Sarbanes-Oxley and the SEC

What are three primary roles of the SEC? How does the Sarbanes Oxley Act augment the SEC’s role in managing financial governance?



The three primary roles of the U.S. Securities and Exchange Commission (SEC) are to protect investors, maintain efficient markets, and facilitate capital. The SEC works to protect investors by maintaining oversight of the capital market to insure that as more and more people use the market to invest to increase the livelihood of their families that these investments are protected. The capital market involves securities that have the ability to gain and lose value, which means that investors have the ability to gain and lose money. The SEC monitors and works to maintain the efficiency of the market to protect investors from inaccurate information, unfair trading practices, and unorganized trading.

The Sarbanes-Oxley Act augments the SEC's role in managing financial governance by review of financial statements, enhancing the enforcement program, increased frequency of reviews of investment advisers and companies, and conducts more broker/dealer examinations (SEC, 2003). The Sox Act increases the review of each registrant's financial statements to a minimum of every three years. The Sox Act increases the amount of enforcement allowed so that investigations can occur more quickly and be resolved sooner. The Act increases the frequency of financial reviews of investment advisers and investment companies based on the risk criteria associated with the company. Finally, the Act increases the examinations of brokers and dealers and related branches and offices to maintain monitoring effectiveness.

The Sarbanes-Oxley Act seems to have allowed the SEC to increase effectiveness in the three primary roles of the SEC. The Act increased the ability to protect, regulate, and enforce the three areas allowing the SEC to be increasingly effective in the three primary roles. This increased ability allows the SEC to increase oversight through multiple facets with increased effectiveness and efficiency to further strengthen the capital market.