Securities and Exchange Commission

Sola Oni and Kyle Ronquillo

Name and Acronym: Securities and Exchange Commission (SEC)

When and Why the SEC Was Created

In 1934 the SEC was established in order to regulate commerce in stocks, bonds, and other securities. The creation of this organization was prompted by the stock market crash of 1929, and their goal was to return investor confidence to American citizens by providing them more reliable information (allgov.com). Companies had to make investors aware of the truth about their businesses, the securities that they are selling, and the risks one takes when investing in the company. They also upheld that brokers, dealers, and exchanges must treat investors fairly and make their interests a priority (sec.gov). The SEC and its responsibilities are outlined in three acts passed by Congress, The Securities Act of 1933, the Securities Exchange Act of 1934, and the 1935 Public Utility Holding Company Act (History.com, 2010).

First Annual Report of the SEC

Big image

Actions taken by the SEC and its Impact

Trading securities were hardly helpful with this issue, which allowed many instances of fraud to take place. Free exchange stocks eventually caused an abuse of power withing the economy, leading to its eventual elimination. In 1940, the SEC took action against 9 out of 13 of the largest public utility holding company and restructured the industry. The SEC also ensured honesty within securities markets by providing investors with reliable information and by establishing rules within the industry. It was made mandatory for companies to disclose truthful information about their companies, the securities they were selling, as well as the risks involved when investing. All of this was done to protect the interests of their customers (allgov.com).

Franklin D. Roosevelt

He became president in 1933, the year of the establishment of the Securities Act of 1933, and led the country during the time of the Great Depression. The SEC was created as part of a series of Roosevelt's New Deal reforms in which he attempted to relieve Americans of the many hardships brought to them as a result of the Great Depression (biography.com).

Reaction of American People and the Government

As a result of the stock market crash, many began to abuse the power for stocks that the free exchange stock provided. In response to this, Congress defined the SEC's responsibilities through three major acts:


  • Securities Act of 1933

    • This was the first act created against security fraud, and it aimed to protect investors from the false statements presented to them by companies.This was necessary as many companies would accentuate the positives of the company while neglecting to mention the negatives.

    • Public corporations were eventually required to register their stocks sales and distribution and make regular financial disclosures (Sarkar, "Legal Information Institute")

  • Securities Exchange Act of 1934

    • This act deals with sales that take place after a security is initially offered by a company

    • It established a mandatory process of disclosure which forced companies to provide information to the public that could have an impact on serious investment decisions

    • This act also established a system of regulating exchanges, brokers, and over-the-counter markets, as well as monitoring the required financial disclosures (Sarkar, "Legal Information Institute")

  • The 1935 Public Utility Holding Company Act

    • This act was created in response to the corrupt actions of utility holding companies, and eliminated holding companies that were more than twice removed from the utilities whose stocks they held

    • It broke up large utility combinations into smaller companies and set up federal commission to regulate utility rates and financial practices

    • Prevented utility holding companies from giving money towards unregulated business practices from their regulated business activities and their customers. The act then required that all side businesses must be separated from regulated businesses ("Union of Concerned Scientists")

Works Cited


"AllGov - Departments." AllGov - Departments. Web. 14 Feb. 2016.


Biography.com Editors. "Franklin D. Roosevelt Biography." Bio.com. A&E Networks Television. Web. 14 Feb. 2016.


Biography.com Editors. "Joseph P. Kennedy Biography." Bio.com. A&E Networks Television. Web. 14 Feb. 2016.


Durr, Kenneth, and Adrian Kinnane. "Securities and Exchange Commission Historical Society." 431 Days: Joseph P. Kennedy and the Creation of the SEC (1934-35) (Introduction). Securities and Exchange Commission Historical Society. Web. 14 Feb. 2016.


History.com Staff. "Securities and Exchange Commission." History.com. A&E Television Networks, 2010. Web. 12 Feb. 2016.


"Hoover & the Depression: The Bonus Army." Hoover & the Depression: The Bonus Army. Authentichistory.com. Web. 14 Feb. 2016.


"How the SEC Protects Investors, Maintains Market Integrity." How the SEC Protects Investors, Maintains Market Integrity. U.S. Securities and Exchange Commission. Web. 15 Feb. 2016.


"Letter to the U.S. Securities and Exchange Commission." Letter to the U.S. Securities and Exchange Commission. Carbon Tracker Initiative. Web. 14 Feb. 2016.


"Public Utility Holding Company Act (PUHCA)." Union of Concerned Scientists. Web. 14 Feb. 2016.


Roosevelt, Franklin D. "Franklin D. Roosevelt: Message to Congress on Curbing Monopolies." Franklin D. Roosevelt: Message to Congress on Curbing Monopolies. The American Presidency Project. Web. 15 Feb. 2016.


Sarkar, Deepa. "Securities Act of 1933." LII / Legal Information Institute. Cornell University Law School. Web. 14 Feb. 2016.


Sarkar, Deepa. "Securities Exchange Act of 1934." LII / Legal Information Institute. Cornell University Law School. Web. 14 Feb. 2016.


"The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation." SEC.gov. Web. 14 Feb. 2016.


"Veritas News Network – American Pension Services Founder Pleads Not Guilty to Fraud Charges." Veritas News Network. Web. 14 Feb. 2016.


"What Does the Securities and Exchange Commission Do- - TeacherTube." TeacherTube. Web. 14 Feb. 2016.