My Firsthand Experience with the SEC
I was in charge of my company's Y2K compliance, which now seems unimportant, but was very important at the time. One day a well-dressed man came into the office and handed his business card to the front desk asking to speak with the operating manager. Within a few minutes I was called into the manager's office and was introduced to the Securities Exchange Commission officer and asked to present all of our Y2K preparations. I must admit that my adrenaline kicked in from this surprise visit. I had nothing to hide, but the fact that the man sitting across from me had the power to close down our company tends to turn the intensity up a notch.
The officer was interested in finding out how prepared investment advisors were for the millennium change and I was relieved to find out that we were ahead of the game. Although he appeared somewhat friendly, I could tell he took his job very seriously and if anything was questionable, he would be able to dig it out.
SEC Enforcement With a Purpose
The SEC takes approximately 500 civil enforcement actions against individuals and companies that violate the law each year. The SEC regulates basically anything related to the securities markets. This includes individuals, investment advisors, mutual funds, broker-dealers, and public companies. Common enforcement actions include: insider trading, accounting fraud, and providing false information about securities and the companies that issue them. Without the SEC, investment fraud would be commonplace and the markets would be much more unstable.
Huge Improvements
The SEC has made many improvements over the years, but the biggest improvement, in my opinion, occurred recently. One of the primary goals of the SEC is to educate the public and their Web site (SEC Online) is getting the job done. For instance, if I was questioning the use of recommendations from an analyst, I would find a telling article in their SEC Online Publications section. Or, if I were looking for information about an investment advisor I was considering doing business with, I could visit the SEC broker and advisor information page and actually see the advisor's filings with the SEC. This would give me information about the advisor's educational and professional background, fee arrangements and much more. The also have a question search page.
NYS Attorney General, Eliot Spitzer, has put some pressure on the SEC over the past couple years. He has uncovered many scandals that the SEC never found. The SEC has doubled their efforts on eliminating investment scandals in the mutual fund, brokerage, investment advisor, banking and hedge fund industries.
Although I think they are doing a good job, I would like to see the SEC produce more articles and spend more time educating the public because no matter how much investigating they do, the scam artists are out there. One rule that I live by: if something sounds "too good to be true," it probably is!
