Administrative discretion in the Securities and Exchange Commission

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1974

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The growth of administrative bodies in the Unites States is one of the greatest changes the country has undergone in the 20th century. The independent regulatory agencies now have an effect on virtually every segment of American society. The rite of administrative agencies has brought a body of laws which allows the agencies a broad latitude of discretion. Administrative discretionary authority is permitted in spite of conflicting American dogmas of separation of powers, supremacy of law and non-delegation of power. The principal reason for the existence of administrative discretion is to give flexibility to a government that must rule a complex society. To explore administrative discretion an analysis of its exercise in a single agency is presented. The chosen agency was the Securities and Exchange Commission charged with regulating the securities industry. In fulfilling its designated duty, the SEC inspects registration and other compulsory disclosure requirements and carries out enforcement proceedings. In the execution of these two major functions the SEC has many regulatory alternatives to choose from which comprise its discretionary authority. In determining the social and economic effect of administrative discretion in the SEC,, the conclusion is made that the present compulsory disclosure requirements are not meaningful and that enforcement proceedings tend to be punitive rather than preventive, therefore both are not in congruence with original Congressional intent creating the securities laws. The regulatory stance of the Commission should and can be changed to fulfill its original purpose.

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