Wall Street, the beating financial heart of the US stock market, is a symbol of wealth, prosperity, and investment.
But who really runs Wall Street? Is the US financial system overseen by the firms and funds that benefit the most from its movements, as some amateur investors on Reddit believe? Thankfully for the balance of the market: no, the markets aren’t overseen by private companies. The real power behind the US market is the Securities and Exchange Commission, no matter what grumbling online might suggest.
Securities are the most tightly regulated aspect of our economy. The SEC, an independent agency created by the US government, is responsible for overseeing Wall Street’s financial activity. It was formed in 1934 by the Securities Exchange Act as a direct response to the Great Depression. The agency was invested with the responsibility to prevent something like the Wall Street Crash of 1929 from occurring again.
So far, it’s been successful. Since the creation of the SEC, there have been no market crashes like what happened in 1929. The SEC has a considerable responsibility to the markets, but it also has significant power to enforce laws relating to securities.
Why Is This Important?
The SEC is almost always at the center of news relating to the markets. For instance, recent interest in short squeezes and amateur retail investing has led to an increase in attention given to the SEC.
In the modern era, the SEC has also received some criticism from outsider and industry analysts alike for allegedly being “fearful” of confronting major firms and investors.
A recent example is amateur investors on social media sites calling on the SEC to address what they see as a loophole in the market involving “naked” short selling. Short selling, the practice of placing bets that a given stock will lose value in the future, has been called an “exploit” by some amateur investors. This is partly what has led to the niche perception of the markets being “run” by private companies.
That being said, the SEC is definitely still in charge. It remains an important cornerstone of the US financial system, no matter what people online might suggest. An independent government watchdog that oversees Wall Street is vital for the market to stay transparent and fair. Some brokerages and firms that offer investment services act in ways that are unethical and have been caught stealing from their customers, but they have been stopped by the securities watchdog. While it might not be popular to admit it, the markets are a safer and more honest system thanks to the efforts of the SEC.