The Securities and Exchange Commission (SEC) is an important governmental entity that companies must deal with properly or risk serious legal consequences. Therefore, SEC compliance forms a major part of the legal requirements of any company with investors or offering any type of security. A Priori securities lawyer can ensure you are compliant with all applicable SEC regulations. The following issues are some of the most important to consider in terms of your company’s SEC compliance procedures.
Securities & Exchange Commission (SEC)
The SEC exists to regulate the securities markets and protect investors. Most SEC regulations dictate corporate accounting practices, deal with public disclosures and other methods that protect the investors against fraudulent and manipulative practices in the securities markets, or provide guidance on the proper way to offer, broker or purchase securities. The SEC also serves as the main arbitrator and regulator of corporate actions. Any company issuing securities of any kind must ensure that they are complying with all the regulations that may apply.
SEC Areas of Enforcement
The SEC enforces all regulations of the securities markets. The following are some of the most important areas of SEC enforcement that any company must take into consideration for SEC compliance practices.
The SEC requires corporations and listed companies to make annual reports and regular disclosures in areas of corporate finance. The intent is to make public these companies' financial condition and business practices, so that investors can make informed decisions. The SEC also dictates proper accounting practices that must be upheld. Some of the required disclosures and filings that companies must file correctly in order to be compliant with the SEC include the following:
- Annual and quarterly financial filings;
- Annual reports to shareholders;
- Proxy materials sent to shareholders before an annual meeting; and
- Executive compensation disclosures.
Mergers and Acquisitions
The SEC regulates antitrust related issues by monitoring mergers and acquisitions by companies that report to the SEC. Companies must file certain disclosures and other documents related to such mergers and acquisitions before they are finalized. In addition, such activities are regulated to ensure shareholders are properly informed and given say on such decisions when appropriate.
Securities laws and regulations are the basis of most SEC compliance requirements that companies face. All major securities laws must be followed by any company issuing securities, no matter the manner in or the stage at which they are offered. The following are the major securities laws that the SEC enforces:
- Securities Act of 1933. Known as the "truth in securities" law, this act regulates the disclosure and registration of securities and prohibits fraud.
- Securities Exchange Act of 1934. This act created the SEC and regulates markets by requiring exchanges, brokers and dealers, transfer agents, clearing agencies, and other market participants to register, as well as establishing what corporate finance reports would be required.
- Trust Indenture Act of 1939. This act regulates the sale of bonds, debentures, and notes via trust indenture.
- Investment Company Act of 1940. This act regulates the organization of companies whose main business is in investing, reinvesting, and trading in securities and who offer their own securities to the public, in order to minimize the conflict of interest.
- Sarbanes-Oxley Act of 2002. This act made reforms to enhance corporate responsibility, improve financial disclosures, fight accounting fraud and create the Public Company Accounting Oversight Board to oversee the auditing industry.
- Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This act reformed practices hurting the average consumer and investor by reforming consumer protection, trading restrictions, and credit ratings, regulating financial products and corporate governance and disclosure, and enhancing transparency.
- Jumpstart Our Business Startups Act of 2012. This act minimized regulatory requirements for small businesses raising funds in public capital markets.
Under these laws, the SEC enforces all disclosures and regulatory standards for securities. SEC compliance for any company must take each act in its entirety under consideration.
The SEC oversees major market participants, including SROs like FINRA, securities exchanges and securities firms. Companies that that operate in this capacity, especially those which perform the duties of broker-dealers, must take extra care to comply with the SEC on these issues, as the rules regulating markets can be incredibly complex and are ever-changing.
FCPA, Insider Trading, and Other Illegal Practices
Within the SEC, there are specific offices and divisions dedicated to eliminating specific illegal practices, including violating the FCPA, participating in insider trading, and other “malicious” illegal practices that are taken very seriously and can have both civil and criminal consequences. Enforcement in these areas is typically quite harsh, so companies must take extra care to comply with rules in these areas.
Depending on the complexity of your needs, the cost of SEC compliance can vary drastically. Hourly rates for Priori securities lawyers range from $225 to $450 per hour. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.
How can I find out what SEC regulations apply to my company and ensure it is compliant?
The best way to ensure that your company is properly executing SEC compliance requirements is to discuss the issue with an experienced securities lawyer. They will be able to review all your company’s actions and reveal the strengths and weaknesses of your current compliance elements. Without a securities attorney, it can be almost impossible to ensure full compliance.