Glossary

Securities and Exchange Commission (SEC)

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The Securities and Exchange Commission (SEC) was designed to ensure transparent trading and to protect the financial safety of investors in the stock market. Like the Federal Deposit Insurance Corporation (FDIC), the SEC was created to increase confidence in the central finance system following the Great Depression. The SEC is far stricter than the Commodities Futures Trading Commission (CFTC), which is why securities are more regulated than other assets.

Warning: The SEC has failed to effectively enforce market manipulation laws on many occasions, and has been accused of destroying documents that were relevant to an ongoing investigation.
The SEC has failed to effectively enforce market manipulation laws on many occasions, and has been accused of destroying documents that were relevant to an ongoing investigation.

Whereas the FDIC insures deposit accounts, the SEC seeks to make business and investing activities more transparent. The SEC is known for its research tool, the EDGAR database, which compiles and stores company information in a public record. In particular, the SEC regulates exchanges where investors buy and sell equities, bonds, and securities. Financial advisors and brokers are also subject to SEC requirements.

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Equity
Equity is ownership of anything with value, representing both the assets and liabilities of that ownership. The total shareholders’ equity in a company is the sum of all assets minus all liabilities.
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Bond
A bond is a low risk debt instrument issued by companies, governments, or other entities to finance a project. Credit rating agencies assign grades to bonds based on the entity’s capacity to meet its financial commitments.
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Capital Markets
Capital markets are platforms that facilitate the trading of assets. These markets facilitate the matching of buyers and sellers.
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Expected Return
The expected return of an investment is the anticipated profit or loss an investor can expect from an investment. The expected return of an investment is calculated by multiplying all of the potential outcomes by their probability of occurring and then summing the results.
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Balance Sheet
A balance sheet is a document that details the assets, liabilities, and shareholders’ equity of an organization. Balance sheets are commonly referenced to assess the financial health of a company.
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