Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

The US Securities and Exchange Commission (SEC) has authority under which act?

1. Securities Exchange Act of 1934

2. Bank Secrecy Act of 1970

3. Financial Institutions Reform Act

4. Investment Company Act of 1940

The correct answer is: Securities Exchange Act of 1934

The U.S. Securities and Exchange Commission (SEC) derives its authority primarily from the Securities Exchange Act of 1934. This piece of legislation was a significant reform enacted in response to the stock market crash of 1929 and aimed to restore investor confidence in the financial markets. The Act established the SEC, granting it broad authority to regulate the securities industry, oversee stock exchanges, and ensure that securities markets operate fairly and honestly. Under the Securities Exchange Act of 1934, the SEC has the power to enact rules and regulations to enforce securities laws, which includes monitoring and investigating potential violations, registering and regulating securities brokers and dealers, and requiring public companies to disclose financial and other significant information to the public. This transparency is crucial for protecting investors and maintaining the integrity of the financial markets. Other acts mentioned, such as the Bank Secrecy Act of 1970, primarily focus on preventing money laundering and other financial crimes, and do not grant authority over the securities markets specifically. The Financial Institutions Reform Act primarily addresses the regulation of savings and loan institutions and related entities, while the Investment Company Act of 1940 regulates investment companies but does not establish the SEC itself. Thus, the Securities Exchange Act of 1934 is the foundational legislation establishing