Finance Basics: Scott Tominaga on the Role of the SEC

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Scott Tominaga: The SEC on Protecting Investors.

The Securities and Exchange Commission (SEC) is an independent government agency responsible for protecting investors and ensuring the integrity of the U.S. securities markets. The SEC restored public confidence in financial markets after the Great Depression, notes Scott Tominaga. It aims to increase fairness and transparency in financial markets by requiring comprehensive financial reporting and restricting insider trading.

The Securities and Exchange Commission (SEC) plays an essential role in safeguarding investors' interests and upholding the integrity of the securities market. As a regulatory agency, the SEC is responsible for enforcing the securities laws enacted by Congress and prosecuting anyone attempting to defraud or circumvent them. 

By taking such measures, the SEC ensures that companies are accountable for their financial reporting and that investors can trust the information they receive from them. The SEC's mandate is to maintain fair and transparent practices in the securities market, protecting the interests of all U.S. citizens who participate in investing. Its efforts are vital to fostering a healthy, sustainable economy where investors can confidently participate in securities transactions with full confidence and trust.

Scott Tominaga notes that the commission protects investors from fraudulent activities like Bernie Madoff's infamous pyramid scheme. If a broker or asset manager takes advantage of their clients, the SEC can investigate them and bring charges.

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The 2011 Dodd-Frank Act created a whistleblower program. The program rewards citizens reporting securities law violators to the SEC. Whistleblowers receive 10% to 30% of the penalties collected by the SEC.

Scott Tominaga mentions that the commission may have unintentionally facilitated the banking crisis that led to the Great Recession—the SEC relaxed the net capital rule in 2004. It allowed investment banks to increase financial leverage. The change incentivized investment banks to take on more mortgage-backed securities. Unfortunately, Scott Tominaga says many of these securities were composed of subprime mortgages. As delinquencies on the mortgages ended up in default, the value of the securities held by banks fell sharply. 

Although the SEC couldn't prevent the crisis, it was able to act on behalf of investors to pursue justice for the illegal actions of many individuals and institutions who caused the crisis.

Scott Tominaga earned his degree in Business Finance from Arizona State University in 1988. He is an experienced professional in the hedge fund and financial services industry. His skills involve expertise in middle and back-office accounting, compliance, and administrative functions within financial services firms. For more articles on finance and investment, visit this blog.