How the SEC made it easy to get into the $200,000-plus market
A federal court has found that the Securities and Exchange Commission violated the federal securities laws by making it nearly impossible for small investors to get in on the $100,000 market.
In its ruling Monday, the U.S. Court of Appeals for the D.C. Circuit said the SEC’s actions made it almost impossible for investors to participate in the market, and that they violated the securities laws because they did not provide adequate notice of when a market was open.
The decision is not a surprise, but it is a big blow to the SEC, which has been criticized for its slow pace of cracking down on fraud and other abuses of the $400 billion market.
The agency did not admit wrongdoing in its own civil case against two investors who were charged with fraud in 2016.
The investors had bought a large number of shares of stock in a small company called WMT-Stocks, but they didn’t know when the market would open.
“The Commission’s action effectively placed investors in a position of knowing when the $500 million market was closed,” wrote Judge John M. Jones in his decision.
“That position, which may well be the most dangerous in the securities market, has created a substantial and unjustified risk to the integrity of the markets.”
The ruling comes as the SEC is under scrutiny for another major rule change, a change that has been delayed because of concerns over possible conflicts of interest.
Under the change, companies are now required to disclose whether their employees are paid on time.
Companies are also required to report their annual returns to the U, SEC.gov, a tool that allows investors to view quarterly financial reports.
That tool was designed to make it easier for investors who want to get involved in the $40 trillion-a-year market to do so.
The SEC’s move to make the filing required disclosures in the SEC website was made to comply with a court order to disclose the information in a timely fashion, the agency said.
SEC spokeswoman Ann Marie Kelly said the agency was still reviewing the ruling.
She added that the agency would consider the court’s order in a matter of days.
The ruling means that for the first time, investors who hold shares of WMT stock, including those who hold it through a broker-dealer, will be required to file quarterly reports with the SEC.
The rules, which were passed in 2014, were designed to protect investors from the risks posed by fraud, manipulation and other abuse in the unregulated market.
They have drawn criticism from regulators who argue that the rules are a way to protect the public from the financial system, which they say is being exploited by unscrupulous individuals.
The Securities and Exchanges Commission said that the filing requirement would help ensure that investors know when a stock or bond is going up or down.
The move is intended to be an effective deterrent to any stock or financial product that could cause a large amount of money to disappear, the SEC said.
The filing requirement was introduced to prevent large sums of money being lost to fraud and the misuse of public funds, according to the agency.
“A significant portion of the SEC rules are designed to stop the fraudulent practices that can cause money to vanish,” said Daniel Gellman, senior counsel at the SEC Office of Inspector General.
“Investors, who are generally well-informed, can look to the information provided on the SEC web site to make informed investment decisions.”
The SEC has said it will take steps to make disclosure of the filings easier for smaller investors.
The commission will continue to work with small investors on their investment strategies, said Gellmen.
“We will continue our efforts to reduce fraud and protect investors,” he said.
“Small investors will continue their role as gatekeepers to the markets, ensuring that investors get access to information about the underlying assets of companies and the financial markets they are trading in.”
The rule change was first proposed in April 2014.
The rule requires companies to provide investors with information about when a securities company has posted quarterly earnings or the company’s balance sheet, as well as the annual returns of employees.
In addition, the disclosure requirements will allow investors to determine when a company is offering or selling its securities and the price at which it is trading, among other things.