Guide to Analysing Companies

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Securities
See security.
Securities and Exchange Commission
A US government department that regulates and polices the
issue and trading of most aspects of the securities industry.
Based in Washington and established in 1934, the main weapon
of the Securities and Exchange Commission (sec) is disclosure.
The sec forces issuers of securities to divulge much more than
similar agencies in other countries. Indeed, it is something of a
shock to the directors of foreign companies seeking a listing
on a US exchange or issuing securities there to find out how
stringent the country’s securities laws are.
The sec is made up of five commissioners who are ap-
pointed on five-year, rolling terms. To ensure that the body
remains independent of the administration of the day, no more
than three members may be from the same political party, yet
the chairmanship is in the gift of the US president. The scandals
over corporate excess and wrongdoing in the United States at
the start of the 21st century showed how important it is to have
strong leadership at the heart of the financial markets, some-
thing which, curiously, the sec of the time was unable to
deliver.
Securities lending
The practice of lending securities to investors (or their
brokers) who are planning to short the market (that is, sell
shares that they do not already own). The securities are sup-
plied when and if they must be delivered to the buyer’s broker.
No premium is usually paid. In the United States, the sec does,
however, insist that brokerage clients give permission (as part of
a standard agreement) for their securities to be lent in this way.
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