With all the financial organizations out there, knowing that all of them can be as complicated as knowing where to invest. Securities and exchange Commission (sec) and financial institutions (finra) – formerly the national Association of securities dealers (NASD) are two of the most important regulatory bodies in the U.S. financial system, but they have very different volume and destination.
The main objective of the SEC is to protect investors and preserve the integrity of the securities markets (as on the official exchanges and OTC). For a second rose from the ashes of the great stock market crash of 1929. After the crash and the subsequent great Depression, public confidence in stock market fell to a record low. As a result, Congress passed the securities act 1933 and the law on the trading of the securities of 1934. These actions were aimed at restoring investor confidence at two basic principles:
When these laws were passed, the Commission was created to enforce them. Their focus was, and remains, to ensure stability in the markets, and, most importantly, to protect investors.
Although it has normative force, the United States is not part of the government. This not-for-profit organization and the largest self-regulatory organization (SRO) in the securities industry in the United States (SRO is a membership-based organization that creates and enforces rules for members based on Federal laws). USA is at the forefront in the field of licensing and regulation of broker-dealers. USA is under the control of sec.
To summarize, the sec is responsible for ensuring fairness for the individual investor and finra oversees almost all American brokers and brokerage firms.
For further reading, see “policing the securities market: a Review of the sec”.