Securities Exchange Act of 1934
What Is the Securities Exchange Act of 1934?
The Securities Exchange Act of 1934 (SEA) was made to govern securities transactions on the secondary market, after issue, guaranteeing greater financial transparency and exactness and less fraud or manipulation.
The SEA authorized the formation of the Securities and Exchange Commission (SEC), the regulatory arm of the SEA. The SEC has the power to oversee securities — stocks, bonds, and over-the-counter securities — as well as markets and the conduct of financial experts, including brokers, dealers, and investment advisors. It additionally screens the financial reports that publicly traded companies are required to uncover.
Understanding the Securities Exchange Act of 1934
All companies listed on stock exchanges must follow the requirements illustrated in the Securities Exchange Act of 1934. Primary requirements incorporate registration of any securities listed on stock exchanges, disclosure, proxy requesting, and margin and audit requirements. The purpose of these requirements is to guarantee an environment of fairness and investor confidence.
The SEC can decide to file a case in federal court or settle the matter outside of trial.
The SEA of 1934 conceded the SEC broad authority to direct all parts of the securities industry. It is driven by five commissioners, who are selected by the president, and has 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.
The SEC has the power and responsibility to lead examinations concerning possible infringement of the SEA, for example, insider trading, selling unregistered stocks, taking clients' funds, controlling market prices, revealing false financial information, and penetrating agent client integrity.
Additionally, the SEC authorizes corporate reporting by all companies with more than $10 million in assets and whose shares are held by in excess of 500 owners.
History of the Securities Exchange Act of 1934
The SEA of 1934 was enacted by Franklin D. Roosevelt's administration as a response to the widely held conviction that reckless financial practices were one of the chief reasons for the 1929 stock market crash. The SEA of 1934 followed the Securities Act of 1933, which required corporations to disclose certain financial information, including stock sales and distribution.
Other regulatory measures put forward by the Roosevelt administration incorporate 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. They all came in the wake of a financial environment in which the commerce of securities was subject to minimal regulation, and controlling interests of corporations were amassed by somewhat couple of investors without public information.
Features
- All companies listed on a stock exchange must follow the requirements illustrated in the SEA of 1934.
- The Securities Exchange Act of 1934 was enacted to govern securities transactions on the secondary market.
- The purpose of the requirements of the Securities Exchange Act of 1934 is to guarantee an environment of fairness and investor confidence.
