On This Day In Finance: May 27 - The Securities Act of 1933

By Investopedia Staff | May 27, 2009 AAA
On This Day In Finance: May 27 - The Securities Act of 1933

On May 27, 1933, the United States Congress enacted the Securities Act of 1933 as a part of Franklin Roosevelt's New Deal in response to the stock market crash of 1929 and in the midst of the Great Depression. The act was the first federal legislation regulating the sale of securities in the United States. Prior to its enactment, securities were governed by state laws.

The Securities Act had two main goals: (1) to ensure greater transparency in financial statements for investors, and (2) to establish laws against misrepresentation and fraud in the securities market.

By passing the Act in retaliation to the questions surrounding the 1929 market crash, Congress paved the way for the creation of the Securities and Exchange Commission (SEC). The SEC is now the primary agency responsible for enforcing security law in the United States.

The Securities Act of 1933 was the first major step by government in ensuring the rights and safeties of investors in the United States. (For more on the SEC, take a look at Policing The Securities Market: An Overview Of The SEC.)

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