Key Takeaways
- The SEC was created in 1934 with a three-part mission: protect investors, maintain fair markets, and facilitate capital formation
- Investment advisers with $100 million+ AUM must register with the SEC; those under $100 million generally register with states
- The Investment Advisers Act of 1940 establishes fiduciary duty requiring advisers to act in clients' best interests
- SEC-registered advisers must file Form ADV, including Part 2A (Brochure) for client disclosure
SEC and Securities Regulation
The Securities and Exchange Commission (SEC) stands as the primary federal regulator of the U.S. securities industry. For CFP professionals, understanding the SEC's role and the foundational securities laws is essential—these regulations shape how financial advisers operate, what disclosures they must make, and how they serve their clients.
The SEC's Mission and Authority
The SEC was created by Congress in 1934 with a three-part mission: protect investors, maintain fair and efficient markets, and facilitate capital formation. The SEC accomplishes this mission through:
- Rulemaking authority to implement securities laws
- Examination programs to monitor compliance
- Enforcement actions against violations
- Investor education initiatives
The SEC has broad authority over all aspects of the securities industry, including the power to register and regulate brokerage firms, transfer agents, clearing agencies, and self-regulatory organizations (SROs) like FINRA and the national securities exchanges.
The Three Foundational Securities Laws
Three federal laws form the backbone of securities regulation in the United States. CFP professionals must understand each law's purpose and key requirements.
Securities Act of 1933: The "Truth in Securities" Law
The Securities Act of 1933 addresses primary market transactions—when companies first offer securities to the public. Congress enacted this law in response to the 1929 stock market crash and the Great Depression.
Two Core Objectives:
- Disclosure - Investors must receive financial and other significant information about securities being offered for public sale
- Anti-fraud - Prohibit deceit, misrepresentations, and other fraud in the sale of securities
Key Requirements:
| Requirement | Description |
|---|---|
| Registration Statement | Companies must file Form S-1 (or similar) with the SEC before offering securities |
| Prospectus | Investors must receive a prospectus containing material information about the offering |
| Waiting Period | A 20-day cooling-off period between filing and the effective date |
| Exemptions | Private placements (Regulation D), intrastate offerings, and certain small offerings are exempt |
Prior to the 1933 Act, securities regulation was governed primarily by state laws known as "blue sky laws." The federal law created a uniform national standard while preserving state enforcement authority.
Securities Exchange Act of 1934: Regulating Secondary Markets
While the 1933 Act governs new issuances, the Securities Exchange Act of 1934 regulates secondary market trading—transactions between investors after the initial offering. This Act also created the SEC itself.
Key Provisions:
| Provision | Purpose |
|---|---|
| Company Registration | Public companies must register their securities with the SEC |
| Periodic Reporting | Registered companies must file annual (10-K), quarterly (10-Q), and current (8-K) reports |
| Proxy Rules | Regulate solicitation of shareholder votes |
| Insider Trading | Prohibit trading on material, non-public information |
| Market Manipulation | Ban schemes to artificially inflate or deflate security prices |
The 1934 Act empowers the SEC to oversee securities exchanges (NYSE, NASDAQ), broker-dealers, and SROs. The SEC can delegate regulatory authority to SROs like FINRA while maintaining oversight responsibility.
Investment Advisers Act of 1940: Fiduciary Standards for Advisers
The Investment Advisers Act of 1940 regulates persons or firms in the business of advising others about securities investments for compensation. This law is particularly relevant for CFP professionals who provide investment advice.
Key Principles:
- Fiduciary Duty - Investment advisers are fiduciaries who must act in their clients' best interests
- Full Disclosure - Advisers must disclose all material conflicts of interest
- Best Execution - Advisers must seek the most favorable terms for client transactions
- Reasonable Basis - Recommendations must have a reasonable basis
Registration Thresholds:
The Dodd-Frank Act of 2010 established the current registration framework:
| AUM Level | Registration |
|---|---|
| Under $25 million | State registration only (no SEC) |
| $25-$100 million | State registration (unless state does not require or examine) |
| $100 million+ | SEC registration required |
Since the Dodd-Frank requirements took effect in 2012, the number of SEC-registered advisers has grown by approximately 45%. As of 2025, there are over 15,400 SEC-registered investment advisers, with nearly 9,000 managing between $100 million and $1 billion in assets.
The SEC Registration Process
Investment advisers register with the SEC by filing Form ADV through the Investment Adviser Registration Depository (IARD) system. Form ADV has two parts:
- Part 1: Firm information, business practices, and disciplinary history (used by regulators)
- Part 2A ("Brochure"): Plain-English disclosure document delivered to clients
- Part 2B ("Brochure Supplement"): Information about specific advisory personnel
Advisers must update Form ADV at least annually and promptly when material changes occur.
SEC Enforcement
The SEC's Division of Enforcement investigates potential violations and brings civil actions. Common enforcement areas include:
- Insider trading
- Accounting fraud
- Investment adviser misconduct
- Broker-dealer violations
- Market manipulation
The SEC can impose civil penalties, disgorgement of ill-gotten gains, injunctions, and industry bars. Criminal prosecutions are referred to the Department of Justice.
2025 Regulatory Developments
The securities regulatory landscape continues to evolve. In July 2025, Congress amended both the Securities Act of 1933 and the Securities Exchange Act of 1934 through the GENIUS Act (P.L. 119-27), which clarified that certain payment stablecoins issued by permitted issuers are not considered "securities" under federal law. This represents a significant development in digital asset regulation.
SEC 2026 Examination Priorities
The SEC's Division of Examinations released its 2026 examination priorities, signaling key focus areas for registered investment advisers:
Key Priority Areas:
| Area | Focus |
|---|---|
| Fiduciary Duty Compliance | Fee structures, conflicts of interest, best execution obligations |
| Information Security | Implementation of amended Regulation S-P requirements (incident response, breach notification) |
| Regulation S-P Compliance | Large entities subject to December 2025 compliance deadline; smaller entities by June 2026 |
| Marketing Rule Compliance | Testimonials, endorsements, and performance advertising under the 2020 Marketing Rule |
| Private Fund Advisers | Fee transparency, preferential treatment disclosures, quarterly statements |
Regulation S-P Enforcement Focus:
Following the December 3, 2025 compliance deadline for large entities, the SEC signaled heightened attention to:
- Written incident response programs
- 30-day customer notification procedures
- 72-hour service provider notification requirements
- Documentation of safeguards programs
For CFP Professionals
Understanding SEC regulation helps CFP professionals:
- Navigate registration requirements based on AUM and business structure
- Maintain required disclosures through Form ADV and client communications
- Fulfill fiduciary obligations under the Investment Advisers Act
- Recognize potential violations that could affect clients or employers
- Stay current with regulatory developments affecting financial planning practice
Which federal securities law established the SEC and regulates secondary market trading?
Under current regulations, at what assets under management (AUM) threshold must an investment adviser register with the SEC rather than the state?
Which document must SEC-registered investment advisers provide to clients that contains plain-English disclosure of advisory services, fees, and conflicts of interest?