SEC to Military: What We Do and How We Can Help

By Patricia Uceda, Spring 2015 Graduate Research Assistant

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In honor of Military Saves Week last month, which strives to make service members and their families aware of the power of savings and setting financial goals for the future, the SEC recently conducted a seminar on SEC Investor Education and Advocacy for military service men and women at Ft. Hood educating them on what the SEC does and how they can help.

What the SEC Does

The SEC explained their three-part mission to the military personnel: 1) to protect investors; 2) to maintain fair, orderly, and efficient markets; and 3) to facilitate capital formation. This mission is carried out through their role in overseeing the key participants in the securities markets, and is conducted by over 4,300 staff members in five Divisions and 21 offices in Washington, DC as well as 11 regional offices.

The Division of Enforcement investigates alleged violations of federal securities laws and recommends to the Commission that it bring civil enforcement actions against individuals or entitles who may be engaging in financial misconduct. The SEC has no criminal authority, and is limited to monetary penalties, remedial relief such as injunctions, and equitable relief such as disgorgement of ill-gotten gains.

The Division of Corporation Finance assists the Commission in ensuring that corporations are disclosing legally required information such as risks associated with certain investments to the investing public. The SEC seeks to ensure that investors have access to basic information about their current and potential investments in order to be able to make informed investment decisions.

However, it is not the SEC’s job to eliminate all risk from the securities markets.  In order to do this they would have to completely standardize every type of investment and set very rigid parameters for each one to ensure that they were all low-risk or risk-free. If they tried to do this, the market would not be as varied and flexible as it is today, and ultimately investors would suffer. In order to get the great rewards, there necessarily has to be some amount of risk.

The Trading and Markets Division assists the Commission in overseeing the day-to-day activities of the major securities market participants, including big broker-dealers and securities exchanges such as the New York Stock Exchange or NASDAQ.

The Investment Management Division is responsible for overseeing the investment management industry (i.e. mutual funds and investment advisors). America currently has a $62 trillion investment management industry, and one of the Investment Management Division’s primary responsibilities is to ensure that disclosures are accurate and useful to investors.

Last but not least, the Economic and Risk Analysis Division studies the potential costs and benefits of all proposed rules. This division is the newest SEC division, and its main purpose is to ensure that SEC rules adequately protect investor’s interests. They do this by carefully analyzing the costs and benefits of each proposed rule and providing recommendations.

How the SEC Can Help

The SEC is dedicated to helping service men and women avoid falling into financial traps. Unfortunately, our armed forces are often targets of a specific type of financial fraud, affinity fraud. The perpetrators of this type of fraud purposefully target certain groups of investors. They have also been known to target the elderly, religious groups, or ethnic groups.

For example, in 2006 the SEC sued a Texas insurance company for targeting American military personnel with a deceptive sales program that misled investors into believing that they could become millionaires by investing in the company’s product. Between 2000 and 2006, approximately 57,000 military personnel purchased the product, and most of them earned little or nothing on their investment.

It is important for investors to always follow up on an investment and the seller’s background, no matter how trustworthy they may appear to be. Being educated about the types of fraud is one of the best protections against becoming a victim. The SEC has a website dedicated to retail investors – Investor.gov – that has content helpful to service members and their families. In addition if you want to learn more you can access the Military Saves Week resources here.