Celebrating 90 years of the SEC: The power of mandatory disclosure
On 6 June, the US Securities and Exchange Commission (SEC) celebrated its 90th anniversary, commemorating nine decades of investor protection and market oversight.
To mark the occasion speeches by Chair Gary Gensler, and Commissioners Mark Uyeda, Hester M. Peirce, and Jaime Lizárraga highlighted the Commission’s significant history and the enduring benefits of its disclosure-based regulatory framework.
Established by the Securities Exchange Act of 1934, the SEC was founded in response to the 1929 market crash and the ensuing Great Depression. This era marked a critical shift in regulatory philosophy, choosing transparency over the merit-based blue sky laws prevalent in many states. Commissioner Uyeda emphasised that centring transparency and accountability has been fundamental to the United States’ rise as an economic superpower.
Commissioner Lizárraga recounted the early opposition to the SEC’s creation but highlighted how mandatory disclosure laws have consistently proven their value. The federal securities laws enacted under President Franklin D. Roosevelt have not only protected investors but also maintained the integrity and growth of US capital markets. Lizárraga noted that the SEC’s $2 billion budget, funded by market participant fees, is budget neutral. Remarkably, in 2022 alone, enforcement actions recovered three times the SEC’s budget, reflecting the efficacy of these regulations.
The SEC’s history is a testament to the power of mandatory disclosure. By requiring companies to provide clear, comprehensive information, the SEC has fostered an environment where investors can make informed decisions, thereby enhancing market integrity. This framework has been instrumental in protecting investors against misconduct and maintaining fair, orderly markets.
Today, the digital age offers new opportunities for enhancing these principles. Digital financial reporting, especially with XBRL, allows for more precise and efficient data analysis. XBRL’s structured format ensures that information is machine-readable, facilitating better transparency and quicker dissemination of data. This evolution is crucial as we move towards a future where technology continues to reshape financial markets.
As the SEC enters its tenth decade, its commitment to transparency remains unwavering. The principles of mandatory disclosure continue to underpin this mission, now enhanced by digital advancements.
