Before June 6, 1934, almost nobody in Washington watched the American securities market. That was the day President Roosevelt signed the Securities Exchange Act, and with it the Securities and Exchange Commission came into being. Large public companies met real regulation for the first time.
After the crash
The groundwork came out of the wreckage of the October 29, 1929 crash. In 1932 the Senate Banking Committee began a run of hearings into what had gone wrong. They became known as the Pecora Commission, after Ferdinand Pecora, who led the investigation, and they ran until May 1934. Public confidence in the markets had collapsed along with prices, and Congress, in the words of the SEC’s own investor site, held hearings to identify the problems and search for solutions.
The 1934 act was not alone. Congress passed the Securities Act of 1933 a year earlier, requiring registration of most securities sales. It also passed the Glass-Steagall Act, which separated investment banking from commercial banking and created the Federal Deposit Insurance Corporation, and later the Public Utility Holding Company Act of 1935.
Who ran it first
Joseph P. Kennedy became the first chairman. Pecora himself was appointed a commissioner, alongside George C. Mathews, James M. Landis and Robert E. Healy.
What the laws demand
Investor.gov, the SEC’s investor education site, boils the two laws down to a pair of plain ideas. Companies that offer securities to the public must tell the truth about their business, the securities they are selling and the risks of investing in them. And brokers, dealers and exchanges must treat investors fairly and honestly.
The agency’s three-part mission follows from that: protect investors, maintain fair, orderly and efficient markets, and facilitate capital formation. The Library of Congress describes the SEC as an independent federal regulatory agency.
Ask most people about the SEC and they think of paperwork, the annual 10K and the quarterly 10Q that companies must file. The Library of Congress guide makes the point that the commission is more than that.
The record of its first years is public. The SEC’s first annual report is described by the Library as a good accounting of how the commission was organized, and a 1984 history marked the agency’s 50th anniversary.
Sources
- Signing of the Securities Exchange Act of 1934 – This Month in Business History – Research Guides at Library of Congress
- The Role of the SEC | Investor.gov
