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.

  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. SEC Form S-6

    A filing with the Securities and Exchange Commission (SEC), which ...
  4. SEC Form 10

    SEC Form 10 is a filing with the Securities and Exchange Commission ...
  5. SEC Form 11-K

    SEC Form 11-K is a form filed with the Securities and Exchange ...
  6. State Administrator

    The government agency or official who oversees and enforces state-level ...
Related Articles
  1. Insights

    Why the South China Sea Dispute Matters for the United States

    The South China Sea dispute between China and other countries that border the area matters to the United States...
  2. Investing

    SEC Employees Enjoy Same Hefty Investment Returns as Insider Traders They Prosecute

    SEC employees are getting huge investment returns just like the companies they investigate for insider trading.
  3. Tech

    How The SEC Regulates Social Media

    The SEC continues to develop requirements and regulations to reflect the new information age.
  4. Investing

    The Issuance Procedure of High-Yield Bonds

    The issuance of corporate high-yield bonds can have several advantages over equity. A closer look.
  5. Personal Finance

    Short Selling: Making The Ban

    Short selling has been around as long as the stock market, and it hasn't always been looked on favorably.
  6. Small Business

    Uncovering The Securities Firm

    Learn about the various departments of a securities firm and the professionals who make it work.
  7. Investing

    Who Owns The Stock Exchanges?

    As M&A heats up among the exchanges, here's how the market currently looks.
  8. Financial Advisor

    Succeeding At The Series 63 Exam

    Your career as a securities agent begins with this test. We'll show you how to score high.
  9. Financial Advisor

    Is Your Broker Ripping You Off?

    We show you how to resolve a problem without getting the lawyers involved.
  1. 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 >>
  2. How are investment banks regulated in the United States?

    Read about the extensive regulations placed on investment banks in the United States, beginning with the Glass-Steagall Act ... Read Answer >>
  3. Should mutual funds be subject to more regulation?

    Understand whether mutual funds need stricter regulation. Learn what types of current and future regulations have been put ... Read Answer >>
  4. What is an unregistered security scam?

    Each year, millions of Americans lose money to con artists who convince them to invest in companies through "private offerings" ... Read Answer >>
  5. What are the regulations involved in releasing an ETF on the open market?

    Learn how an exchange traded fund comes to life, and find out about regulations surrounding ETF release from the Investment ... Read Answer >>
Hot Definitions
  1. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  2. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  3. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  4. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  5. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center