SEC (U.S. Securities and Exchange Commission)

The U.S. Securities and Exchange Commission (SEC), based in Washington, D.C., is an independent U.S. federal agency created in 1934 that regulates securities markets (like gold stocks). The stated mission of the SEC is to “protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation.”

SEC and Gold

Buying and selling gold is highly regulated by federal agencies. The legal involvement of the SEC is based on the type of investment – although it does not directly regulate the bullion trade, it deals with other gold investments, like options, gold ETFs, or gold stocks. For example, in 2008 the SEC approved the trading in options on the SPDR Gold Trust, while the CFTC approved the trading in futures on it. Moreover, exchange traded commodity funds (like GLD or IAU) must register with the SEC when they want a new subscription of shares, and provide regulatory filings. Gold mining companies which issues stocks also have to file periodic reports with the SEC.

SEC also protects gold investors. For example, in 2010, the SEC took legal action against a mining company based in Florida for false press releases and other misleading statements associated, in part, with a mining project in Ecuador. The releases claimed the gold reserves were worth more than $1 billion. The SEC noted that the exact value of those reserves could not be known “without further detailed exploration.” In the same year, the SEC charged six individuals with running a $300 million Ponzi scheme on investors in a purportedly successful gold mining operation (they claimed to represent an independent financial education firm that had discovered a way to earn up to 36 percent annually by investing in mining investments that were “fully collateralized by gold”, but rather than invest the money, they diverted investor funds for their personal benefit).

We encourage you to learn more about gold – not only how it is regulated by the SEC, but also how to successfully use gold as an investment and how to profitably trade it. A great way to start is to sign up for our gold newsletter today. It's free and if you don't like it, you can easily unsubscribe.