Securities Exchange Act

Securities Exchange Act
U.S. Government · Public domain · source
Name	Securities Exchange Act
Enacted by	73rd United States Congress
Signed by	Franklin D. Roosevelt
Date signed	1934
Citations	48 Stat. 881
Purpose	Regulation of securities exchanges, brokers, dealers, and over-the-counter markets
Administered by	U.S. Securities and Exchange Commission

Contents

Securities Exchange Act

The Securities Exchange Act established a federal framework for oversight of New York Stock Exchange, Chicago Board of Trade, American Stock Exchange, NASDAQ, Philadelphia Stock Exchange and other trading venues in the wake of the Wall Street Crash of 1929 and during the era of Great Depression reforms led by Franklin D. Roosevelt. It created the U.S. Securities and Exchange Commission and introduced anti-fraud, reporting, and registration requirements affecting broker-dealer firms, investment advisers, and public companies such as those listed on the New York Stock Exchange and NASDAQ. The Act interacts with statutes and institutions including the Securities Act of 1933, Glass–Steagall Act, Banking Act of 1933, and later statutes like the Sarbanes–Oxley Act of 2002 and the Dodd–Frank Wall Street Reform and Consumer Protection Act.

Background and Legislative History

The Act emerged from investigations by the United States Senate Committee on Banking and Currency, public hearings featuring testimony from figures tied to J.P. Morgan, John D. Rockefeller Jr., and analyses by the Federal Reserve System and National Recovery Administration. Legislative drafting drew on proposals from the Harvard Committee on Capital Markets and critiques published in outlets like the New York Times and reports by the General Accounting Office. Debates in the United States House of Representatives and the United States Senate invoked precedents from the Securities Act of 1933, court opinions from the Supreme Court of the United States, and commentary by legal scholars at Columbia Law School and Harvard Law School. Passage was shaped by political coalitions including members of the Democratic Party (United States) and opposition from elements of the Republican Party (United States) representing financial interests.

The Act established registration mandates and disclosure obligations for entities trading on exchanges such as the New York Stock Exchange and NASDAQ, created antifraud provisions used in litigation before the United States District Court for the Southern District of New York and appeals to the United States Court of Appeals for the Second Circuit. It authorized the U.S. Securities and Exchange Commission to regulate broker-dealer registration, to require periodic reports similar to filings to the Securities and Exchange Commission like Form 10, and to set rules for proxy solicitation procedures that affected companies like General Electric and IBM. The Act's Sections addressed manipulation, insider trading prosecutions later enforced in cases brought by the Manhattan District Attorney and followed in opinions by the Supreme Court of the United States in decisions involving United States v. O'Hagan and related matters. It provided authority for rulemaking that influenced exchanges such as the Chicago Board Options Exchange and self-regulatory organizations like the Financial Industry Regulatory Authority.

Enforcement under the Act is led by the U.S. Securities and Exchange Commission with cooperation from the Federal Bureau of Investigation, the Department of Justice (United States), state regulators like the New York State Department of Financial Services, and self-regulatory organizations including the Financial Industry Regulatory Authority and the Municipal Securities Rulemaking Board. The SEC brings civil actions in federal courts such as the United States District Court for the Southern District of New York and administratively adjudicates before the SEC Office of Administrative Law Judges. Enforcement priorities have targeted practices scrutinized in high-profile investigations involving institutions like Goldman Sachs, Morgan Stanley, Lehman Brothers, Bear Stearns, and individuals prosecuted in cases linked to the Enron scandal and the WorldCom accounting scandal. The Act authorizes remedies including injunctions, disgorgement, civil monetary penalties, and registration suspensions imposed by the U.S. District Court for the District of Columbia and affirmed by appellate panels.

Public companies subject to the Act must comply with reporting regimes administered through filings analogous to those used for companies like Apple Inc., Microsoft Corporation, ExxonMobil, and General Motors. Required disclosures affect trading practices on venues such as the New York Stock Exchange, NASDAQ, Chicago Mercantile Exchange, and ICE and concern events referenced in filings for companies like Citigroup and Bank of America. Rules address insider trading, short selling, disclosure of material events, and proxy contests involving corporations like Procter & Gamble, Coca-Cola Company, Walmart, and Berkshire Hathaway. Transparency obligations have been advanced by rulemaking influenced by agencies such as the Public Company Accounting Oversight Board and standards setters like the Financial Accounting Standards Board and auditors from firms including PricewaterhouseCoopers, Deloitte, Ernst & Young, and KPMG.

The Act reshaped capital markets infrastructure, affecting the evolution of exchanges such as the New York Stock Exchange and NASDAQ and contributing to legal doctrines developed in cases before the Supreme Court of the United States and federal appellate courts including the United States Court of Appeals for the Second Circuit and the United States Court of Appeals for the D.C. Circuit. Its influence is evident in regulatory responses to crises involving Long-Term Capital Management, the 2008 financial crisis, and restructurings like General Motors bankruptcy; policy adaptations also followed from legislation including the Sarbanes–Oxley Act of 2002 and the Dodd–Frank Wall Street Reform and Consumer Protection Act. Judicial decisions interpreting the Act have involved parties such as SEC v. W.J. Howey Co.-era jurisprudence, enforcement actions against firms like Bernard L. Madoff Investment Securities LLC, and appellate rulings shaping doctrines applied in disputes featuring Goldman Sachs and J.P. Morgan Chase. The Act remains central to debates in venues such as the United States Congress, rulemaking at the U.S. Securities and Exchange Commission, and scholarship from institutions like Yale Law School and Stanford Law School.