The Securities and Exchange Commission (SEC) is a federal agency with regulatory jurisdiction over the issuance and trading of financial securities.
After the 1929 stock market crash, Congress established a committee to investigate the causes of the crash. This committee, which later became associated with its lead counsel, Ferdinand Pecora, uncovered a number of abuses among banks, brokerages, and other stock market participants. This led to the passage of various securities laws intended to regulate securities markets at the federal level.
The first major piece of legislation regulating securities markets was the Securities Act of 1933, which passed in May of that year. The Securities Act requires issuers of securities (stocks, bonds, options, etc.) to register their offering or apply for a specific exemption. Enforcement of the Securities Act was initially given to the Federal Trade Commission (FTC). However, in 1934, Congress passed the Securities and Exchange Act, which created the Securities and Exchange Commission. The SEC became responsible for regulating securities issuance and securities trading in secondary markets, such as on stock exchanges and broker-dealer networks.
Since the 1930s, Congress has passed numerous laws which have expanded the scope of activities for which the SEC is responsible. Today, the SEC states its mission as “to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.” (www.sec.gov/about)
Prior to the passage of national securities laws, securities issuance was regulated at the state-level under so called “blue sky laws” and securities trading was regulated by the individual exchanges.
