The Securities and Exchange Commission (SEC) is the agency charged with overseeing trade of stocks, bonds and other investments that change value with the stock market's movements.

The agency was formed after the 1929 stock market crash to serve as a watchdog, protecting investors from possible corporate fraud. The SEC is responsible for prosecuting fraud, insider trading and other deceptive practices in the stock market, as well as ensuring the accuracy of corporate financial disclosures.

Unlike the banking industry, where deposits are guaranteed by the federal government, trading in the stock market does not benefit from government backing. Only through research can investors make sure they're choosing the right stocks and securities for their money. To that end, the SEC requires companies trading in the U.S. to regularly disclose financial records to give investors access to basic information before they make an investment.

Crucial to the SEC's effectiveness is its enforcement authority. Typical violations include insider trading, accounting fraud and providing false or misleading information about securities or the companies that issue them. The commission works with other institutions, including Congress, other federal agencies, state securities regulators, various private sector organizations and self-regulating organizations like the stock exchanges.

The SEC's board of commissioners consists of five presidential appointees, with no more than three belonging to the same political party. Currently, two of the five commissioner seats are open.

Harvey L. Pitt was sworn in as the SEC's twenty-sixth chairman in August, promising to crack down on Wall Street misdeeds and expedite enforcement efforts.

Pitt served as an attorney for the SEC from 1968 until 1978, working the last three years of his term as the commission's general counsel. During the Wall Street insider trading scandals of the 1980s, Pitt gained a reputation as a powerful securities lawyer for his defense of clients such as speculator Ivan Boesky, who plead guilty in exchange for a lesser sentence in the 1988 Savings & Loan insider trading trials.