The Securities Exchange Act of 1934 (SEA) was passed to regulate securities transactions that occur on secondary markets. second market after the issue, to ensure greater transparency in the financial system and accuracy and fewer frauds or manipulations.
The SEA has authorized the establishment of the Securities and Exchange Commission (SEC), the regulator that is part of SEA. The SEC is able to regulate securities, including bonds, stocks as well as over-the-counter securities as along with markets and the behavior of financial professionals, such as dealers, brokers as well as investment advisors. The SEC also oversees accounts which publicly traded firms are required to publish.
Knowing how to apply the Securities Exchange Act of 1934
Companies listed in stock exchanges have to adhere to the rules set out within the Securities Exchange Act of 1934. The primary requirements are the registration of securities that are that are listed on stock exchanges, information disclosures, proxy solicitations and the margin and auditing requirements. The reason for these requirements is to create an atmosphere of fairness and trust.
The SEA of 1934 conferred the SEC the authority to regulate every aspect of the industry of securities. It is headed by five commissioners which are chosen by presidents and is comprised of five departments: 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 authority and duty to investigate possible violations of SEA for example, the insider trade and selling stocks that are not registered taking customer money manipulating prices on the market disclosure of false financial data, and sabotaging the integrity of the broker-customer relationship.
Furthermore is the SEC regulates corporate reporting by all businesses with over 10 million dollars in assets and which have shares held by more than 500 shareholders.
The history of the Securities Exchange Act of 1934
The SEA of 1934 was passed by the Franklin D. Roosevelt’s administration in reaction to the widely believed conviction that unresponsible financial practices were among the main reasons for the 1929 crash in the stock market. The SEA of 1934 was in accordance with that of the Securities Act of 1933 which obliged corporations to disclose certain financial data, including stock distribution and sales.
Other measures to regulate during Roosevelt administration Roosevelt administration included those of the Public Utility Holding Company Act of 1935 The Trust Indenture Act of 1934 and the Investment Advisers Act of 1940 as well as the Investment Company Act of 1940. They all came into the aftermath of a financial environment where the trading of securities was not subject to any regulation, and the controlling corporate interests were accumulated by a small number of investors who were not the public’s knowledge.
