The Securities And Exchange Commission :: essays research papers

The Securities and Exchange Commission In 1934 the Securities Exchange Act created the SEC (Securities and Exchange Commission) in response to the stock market crash of 1929 and the Great Depression of the 1930s. It was created to protect U.S. investors against malpractice in securities and financial markets. The purpose of the SEC was and still is to carry out the mandates of the Securities Act of 1933: To protect investors and maintain the integrity of the securities market by amending the current laws, creating new laws and seeing to it that those laws are enforced. During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a â€Å"run† on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that â€Å"Companies publicly offering securities must tell the public the truth about thei r businesses, the securities they are selling and the risks involved in the investing.† Secondly, â€Å"People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.†2   Ã‚  Ã‚  Ã‚  Ã‚  Franklin Delano Roosevelt defeated Herbert Hoover in a landslide in the 1932 election and began to work on his â€Å"New Deal†. In the New Deal four key regulatory bodies were established: The National Labor Relations Board, Civil Aeronautics Authority, Federal Communications Commission, and the Securities and Exchange Commission. Wall Street was not enamored with the coming regulation, but Congress was confident that the Street was seen as an easy target for the Crash and the Depression that followed. In response, the SEC was created by Congress on June 6, 1934 for the purpose of protecting the public and the individual investors against malpractice in the financial markets. Commenting on the creation of the SEC, Texas Congressman and future Speaker Sam Rayburn admitted3 â€Å"he didn’t know whether the legislation passed so readily because it was so good or so incomprehensible.