Financial Markets, the US Security and Exchange Commission, and the Academy of Finance


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The SEC oversees the US financial markets, protects investors, and facilitates capital formation. Participants will get tips on how to teach students to save and invest wisely and hear how local programs can work with the SEC.

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Financial Markets, the US Security and Exchange Commission, and the Academy of Finance

  1. 1. The SEC and NAF Kathy Floyd Office of Investor Education and Advocacy NAF Institute July 18, 2011
  2. 2. SEC Disclaimer <ul><li>The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed in this presentation do not necessarily reflect the views of the SEC, its Commissioners, or other members of the SEC’s staff. </li></ul>
  3. 3. The Mission <ul><li>The SEC’s Mission: </li></ul><ul><li>Protect Investors </li></ul><ul><li>Maintain Fair, Orderly, & Efficient Markets, and </li></ul><ul><li>Facilitate Capital Formation </li></ul>
  4. 4. The SEC <ul><li>Five Commissioners </li></ul><ul><li>Five Divisions: </li></ul><ul><li>Division of Corporation Finance </li></ul><ul><li>Division of Enforcement </li></ul><ul><li>Division of Investment Management </li></ul><ul><li>Division of Trading and Markets </li></ul><ul><li>Division of Risk, Strategy & Financial Innovation </li></ul>
  5. 5. Ten Key Messages for Students <ul><li>You control your financial future </li></ul><ul><li>Set a financial goal </li></ul><ul><li>Understand compound interest </li></ul><ul><li>Know your asset classes </li></ul><ul><li>Diversification is key </li></ul>
  6. 6. Ten Key Messages for Students <ul><li>Know your risks </li></ul><ul><li>Indentify Fees </li></ul><ul><li>Research, Research, Research </li></ul><ul><li>Fraud can happen to you </li></ul><ul><li>Never too early (or late) to save for retirement </li></ul>
  7. 7. Students should know: <ul><li>You are ultimately responsible for accumulating and managing your own wealth </li></ul>
  8. 8. Financial Goals <ul><ul><li>Set a Financial Goal </li></ul></ul><ul><ul><li>Short Term, Medium Term, Long Term </li></ul></ul><ul><ul><li>Understand Your Risk Tolerance </li></ul></ul>
  9. 9. Financial Goals <ul><ul><li>Understand Your Risk Tolerance </li></ul></ul><ul><ul><ul><li>Your ability to handle declines or swings in the value of your portfolio </li></ul></ul></ul><ul><ul><li>More About Risk </li></ul></ul><ul><ul><ul><li>All investments involve some degree of risk </li></ul></ul></ul><ul><ul><ul><li>The potential for greater returns typically comes with greater risk </li></ul></ul></ul>
  10. 10. Compound Interest <ul><li>The interest you earn on interest </li></ul><ul><li>Know the Rule of 72 </li></ul><ul><li>Remember: Compound Interest can work for you or against you </li></ul>
  11. 11. Compound Interest <ul><li>At age 20 , you start </li></ul><ul><li>investing $2000 a year </li></ul><ul><li>at 8%. But you stop </li></ul><ul><li>after 10 years. </li></ul><ul><li>At age 40 , your friend </li></ul><ul><li>starts investing $2000 </li></ul><ul><li>a year at 8% and keeps </li></ul><ul><li>investing until you’re </li></ul><ul><li>both 65. </li></ul>
  12. 12. Who comes out ahead? <ul><li>You! </li></ul><ul><li>You have </li></ul><ul><li>$462,647 </li></ul><ul><li>Your friend has </li></ul><ul><li>only $157,908 </li></ul>
  13. 13. Asset Classes <ul><ul><li>Common Types: </li></ul></ul><ul><ul><li>Cash </li></ul></ul><ul><ul><li>Bonds </li></ul></ul><ul><ul><li>Stock </li></ul></ul>
  14. 14. Types of Investments <ul><ul><li>Certificates of Deposit </li></ul></ul><ul><ul><li>Money Market Funds </li></ul></ul><ul><ul><li>Treasuries (Bills, Notes, Bonds, TIPS) </li></ul></ul><ul><ul><li>Corporate Bonds </li></ul></ul><ul><ul><li>Municipal Bonds </li></ul></ul><ul><ul><li>Mutual Funds </li></ul></ul><ul><ul><li>Exchange Traded Funds (ETFs) </li></ul></ul><ul><ul><li>Stocks </li></ul></ul>
  15. 15. Rates of Return <ul><ul><li>Treasury Bills 3.7% </li></ul></ul><ul><ul><li>Long-Term Treasuries 5.4% </li></ul></ul><ul><ul><li>Long-Term Corp. Bonds 5.7% </li></ul></ul><ul><ul><li>Large Co. Stocks 9.6% </li></ul></ul><ul><ul><li>Small Co. Stocks 11.7% </li></ul></ul><ul><ul><li>Source: Computed using data from Stocks, Bonds, Bills, and Inflation 2009 Yearbook, Ibbotson Associates, Chicago, a Morningstar subsidiary. </li></ul></ul>Compound Annual Rates of Return* 1926 – 2008 * Nominal
