What was the 'Securities Exchange Act Of 1934'

The Securities Exchange Act of 1934 (SEA) was created to govern securities transactions on the secondary market, after issue, ensuring greater financial transparency and accuracy and less fraud or manipulation. The SEA authorized the formation of the Securities Exchange Commission (SEC), the regulatory arm of the SEA. The SEC has the power to oversee securities, such as stocks, bonds and over-the-counter securities, markets and the conduct of financial professionals including brokers, dealers and investment advisors, and monitor the financial reports that publicly traded companies are required to disclose.

BREAKING DOWN 'Securities Exchange Act Of 1934'

All companies listed on stock exchanges must follow the requirements set forth in the Securities Exchange Act of 1934. Primary requirements include registration of any securities listed on stock exchanges, disclosure, proxy solicitations and margin and audit requirements. The purpose of these requirements is to ensure an environment of fairness and investor confidence.

History of the Securities Exchange Acts

The SEA of 1934 was enacted by Franklin D. Roosevelt's administration as a response to the widely held belief that irresponsible financial practices were one of the chief causes of the 1929 stock market crash. The SEA of 1934 followed the Securities Exchange Act of 1933, which required corporations make public certain financial information, including stock sales and distribution.

Other regulatory measures put forth by the Roosevelt administration include the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1934, the Investment Advisers Act of 1940 and the Investment Company Act of 1940 . These legislations came in the wake of a financial environment in which the commerce of securities was subject to little regulation, and controlling interests of corporations were amassed by relatively few investors without public knowledge.

Overview of the SEC

The SEA of 1934 granted the SEC with broad authority to regulate all aspects of the securities industry. It is led by five presidentially appointed commissioners and broken up into five divisions: Division of Corporation Finance, Division of Trading and Markets, Division of Investment Management, Division of Enforcement, and Division of Economic and Risk Analysis.

It has the power and responsibility to lead investigations into potential violations of the SEA such as insider trading, selling unregistered stocks, stealing customers' funds, manipulating market prices, disclosing false financial information or breaching broker-customer integrity. Also, the SEC enforces corporate reporting by all companies with more than $10 million in assets and whose shares are held by more than 500 owners. The SEC can choose to file a case in federal court or settle the matter outside of trial.

RELATED TERMS
  1. Securities And Exchange Commission ...

    A government commission created by Congress to regulate the securities ...
  2. Securities Act Of 1933

    A federal piece of legislation enacted as a result of the market ...
  3. Division Of Enforcement

    The Division of Enforcement is a branch of the U.S. Securities ...
  4. Division Of Investment Management

    The Division of Investment Management is a branch of the U.S. ...
  5. SEC Form 1

    An application for and amendments to an application for registration ...
  6. SEC Form S-6

    A filing with the Securities and Exchange Commission (SEC), which ...
Related Articles
  1. Personal Finance

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  2. Insights

    Understanding the SEC

    The SEC's triple mandate of investor protection, maintenance of orderly markets and facilitation of capital formation makes it a vital player in capital markets.
  3. Insights

    The SEC: A Brief History Of Regulation

    The SEC has continued to make the market a safer place and to learn from and adapt to new scandals and crises.
  4. Taxes

    How A Company Files With The SEC

    Filing with the SEC is not as complicated as you might thing -- just be meticulous about following the steps.
  5. Insights

    What's an Exchange?

    An exchange is an organized marketplace where securities and other financial instruments are traded.
  6. Personal Finance

    What's the SEC?

    The Securities and Exchange Commission (SEC) is an independent agency of the United States government. The mission of the SEC is to enforce securities laws passed by congress. These laws aim ...
  7. Investing

    What is a Public Company?

    A public company has sold stock to the public through an initial public offering (IPO) and that stock is currently traded on a public stock exchange.
  8. Personal Finance

    Why You Should Understand The Stock Market

    Even if you don't invest a cent in stocks, you should still understand how the stock market works. Find out why.
  9. Trading

    Financial Regulators: Who They Are And What They Do

    Find out how these government agencies govern the financial markets.
  10. Investing

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
RELATED FAQS
  1. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ... Read Answer >>
  2. What financial regulation exist to control the secondary market?

    Examine a brief characterization of financial regulation in the secondary market, including self-regulatory organizations ... Read Answer >>
  3. How are asset management firms regulated?

    Find out how the asset management industry is regulated and how those regulations fit within the broader scope of financial ... Read Answer >>
  4. How do I know if I am buying unregistered securities or stocks?

    All securities, including stocks, bonds and notes, must be registered with the Securities and Exchange Commission (SEC) before ... Read Answer >>
  5. Do traders, market makers, specialists or others ever deliberately drive a stock's ...

    Many individual investors have had the experience of closing their position in a stock only to see the price rebound moments ... Read Answer >>
  6. Who facilitates buying and selling on the primary market?

    Learn more about the primary marketplace -- home of initial public offerings -- and the major players that make buying and ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center