the first federal regulator that is of the securities markets.
The Role of the SEC
The main role of the SEC is promoting a full public disclosure, aims at monitoring corporate takeover actions in the country, and protects investors from manipulative and fraudulent practices in the market ( Rittenberg, 2011) . In other words, the primary responsibility of the SEC is to make sure that the practices of the business are transparent and legal in terms of being accessible and open to the company’s stockholders as well as the public. In addition, they police the way in which the businesses conduct their transactions and regulate themselves. In their focus on transactions that relate to stock, the SEC often has its attention on any possible irregularities that can happen during the selling and purchasing of stock and aims at exposing anything that might negatively affect investors. It has an oversight responsibility in relation to the Public Company Accounting Oversight Board (PCAOB), the Dodd-Frank Act, and the Sarbanes-Oxley Act of 2002.
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The Oversight Responsibility of the SEC
After the stock market crashed in the year 1929, there was a decrease in the level of public confidence in the United States markets. Afterwards, Congress aimed at identifying the problems and fined the solutions. In the year 1933, it passed the Security Act of the year 1933 and the following year passed Securities Exchange Act of 1934 that created the SEC. The main responsibility of the SEC is to act as an oversight organ to companies. The oversight responsibility of the SEC is seen in relation to the Sarbanes-Oxley Act of 2002 or the SOX ( Stickney, 2010) . It is an act that was passed by the United States Congress in the year 2002 with the aim of protecting the investors from any form of fraudulent activities by the corporations. It was created in response to the accounting malpractices that were seen in the early 2000s in the United States such as those that related to WorldCom, Tyco International plc., and Enron Corporation. The enforcement policies and rules that are outlined by the SOX Act aim at supplementing or amending the existing legislation that deals with security regulations and oversight responsibilities. The main provisions of the act are Section 302 and Section 404 that aim at improving the oversight responsibility of the SEC. Section 302 requires senior management to provide a certification of the level of accuracy of the financial statement that has been reported. On the other hand, Section 404 requires that the auditors and management establish internal controls and also methods of reporting the adequacy of the controls.
The SEC also has an oversight responsibility as a relationship to the Public Company Accounting Oversight Board (PCAOB) that was created by the Sarbanes-Oxley Act of the year 2002. Its main responsibility is to oversee the auditors from public companies to ensure that the interests of the investors are protected. More specifically, the main responsibilities of the PCAOB include registering accounting firms that are responsible for auditing public companies that are trading in the United States security markets. It also inspects the registered public accounting firms and established quality control, independent standards, ethics, and auditing for all the public accounting firms that are registered ( Collier, 2006) . Finally, it investigates and disciplines the registered accounting firms and all of their related persons for violating specific professional standards and laws.
Finally, the oversight responsibility of the SEC as a relationship with the Dodd-Frank Act that was signed into law in the year 2010 by the former president Barack Obama aims at reshaping the regulatory system in the United States. It aims at doing this through trading restrictions, transparency, credit ratings, regulation of financial products, trading restrictions, corporate disclosure and governance, and customer protection. The objectives of the Act help the SEC in fulfilling its responsibility as an oversight organ.
Conclusion
The U.S. SEC has the main responsibility of facilitating capital formation, maintaining an orderly and fair functioning of the securities markets, and also protects investors. The fulfillment of the responsibilities is possible through its oversight function. In addition, it has an oversight function in relation to the Sarbanes-Oxley Act of 2002, the Public Company Accounting Oversight Board (PCAOB), and the Dodd-Frank Act. For example, the oversight responsibility of the SEC is seen in relation to the Sarbanes-Oxley Act of 2002 or the SOX through the main provisions of the act are Section 302 and Section 404. The SEC also has an oversight responsibility as a relationship to the Public Company Accounting Oversight Board (PCAOB) that is seen through its main responsibility of overseeing the auditors from public companies to ensure that the interests of the investors are protected. Finally, the oversight responsibility of the SEC as a relationship with the Dodd-Frank Act is seen through trading restrictions, transparency, credit ratings, regulation of financial products, trading restrictions, corporate disclosure and governance, and customer protection
Reference
Collier, P. M., Agyei-Ampomah, S., & Chartered Institute of Management Accountants. (2006). Management accounting - risk and control strategy: Strategic level . Oxford: CIMA/Elsevier.
Rittenberg, L. E., Johnstone, K. M., & Gramling, A. A. (2011). Auditing . Mason, Ohio: South-Western.
Stickney, C. P. (2010). Financial accounting: An introduction to concepts, methods, and uses . Mason, OH: South-Western/Cengage Learning.