  16. 16. Diversification <ul><ul><li>The Magic of Diversification. The practice of spreading money among different investments to reduce risk. By picking the right group of investments, you may be able to limit your losses without sacrificing too much potential gain. </li></ul></ul>
  17. 17. Retirement – Never to early to start <ul><li>Retirement Plans: </li></ul><ul><li>Defined Benefit Plans </li></ul><ul><li>Defined Contribution Plans 401(k), Roth 401(k), 403(b) </li></ul><ul><li>Individual Retirement Plans – IRAs </li></ul><ul><li>US Department of Labor, Employee Benefits Security Administration, </li></ul>
  18. 18. <ul><li>Know your risks </li></ul><ul><ul><li>Volatility </li></ul></ul><ul><ul><li>Purchasing Power/Inflation </li></ul></ul><ul><ul><li>Business Specific </li></ul></ul><ul><ul><li>Interest Rate </li></ul></ul><ul><ul><li>Accumulation </li></ul></ul>
  19. 19. Understand Fees <ul><ul><li>Per Transaction </li></ul></ul><ul><ul><li>Beware inactivity fees </li></ul></ul><ul><ul><li>Assets Under Management </li></ul></ul><ul><ul><li>As your wealth increases, their revenue increases </li></ul></ul><ul><ul><li>Mutual Fund Fees </li></ul></ul><ul><ul><li>Ask: How are you being paid? </li></ul></ul>
  20. 20. Research, Research, Research <ul><li>Ask Questions… </li></ul><ul><ul><li>Is this product registered with the SEC or my state regulator? </li></ul></ul><ul><ul><li>Why is this investment suitable for me? </li></ul></ul><ul><ul><li>How will this investment make money? (Dividends? Interest? Capital gains?) </li></ul></ul><ul><ul><li>What are the total fees? </li></ul></ul><ul><ul><li>How do I sell this product? </li></ul></ul>
  21. 21. Research, Research, Research <ul><ul><li>Check out brokers and investment advisers </li></ul></ul><ul><ul><li>Understand the fee structure </li></ul></ul><ul><ul><li>Know the companies you buy – use EDGAR </li></ul></ul><ul><ul><li>Review Mutual Fund Prospectuses (485 filings) </li></ul></ul><ul><ul><li>Use trusted websites </li></ul></ul><ul><ul><ul><ul><li> </li></ul></ul></ul></ul><ul><ul><ul><ul><li> </li></ul></ul></ul></ul><ul><ul><ul><ul><li> </li></ul></ul></ul></ul>
  22. 22. Research, Research, Research <ul><li>Check out Brokers and Investment Advisers </li></ul><ul><ul><li>Call State Regulators, visit </li></ul></ul><ul><li>Call FINRA at 1-(800) 289-9999 or visit FINRA’s Broker Check at </li></ul><ul><li>Guidance from the SEC staff </li></ul><ul><li>SEC Investment Adviser Public Disclosure page: </li></ul>
  23. 23. Avoid Fraud <ul><li>Fraud Types </li></ul><ul><ul><li>On-line Fraud </li></ul></ul><ul><ul><li>“ Free” Lunch </li></ul></ul><ul><ul><li>Pump & Dump </li></ul></ul><ul><ul><li>Pyramid/Ponzi Schemes </li></ul></ul><ul><ul><li>Affinity Fraud </li></ul></ul><ul><ul><li>Red Flag Sales Techniques </li></ul></ul>
  24. 24. How to work with the SEC <ul><ul><li>School visits – Washington, DC Headquarters </li></ul></ul><ul><ul><li>SEC/AOF Shadowing program </li></ul></ul><ul><ul><ul><li>Regional Offices: </li></ul></ul></ul><ul><ul><ul><ul><li>Boston New York </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Salt Lake City Ft. Worth </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Philadelphia Chicago </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Atlanta Miami </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Denver LA/SFO </li></ul></ul></ul></ul>
  25. 25. Teaching tools: <ul><li>NYSE-SEC Summer Teachers’ Workshops </li></ul><ul><ul><li>Three one-week workshops in NY </li></ul></ul><ul><ul><li>SEC Graduate Program in DC </li></ul></ul><ul><ul><li>NYSE Euronext Graduate Program in NY </li></ul></ul><ul><li>Saving and Investing for Students </li></ul><ul><ul><li>Free classroom sets </li></ul></ul><ul><li> </li></ul><ul><ul><li>In the Classroom </li></ul></ul>
  26. 27. SEC contact information <ul><li>Website: ; </li></ul><ul><li>Toll free number: 1-(800) 732-0330 </li></ul><ul><li>Mail: U.S. Securities and Exchange Commission </li></ul><ul><li>100 F Street NE </li></ul><ul><li>Washington, DC 20549 </li></ul><ul><li>Name: Kathy Floyd </li></ul><ul><li>[email_address] </li></ul><ul><li>202-551-6394 </li></ul>