Securities and Exchange Act

By Roosevelt Institute |


[Note: updated on 8.6.2010]

What is the Securities and Exchange Act?

The act, passed in 1934, created the Securities and Exchange Commission (SEC), a market watchdog.  The SEC is part of the federal government and oversees brokerage firms and self-regulatory organizations like the New York Stock Exchange or the National Assocation of Securities Dealers, which runs NASDAQ.  The act authorizes the SEC to collect information periodically from companies with publicly traded securities.

What’s the significance?

The SEC has emerged as a key institution in the wake of the global economic crisis.  It has both taken partial blame for the financial meltdown and been charged with investigating some of the most notorious people accused of being behind the problem, including Bernie Madoff, alleged Ponzi scheme mastermind Allen Stanford, and Jon-Paul Rorech and Renato Negrin, formerly a Deutsche Bank Securities bond salesman and a Millennium Partners hedge fund manger respectively, accused by the SEC of insider trading on credit default swaps.  The latter marks the SEC’s first investigation into credit default swaps, a major part of what brought on the financial meltdown.

Who’s talking about it?

Braintruster David Woolner explains how the SEC, as part of FDR’s financial vision, helped lay the groundwork for a more stable economic system….Former SEC Chairman Arthur Levitt told the Senate in 2008 said the SEC should take some of the blame for letting the financial crisis happen, in part for “remain[ing] too often on the sidelines”….Meanwhile, SEC members defend their institution’s need for independence in the face of proposals to merge it with other trade oversight organizations…Jake Zamansky at Seeking Alpha thinks there’s something really wrong with the revolving door between the SEC and Wall Street…Project on Government Oversight urges the removal of the mysterious secrecy measures for the SEC in FinReg.

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