Stock Market Investors » Stock Broker Classes and Commissions » Regulatory Bodies of the Securities Industry

Regulatory Bodies of the Securities Industry

The stock market is guarded from the complicated con schemes by a complex regulatory system.

The success of the regulatory system in guarding individual investors is questionable. Many believe that it serves its purposes, whereas others supported by the many examples of scams are against its viability.

There are many cases in which the swindler has gone without being punished. In such cases many investors wonder where the regulators are in guarding their rights.

Despite the many failures of the regulators, still the securities industry remains one of the most highly regulated one.

US Congress Role

At the top of the hierarchy the US Congress stands. It is responsible for the establishment of the structure of the industry and the laws that regulate it. Generally, the regulatory functions are assigned to the Securities and Exchange Commission. The US Congress is the entity that authorizes the budget of the SEC.

SEC Role

As mentioned above the body that is responsible for the regulation of the securities industry is the SEC. It monitors the activities of the stock exchanges and the organizations whose activities are in the securities field. Some of the responsibilities of the SEC are:

  • Registration of new securities
  • Operates with the filings of the public companies (e.g. annual reports, quarterly reports)

Another responsibility of the SEC is to monitor the advertising and marketing activities of the companies. This monitoring is required in order for the SEC to be sure that the companies follow the rules concerning the selling of securities.


The National Association of Securities Dealers is the entity below the SEC. It represents the police in the securities industry. Additionally, it is self-regulatory body that sets the standards, which stockbrokers and industry professionals as a whole should meet. After making a thorough examination of their qualifications, the NASD is required to license them if everything is alright.

It is under the NASD right to punish individuals or organizations that don't abide by the regulations and have unethical practices. The NASD can even deprive the violator from its license.

Therefore, if you feel that a company or a broker is having an unethical behavior or it is in contrast to the regulations, you should present your complaint to the NASD.

Regulatory functions are also possessed by the individual exchanges. The major functions are to ensure that the customers are getting fair deals by examining the executed trades.

State Securities Divisions Role

State securities divisions are responsible for the handling of complaints. They also register securities that are to be traded within the state. The functions of these securities divisions differ from state to state.

Broker's Role

The ethical and legal dimensions of the activities of brokers are supervised by the firms for which the broker works. This is required in order for the firm to be sure that the broker follows the legal and ethical regulations of the securities field.

Finally, as you can see investors are protected at many levels. However, as the history shows still there are many swindlers that manage to circumvent the rules and make there schemes. Therefore, you should deal with the required caution with your trades and the people with whom you are making them.

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