Securities and Exchange Commission

Abstract

Abstract The Securities and Exchange Commission was established in response to the financial crises of the 1930s. Its two‐part mission is to police the securities markets in the United States and to encourage capital formation by maintaining public confidence in the market for stocks and bonds. That mission contains an obvious contradiction and requires a careful balance: an aggressive approach to its policing mission might well raise questions in the minds of market participants as to the fairness of the larger market; failure to police aggressively might well raise the same question. Some argue that an efficient market provides its own police mechanism, and the SEC's rules and regulations get in the way of capital formation. Nonetheless, the financial community – and the Congress – have concluded that the pressures of the market place will tempt some companies and managers to go beyond their personal ethics and that a legitimatized restraining authority serves the interests of all.

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