U.S. SECURITIES AND EXCHANGECOMMISSION AND BANKING ACT

Max, Alex, Carly

SEC

OVERVIEW

The SEC was instated in 1934 to increase public trust in the capital markets by requiring uniform disclosure of information about public securities offerings.

OVERVIEW

It has the power to license and regulate stock exchanges, the companies whose securities traded on them, and the brokers and dealers who conducted the trading.

The SEC maintains confidence in the U.S. stock market, which is critical to the strong functioning of the U.S. economy.

OVERVIEW

It does this by providing transparency into theworkings of U.S. companies, so investors can getaccurate information about the profitability ofthe companies in which they would like toinvest. (Amadeo)

Because of the SEC, investors may have access tobasic financial information about issuingcompanies and risks involved in investing in thesecurities in question.

OVERVIEWA modern example would be, hypothetically, if Microsoft wanted to merge with Google. Bill Gates would have to disclose the financial information involved with this merge with the SEC. Because of that, the SEC wouldn’t allow him to buy up masses of Google’s stock, knowing that it would make Gates huge amounts of money.

Bank Holiday and Banking Act

Bank Holiday

➲ FDR declared a “national emergency”

➲ Stopped all bank transactions

➲ Initially March 6-9, 1933, extended to March 13

➲ Prevented a bank run from occurring

Emergency Banking Relief Act

➲ Passed March 9, 1933➲ Temporarily insured all

deposits➲ Allowed financially

sound banks to reopen➲ A short-term

prevention of bank runs

➲ People re-deposited more than half of what was taken out during bank runs

Banking Act of 1933 (Glass-Steagall Act)

➲ Established FDIC➲ Prevented banks

from using deposited money to invest in stocks and bonds

➲ Allowed more banks to reopen

➲ Bank failures nearly stopped by mid 1934

Banking Act of 1933 (Glass-Steagall Act)

➲ Banks did not like the regulations imposed on them

How does the SEC depart from the way the government did business

up to that point?

Before:

➲ No requirement for public companies to disclose financial and other important information to the public.

➲ No “common pool” of information for investors to get an idea of whether they wanted to buy, sell, or hold particular security.

➲ Little regulation of securities markets.

Before (cont):

➲ No one purposed financial disclosure to the government.

➲ People trusted the banks, because they had no reason not to.

➲ 1920’s: 20 million share holders set to make profit in the stock market.

➲ “Of the $50 billion in new securities offered during this period, half became worthless.

Blue Sky Laws

➲ “A blue sky law is a state law in the United States that regulates the offering and sale of securities to protect the public from fraud.”

➲ Law had loop holes.➲ Could make security offerings across state

lines.➲ Held hearings about abuse of interstate

fraud.

After:

➲ Depression in October of 1929, overall consensus that citizens needed to regain trust in banks.

➲ “Based on the findings in these hearings, Congress — during the peak year of the Depression — passed the Securities Act of 1933. This law, together with the Securities Exchange Act of 1934, which created the SEC, was designed to restore investor confidence in our capital markets by providing investors and the markets with more reliable information and clear rules of honest dealing.”

➲ Both the Securities Act of 1933, and the Securities Exchange Ave of 1934 are considered part of Franklin Roosevelt's “New Deal” raft of legislation.

WORKS CITED

Amadeo, Kimberley. "What Is the S.E.C. and How Does It Affect You?." about.com. Web. 20 Apr. 2010. <

http://useconomy.about.com/b/2007/01/16/what-is-the-sec-and-how-does-it-affect-you.htm

>.

Kolakowski, Mark. "Securities and Exchange Commission." about.com. Web. 20 Apr. 2010. <http://financecareers.about.com/od/overview/a/SEC.htm>.

"The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation." U.S. Securities and Exchange Commission. Web. 20 Apr. 2010. <http://www.sec.gov/about/whatwedo.shtml>.

"U.S. Securities and Exchange Commission." Wikipedia, the free online encyclopedia. Web. 20 Apr. 2010. <http://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission>.

WORKS CITED

➲ Dubovoy, Sina. “Banking Act of 1933.” Reference for Business. n.d. Web. 20 April

2010.➲ “Emergency Banking Act.” Wikipedia. 8 April

2010. Web. 20 April 2010.➲ Howard. “The 1933 Bank Holiday.” Delmar

Dustpan. 6 March 2008. Web. 20 April 2010.