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SEC Compliance

SEC Compliance

Compliance with the Securities and Exchange Commission (SEC) is critical for businesses of all sizes that utilize investors or offer any type of security. Compliance with SEC regulations is often a complex task, requiring either a dedicated in-house team of legal professionals or businesses to seek outside counsel. There are several important things to consider in regards to a company’s SEC compliance policies and procedures in order to avoid regulatory problems. Because of the complexity of these regulations, it is important to work with an attorney specializing in securities law.

Areas of Enforcement

There are several main areas of SEC enforcement relevant to businesses, namely regulations surrounding corporate finance, mergers and acquisitions, market regulations, securities and illegal practices such as insider trading. Below is a list detailing these key areas.

Corporate Finance
Corporations and companies listed on the stock exchange are required by the SEC to make annual reports and regular disclosures in areas of corporate finance. The purpose behind this is to ensure transparency regarding companies financial condition and business practices in order to allow investors to make informed decisions. Additionally, the SEC also has guidelines regarding accounting practices that are required to be upheld. Some of these disclosures and filings required by the SEC include:

  • Financial filings both annually and quarterly
  • Reports issued annually to shareholders
  • Proxy materials sent to shareholders before an annual meeting;
  • Executive compensation disclosures.

Mergers and Acquisitions
A big part of the SEC’s work is regulation of mergers and acquisitions in order to ensure compliance with antitrust laws. Specifically, this includes companies that report to the SEC. Companies are required to file disclosures and other documentation related to mergers and acquisitions before the deals are finalized. On top of this, the SEC regulates these activities to ensure that shareholders are properly informed and given a say on any decision making related to these deals when appropriate.

PDF copy of the SEC Securities Act of 1933 for SEC compliance

The majority of laws and regulations companies face from the SEC are in regards to securities. All of these laws must be followed by any company that issues securities, regardless of the manner in or state at which they are offered. Below are the major securities laws enforced by the SEC:

  • Securities Act of 1933 – This act was specifically created to regulate the disclosure and registration of securities and prohibits fraud. It is known as the “truth in securities” law.
  • Securities Exchange Act of 1934 – This act not only created the SEC, it also regulates markets by requiring exchanges, brokers and dealers, transfer agents, clearing agencies, and other market participants to register with the SEC and  as well as establishing what corporate finance reports would be required.
  • Trust Indenture Act of 1939 – This act covers the regulation of the sale and transfer of bonds, debentures, and notes via trust indenture.
  • Investment Company Act of 1940 – This regulates the organization of companies whose primary business is in investing, reinvesting, and trading in securities who  also offer their own securities to the public. The purpose of this is to minimize the conflict of interest between the two different types of securities.
  • Sarbanes-Oxley Act of 2002 – This act made specific reforms in order to enhance corporate responsibility, as well as to improve financial disclosures and reduce accounting fraud. It also created the Public Company Accounting Oversight Board, which oversees the auditing industry as a whole.
  • Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 – This act reformed financial practices that hurt the average consumer and investor. Specifically, this act reformed practices surrounding consumer protection, trading restrictions, and credit ratings, as well as further regulating financial products and corporate governance and disclosure, all while enhancing transparency.
  • Jumpstart Our Business Startups Act of 2012 – This act minimized regulatory requirements for small businesses raising funds in public capital markets in order to help small businesses grow.

Under these laws, the Securities and Exchange Commission has the legal authority to enforce all disclosures and regulatory standards for securities. Because of this, companies must take each act into consideration when working on SEC compliance.

How an Attorney Can Help

Compliance with SEC rules and regulations is one of the most complex ongoing legal matters a business will face. Unless the company has its own legal department to handle compliance, this can be a challenging burden on business owners and executives. Not only that, errors causing non-compliance can result in considerable fines and penalties.

Because of this, it is strongly recommended that companies work with an experienced attorney specializing in securities law. This will oftentimes be more cost effective in the long run, saving valuable time and ensuring accurate compliance. Hoeg Law specializes in business law, with a specific focus on securities regulation compliance. If your company is in need of legal advice and assistance regarding securities law matters, please contact our office today for a consultation.

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