Why Is Sec Important For The Smooth Functioning Of Both Securities And Stock Markets

1607 Words May 4th, 2016 7 Pages
The primary role of SEC is to promote the smooth functioning of both securities and stock markets. Companies use the stock exchange as one of the main sources of capital. The security of investors is guaranteed by the Security and Exchange Commission through the regulation of the stock markets.
Publication of operations results as required by the SEC is a process that must involve the reconciliation of company’s financial records. Most business corporations update their financial statements and publish financial reports at the end of the financial year. Cost minimization is one way of maximizing profits. Publicizing the operating results on a quarterly basis is very costly to the firms, and it reduces the long-term profitability of the corporations due to high annual operating costs. The publication of corporations’ operating results on a quarterly basis guarantees the investors high security of their investments. As such, they tend to have more confidence in the ability of the companies to meet their financial obligations. The two competing objectives need high management skills to be harmonized. Though the investors’ security guarantee is essential, the Security and Exchange Commission should consider changing regulations of public corporations and require them to publicize their operating results annually since this will ensure high long-term profitability.
The change of SEC regulations will increase the short run price of stock. The investors will respond to a change of…
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