Things to Know About the Securities and Exchange Commission

According to legend, Presidential patriarch Joseph Kennedy, Sr. once got a hot stock tip from the man shining his shoes. “Buy radio stocks,” the shoe shiner advised. Kennedy didn’t double down on his investment. He sold his shares immediately. That’s because Kennedy believed when the average person was playing the market, it was probably inflated beyond all reason.

Not long after selling, he was proven correct. On October 29, 1929, the stock market plummeted in value as a record 16 million shares were traded and billions of dollars in stock value was erased. By 1932, stocks were worth just 20% of what they had been only three years before.

The Kennedy story may be a myth, but it illustrates a common investment risk. Inexperienced investors often buy at the peak of a market, while those with wealth and connections are often able to better time their purchases.

The 1929 Crash didn’t just wipe out the value of radio stocks (the tech stock of the day) along with numerous others. It bankrupted cash poor investors who had helped run up the market by buying on margin –– paying just pennies on the dollar for a share of stock. So long as their shares climbed, they continued to buy.

When the market crashed, the margins were called, leaving thousands broke. The Securities and Exchange Commission was created in part to protect both people like the shoeshiner and people like Joseph Kennedy. No matter your background, here are a few things to know about the Securities and Exchange Commission (SEC).

Noble Goals

Founded in 1934, the SEC was created “to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.” Under the leadership of its first Chairman, Joseph Kennedy, Sr., the organization forced companies to be more transparent, while requiring that they register initial public offerings and regularly file reports.

By regulating at the Federal level rather than state-by-state, the SEC helped encourage investor confidence. Today, start-ups promising to be the next Uber or Facebook often attract people with limited investing backgrounds. By regulating investments, the SEC protects them – often restricting inexperienced, non-wealthy investors.

Organizations that flout regulations have cost people billions of dollars. Yet waiting for investors to be victimized to initiate criminal proceedings means risking not just their money, but also the chance those who committed the crime can flee the country or destroy evidence. That’s why having inside people willing to report wrongdoing is so vital.

Unfortunately, stepping forward can mean risking a job, a reputation, or even a countersuit. The Dodd-Frank Wall Street Reform and Consumer Protection Act sought to protect them from recrimination by making employer retaliation illegal and offering means of redress. Unfortunately, the shield of anonymity is only provided for those who hire a whistleblower lawyer, like those at Meissner Associates.

SEC Services

The SEC doesn’t just assist victims of securities fraud. They can help investors before a trade even takes place. The organization provides a range of investment advice. For instance, if you are concerned that someone offering you investment advice is not who they say they are, the Investment Adviser Public Disclosure website lets you determine if an organization is a bona fide brokerage firm or an individual investment advisor’s employment history.

If they have been disciplined for misconduct, it will be listed. The site also allows access to FINRA’s BrokerCheck portal. Since selling securities without an SEC registration (or a legal exemption from this requirement) is against the law, individuals can use the agency’s EDGAR database to uncover details about the company.

There is also a toll-free SEC’s investor assistance line at (800) 732-0330. Investing is often stressful and even risky. The SEC helps reduce the stress and the risk by working to ensure investment opportunities are legitimate.