Securities Exchange Act of 1934

Definition

The Securities Exchange Act of 1934 is a federal law that regulates the secondary trading of securities, such as stocks and options, in the United States. It established the Securities and Exchange Commission (SEC) as the primary regulatory body overseeing the securities industry and financial markets.

5 Must Know Facts For Your Next Test

1. The Securities Exchange Act of 1934 was enacted in response to the stock market crash of 1929 and the subsequent Great Depression.
2. The Act gives the SEC the authority to regulate the securities industry, including the registration and disclosure requirements for public companies.
3. The Act prohibits insider trading and market manipulation, aiming to ensure a fair and transparent securities market.
4. The Act established the national securities exchanges, such as the New York Stock Exchange and NASDAQ, and requires them to register with the SEC.
5. The Act also regulates the activities of broker-dealers, investment advisors, and other financial professionals who participate in the securities markets.

Review Questions

• Explain the primary purpose and objectives of the Securities Exchange Act of 1934.
  • The main purpose of the Securities Exchange Act of 1934 is to regulate the secondary trading of securities in the United States. The Act aims to ensure a fair and transparent securities market by establishing the Securities and Exchange Commission (SEC) as the primary regulatory body. The Act's objectives include protecting investors, preventing fraud and manipulation, and promoting the efficient functioning of the financial markets.
• Describe the key regulatory powers and responsibilities granted to the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934.
  • The Securities Exchange Act of 1934 grants the SEC broad regulatory powers over the securities industry. The SEC is responsible for registering and overseeing public companies, broker-dealers, and other financial professionals who participate in the securities markets. The Act also gives the SEC the authority to enforce securities laws, investigate fraudulent activities, and impose penalties on individuals or entities that violate these laws. Additionally, the SEC is tasked with regulating the national securities exchanges and ensuring they operate in a fair and transparent manner.
• Analyze the impact of the Securities Exchange Act of 1934 on the development and regulation of the U.S. securities markets over time.
  • The Securities Exchange Act of 1934 has had a significant and lasting impact on the U.S. securities markets. By establishing the SEC as the primary regulatory body, the Act has helped to restore investor confidence and promote the integrity of the financial markets following the stock market crash of 1929. Over time, the Act has been amended to address evolving market conditions and new financial instruments, such as derivatives. The SEC's enforcement of the Act's provisions, including the prohibition on insider trading and market manipulation, has been crucial in maintaining fair and efficient securities markets. The Act's disclosure requirements for public companies have also increased transparency and informed decision-making for investors. Overall, the Securities Exchange Act of 1934 has played a vital role in shaping the modern U.S. securities industry and protecting the interests of investors.

Related terms

Securities: Financial instruments, such as stocks, bonds, and options, that represent an ownership interest or debt in a company or other entity.

Securities and Exchange Commission (SEC):

The federal agency responsible for regulating the securities industry, enforcing securities laws, and protecting investors.

Secondary Market: The market where securities are traded among investors after their initial public offering, as opposed to the primary market where they are first issued.