SEC Securities and Exchange Commission Acts and How They Can Be Improved

Narrative for Prior Slide My name is Dustine Rogers, and today I will be presenting on the Security and Exchange Commission's Act's and how they could be improved. The Security and Exchange Commission was created in 1934 to protect the public from being defrauded by corporations. This was shortly after the Great Depression, so most consumers did not have their faith fully restored in a new market. Meaning if companies tried to defraud consumers, as many of them were, the US economy could have trust back in to another Great Depression.

Securities Act of 1933 Summary  Its role was to make sure that investors receive significant information about securities being offered for public sale.  And to prohibit various types of fraud in the sale of securities to the public.

Narrative for Prior Slide The Securities Act of 1933 was the first step in the direction to protect consumers, even if it was created before SEC was. This act required companies to disclose information about themselves and the terms of their securities to the public. In addition to being forced to disclose information about themselves they also had to register the securities that they sold to the public.

Improvements Give less exemptions to Companies More regulation on foreign transactions.

Narrative for Prior Slide Even though the Act of 1933 gave consumers a good deal of protection, it still lacked in certain areas. The Act offered certain exemptions that could be used to avoid registration or at least full registration. The exemptions were not very difficult for companies to take advantage of, such as the exemption for Qualified Institutional Buyers. There were not many restrictions on foreign transactions. So exemptions did not even matter if you could avoid the law all together.

Securities Exchange Act of 1934 Summary  The Physical Securities Exchange  Security Associations to Regulate brokers/dealers  More Steps to Prevent Fraud  More Strict Guidelines for Exemptions

Narrative for Prior Slide The Exchange Act of 34 created security exchanges were well known securities could be traded, bought and sold. This act is also responsible for security associations that were responsible for the regulation of brokers and dealers. It was an early example of groups like NASDAQ and NASD, which required all reputable brokers/dealers to register with. The level of anti-fraud security was stepped up as well. Insider trading was cracked down upon much in reference to price fixing. Among exemptions that were added were National Security.

Improvements Exemptions were not corrected from the Act of 33 Not too many to be made at the time.

Narrative for Prior Slide The Act of 1934 introduced a few revisions to the Act of 1933, but it did not correct the ease of getting an exemption to registration. Other than the failure to place further restriction on exemptions, there were not too many improvements to be made.

Trust Indenture Act of 1939 Summary  Made it mandatory to appoint a trustee to be in charge of securities.  Securities could not be sold unless a formal agreement was reached between the bondholder and the issuer of the bonds.

Narrative for Prior Slide Required that an independent party become the trustee and that sales could be made unless an agreement was reached between both parties involved.

Improvements Trustee should have had to follow more stringent guidelines. Heavier offenses for not disobeying requirements.

Narrative for Prior Slide Even though a trustee was created to help keep things impartial, there were not many restrictions to prevent one side from trying to sway them away from the other side. Often times, the penalties for breaking the requirements that were set forth, were not great enough to stop many companies from doing so. Because of this many consumer's were still being defrauded.

Sarbanes Oxley Act of 2002 Summary  Established external auditor independence  Enhanced financial disclosure  Gave the commission more authority and resources to use  Created Corporate Fraud Accountability Act, White Collar Crime Penalty Enhancement Act, and the Corporate and Criminal Fraud Act through its various sections.

Narrative for Prior Slide The Sarbanes-Oxley Act of 2002 has made the largest number of significant changes to date. It held the corporate leaders responsible for accounting accuracy, as well as greatly increasing the level of disclosure of a companies financial records. It was responsible for the creation of the PCAOB, which kept companies on their toes as far keeping their financial records accurate and truthful. It also ensured that those responsible for fraud, corporate leaders, were given adequate punishment for their crimes such heavy fines, jail time, or both.

Improvements Costly to Businesses (like in IT for example) Perhaps too strict

Narrative for Prior Slide All of the new changes that businesses were forced to make did not come cheap. Many small businesses were struck a fairly hard blow by all of those changes, but I can't really complain because it creates many job opportunities for people in the network security field. Nonetheless businesses are not the only ones who were hit by the large cost of this Act. Putting so many people in the groups that are meant to police the companies is a very costly move by the government. It is important to protect the consumer from danger, but to what extent we should pay for that protection? The SOX Act is considered too excessive for its price.

Sources Sarbanes Oxley Act of 2002: Investment Advisers Act of 1940: Investment Company Act of 1940: Trust Indenture Act of 1939: Registration of Exchanges, Associations, and Others: Securities Act of 1933:

Narrative for Prior Slide These are my sources and this was my presentation on the Security and Exchange Commission's Act's and how they could be improved.