Federal Securities Act & SEC

By: Colin Hastings and Lee Usiskin

Different Kinds of Securities

• Debt securities– Banknotes– Bonds

• Equity securities– Common Stocks

• Derivative contracts– Options– Futures

What Was the Federal Securities Act?

• Alternately referred to as the “truth in securities law”– Made investing more transparent

• Required businesses to provide financial information to investors before investing

• Prohibited fraud and misrepresentation in the sale of securities

What is the SEC

• U.S Securities and Exchange Commission • Created by the Federal Securities Act of 1934• Enforced the Federal Securities Act of 1933,

the Trust Indenture Act of 1939, and the Investment Company Act of 1940 among others

• Still in existence today

How Did it Affect the Government?

Government became involved in people’s investments Made investing more fair (fought against insider trading) Did not increase federal spending

Government fought against big business– Required businesses to supply investors with correct financial

information

How Effective Was the SEC?

• Effective in regulating stock market– Regulated trade of securities– Defined individual’s antifraud right• Individual can sue stock issuer

• Deemed constitutional

SEC Today

• 3,748 employees as of 2010• Financial failures– Documents about crimes committed by Lehman

Brothers, Goldman Sachs, and other financial companies allegedly destroyed

– Failed to stop Madoff fraud• November 2012-Mary Schapiro announced a

December resignation

Works Cited• Sarka, Deepa. "Securities Law History." Legal Information Institue: Open Access to Law Since 1992. Ed.

Thomas R. Bruce and Peter1 W. Martin. Cornell University, n.d. Web. 26 Nov. 2012. <http://www.law.cornell.edu/wex/securities_law_history>.

• Dietzel, Susan, and Cheryll Olson-Collins. "A Brief History of Securities Regulation." State of Wisconsin Department of Financial Institutions: Strengthening Wisconsin's Financial Future. Wisconsin Department of Financial Institutions, n.d. Web. 26 Nov. 2012. <http://www.wdfi.org/fi/securities/regexemp/history.htm>.

• Securities and Exchange Comission. U.S. Securities and Exchange Comission. Ed. Thomas Butler. Securities and Exchange Comission, n.d. Web. 26 Nov. 2012. <http://www.sec.gov/index.htm>.

• United States. Cong. Senate. ‘‘Securities Act of 1933’’. (May 27, 1933, ch. 38, title I, Sec. 1, 48 Stat. 74.). Washington:GPO, 1933. Print.

• Viswanatha, Aruna. "Schapiro Stepping down at SEC, Walter to Step in." Reuters. Thomson Reuters, 27 Nov. 2012. Web. 30 Nov. 2012. <http://www.reuters.com/article/2012/11/27/us-sec-schapiro-nyt-idUSBRE8AP0ON20121127>.