SEC Rulemaking and Enforcement

Author: Lynn Fountain

The Commission's rulemaking process is intended to ensure that aspects of regulatory changes are analyzed before a change takes effect. A need for rulemaking can be identified internally by the Commission or externally by Congress, another government agency, private industry or the general public.

The rulemaking process usually begins with a rule proposal. , If the Commission approves the rule proposal, it is then presented to the public (through publication in the Federal Register and on the Commission's website) for a specified period of time. The public's input is considered as a final rule is crafted. Rules are adopted by a vote of the full Commission. The Office of the Secretary (OS) reviews rules for compliance with Federal Register requirements, sends related documents to various agencies involved in the process, issues official rulemaking documents, coordinates Commission approval of rules, and maintains certain rule related files. OS also receives and organizes public comments and then forwards them to the Office of Filings and Information Services (OFIS) and to the relevant division staff.

Enforcement
The Commission's mandate is to protect investors. The Commission is not authorized to act on behalf of individual investors. The Commission can bring a variety of administrative proceedings, which are heard by hearing officers and the Commission. One type of proceeding, for a cease and desist order, may be instituted against any person who violates the federal securities laws. With respect to regulated entities (e.g., brokers, dealers and investment advisers) and their employees, the Commission may institute administrative proceedings to, among other things, revoke or suspend registration, or to impose bars or suspensions from employment. In both cease-and-desist proceedings and administrative proceedings against regulated persons, the Commission is authorized, among other things, to order the payment of civil penalties and disgorgement of ill-gotten gains.

This session is to provide an understanding of the SEC’s responsibilities related to rulemaking and enforcement of rules related to the financial markets. We will examine the rulemaking process and the enforcement process that all accountants and auditors must understand to ensure proper compliance with SEC laws.

Publication Date: April 2021

Topics Covered

• Laws Affecting the Securities Industry
• Rulemaking Process
• Roles
• Enforcement
• SEC Enforcement Manual
• Recent Litigation Proceedings
• Summary
• Appendix

Learning Objectives

• Identify the process utilized by the SEC in rule making including the roles played by Market Regulation (MR), Corporate Finance (CF) or Investment Management (IM), the rulemaking divisions as well as the Office of General Counsel (OGC) and Office of Economic Analysis (OEA)
• Recognize the role played by the public in the SEC's rule making process and final aspects of including the rules within the Federal Register
• Identify the SEC's process of communication on new rules
• Describe the SEC Enforcement Division responsibilities
• Recognize the SEC's enforcement manual and its role in providing guidance in review of potential violations of federal securities laws
• Identify the process of accounting and auditing enforcement releases and administrative proceedings
• Describe recent litigation proceedings brought by the SEC division of enforcement
• Recognize what the Investment Advisory Act of 1940 accomplishes
• Identify the purpose of a judicial review
• Identify the purpose of the Office of the General Counsel
• Recognize what the SEC's enforcement manual can be used for
• Identify the purpose of a Wells notice
• Identify the purpose of an immunity order

Level
Basic

Instructional Method
Self-Study

NASBA Field of Study
Accounting (2 hours)

Program Prerequisites
None

Advance Preparation
None