Chartered Alternative Investment Analyst Association (CAIA) Practice Exam

In terms of investor protection, what does the SEC primarily oversee?

1. Derivatives trading

2. Private company regulations

3. Publicly traded securities

4. Commodities market

The correct answer is: Publicly traded securities

The correct choice highlights the primary focus of the U.S. Securities and Exchange Commission (SEC), which is the regulation and oversight of publicly traded securities. This encompasses various functions, including ensuring that companies provide accurate and timely disclosures to protect investors from fraud and deceptive practices. The SEC seeks to maintain fair, orderly, and efficient markets, creating a level playing field for all investors. By regulating publicly traded securities, the SEC aims to instill confidence in the financial markets, thereby encouraging investments while safeguarding public interest. The agency also actively investigates and penalizes any violations of securities laws to ensure compliance and deter misconduct. The other areas mentioned in the options, such as derivatives trading, private company regulations, and the commodities market, fall under different regulatory bodies or frameworks. For instance, while the SEC also has some oversight on derivatives as they relate to securities, the primary jurisdiction for derivatives trading can also involve the Commodity Futures Trading Commission (CFTC). Private companies, not typically engaged in the public marketplace, have different reporting obligations and are primarily regulated through state laws, and the commodities market encompasses separate regulatory details that do not fall under the SEC’s main purview.