What was the Securities Exchange Act of 1934?

Published by Thomas Herold in Investments, Laws & Regulations, Trading

'Securities Exchange Act of 1934' is explained in detail and with examples in the Trading edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

The Securities Exchange Act of 1934 is also known by its acronym of SEA. This piece of legislation was crafted in order to regulate transactions in securities which trade on the secondary market after they are already issued. The goal of this is to guarantee a higher level of financial transparency, better accuracy of trades, and a lower degree of manipulation and outright fraud.

This The Securities Exchange Act of 1934 laid the grounds for the SEC Securities Exchange Commission creation. In this way, the SEC became the SEA’s regulatory body. Thanks to the act, the Securities Exchange Commission gained the authority to regulate securities like over the counter issues, stocks, and bonds. Thy also have regulatory oversight on the markets as a whole and the behavior of all financial professionals which includes dealers, brokers, and financial advisors. The SEC also reviews the financial reports of the various publically trading corporations, which they mandate be released.

Every company which chooses to be exchange listed has to adhere to the rules and regulations which The Securities Exchange Act of 1934 spells out for everyone. The principle requirements are disclosure, registration of all stock exchange listed securities, audit and margin requirements, and proxy solicitations. The reason for such requirements as these are to make sure that the playing field is level and fair. They also want to instill confidence in investors who participate in the various stock exchange markets.

It was then-President Franklin D. Roosevelt and his administration which arranged for The Securities Exchange Act of 1934 to come to Congress. They launched it as their official response to the generally accepted idea that poor financial market practices had been the primary perpetrator in the Black Monday stock market collapse of 1929.This act actually was not the first such legislation on the topic. The Securities Exchange Act of 1933 preceded it by a year. The 1933 piece of legislation mandated that all corporations had to publically disclose important and regulated financial information. This covered distribution and sales of stock shares. The 1934 act was more concerned with the behaviors of professionals in the financial advising and brokering industries.

The Roosevelt administration was not content with these two acts where regulation was concerned. They sponsored the Trust Indenture Act of 1934, the Public Utility Holding Company Act of 1935, The Investment Advisers Act of 1940, and finally the Investment Company Act of 1940. The numerous acts of legislation were passed in the wake of a devastated financial environment where the securities sales had little effective regulation. At the time, corporations could become controlled by a handful of investors while the public had no knowledge of these facts at all.

Thanks to this Securities Exchange Act of 1934, the SEC obtained broad and vast powers to oversee and police all corners of the securities business. To this effect, it is headed by five commissioners who lead the five divisions. The President of the United States appoints these commissioners. The divisions of the SEC are Division of Trading and Markets, Division of Corporation Finance, Division of Investment Management, Division of Economic and Risk Analysis, and Division of Enforcement.

They have both the authority and are the mandate to head up investigations into possible violations of The Securities Exchange Act of 1934. This covers a wide range of illegal and unscrupulous activities. Included in these are stealing the funds of clients, insider trading, selling unregistered stocks, manipulating the prices of the markets, and releasing falsified information or breaking the broker customer trust.

Besides this, the SEC is tasked with enforcing all corporate reporting they mandate for any company which possesses greater than $10 million of assets if their shares are owned by over 500 stake holders. The SEC has two tools for dealing with any and all matters which pertain to their areas of responsibility. They may settle any issue without it going to trial by dealing directly with the parties in question. They might also file a federal court case to resolve the problems.

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The term 'Securities Exchange Act of 1934' is included in the Trading edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.