Page 682 - Encyclopedia of Business and Finance

eobf_S 7/5/06 3:21 PM Page 659

Service Industries

investment advisers and their activities. In 1974 the BIBLIOGRAPHY
Employee Retirement Income Security Act gave the SEC Hirt, Geoffrey A., and Block, Stanley B. (2006). Fundamentals
of investment management (8th ed.). Boston: McGraw-
jurisdiction over pension funds; and the Sarbanes-Oxley
Hill/Irwin.
Act of 2002 mandated reforms relating to public account-
Levy, Haim (1999). Introduction to investments (2nd ed.).
ing fraud and created oversight of the auditing profession
Cincinnati: South-Western College.
through the Public Company Accounting Oversight
Securities and Exchange Commission. (2004). Securities and
Board. Other legislation addressed foreign activities, Exchange Act of 1934. Retrieved December 9, 2005, from
insider trading, and further clarification of existing legis- http://www.sec.gov/about/laws/sea34.pdf
lation. Securities and Exchange Commission. (2004). Trust Indenture
The SEC consists of five presidentially appointed Act of 1939. Retrieved December 9, 2005, from
commissioners, only three of whom can be from the same http://www.sec.gov/about/laws/tia39.pdf
political party. Terms are staggered; thus, each June 5, a
person rotates off the commission. To accomplish their Mary Jean Lush
duties, the commissioners have office staffs of accountants Val Hinton
and lawyers and regional offices in eleven cities.
The organizational structure of the SEC includes four
divisions. The Division of Corporation Finance reviews
registration statements, tender offers, and mergers and SERVICE INDUSTRIES
acquisitions. The Division of Market Regulation oversees Every year the service industries make significant contri-
markets and market participants. The Division of Invest- butions to the U.S. economy. These contributions appear
ment Management is responsible for the enforcement of in a myriad of ways such as a letter carrier delivering the
three statutes: the Investment Company Act of 1940, the mail, a physician treating a patient, or an airline pilot
Investment Advisers Act of 1940, and the Public Utility transporting passengers to their destinations. Taken on an
Holding Company Act of 1935. The Division of Enforce- individual basis, these service providers are only a small
ment is the SEC’s investigative arm. After conducting pri- part of a very big picture. When the service industries as a
vate investigations of possible violations, the Division of whole are examined, however, their critical role in the
Enforcement recommends appropriate commission action everyday lives of millions of people and businesses
either before an administrative law judge or in federal throughout the United States and abroad becomes evi-
court, and then negotiates settlements. dent.
The commission also has fifteen offices performing
duties defined by their titles. For instance, the Office of SERVICE INDUSTRIES DEFINED
Compliance, Inspections, and Examinations determines The U.S. Department of Commerce’s Bureau of Eco-
whether all investment organizations are in compliance nomic Analysis (BEA) offers a broad definition of service
with federal securities laws. industries—service industries provide products that can-
In enforcing the securities laws, the SEC acts as a not be stored and are consumed at the time and place of
guide and adviser whose actions are largely remedial. One purchase. Typically, the “products” sold by the service
common activity of each division is rule making. New industry providers are intangible and thus little if any-
rules and rule modifications are usually accomplished in thing physical is involved in the transactions. For exam-
open meetings. Those industries or parties affected by rule ple, an airline company may sell tickets allowing
changes are allowed to present their positions and make passengers to occupy seats on an airplane while it flies
comments in an open meeting. Any SEC investigations from one city to another. Upon the completion of the
are conducted by the Division of Enforcement and the flight, the passengers deplane with no more than what
field offices. If the evidence indicates a violation, the SEC they boarded the flight with, but are indeed in a different
location from where they started. In other instances,
can take administrative action (such as suspension) or
transactions within the service industries may result in the
instigate a civil action in a U.S. district court. If evidence
delivery of something tangible.
indicates a criminal action, the SEC turns the case over to
the U.S. Department of Justice. For example, every year millions of Americans pur-
chase tax-preparation software on a compact disk (CD)
More information is available from the Securities and
Exchange Commission, 450 Fifth Street NW, Washing- that facilitates the completion of annual federal and state
tax returns. The basis for the inclusion of such transac-
ton, DC 20549; 202-942-7114; or http://www.sec.gov.
tions within the service industry is that the BEA allows
SEE ALSO Securities Acts: Requirements for Accounting tangible items to be included, provided that any tangible

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 659