Securities Exchange Act Of 1934 Flashcards, test questions and answers

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What is Securities Exchange Act Of 1934?

The Securities Exchange Act of 1934 was a major piece of federal legislation that greatly altered the regulation and governance of the financial sector. It established the Securities and Exchange Commission (SEC), which is responsible for regulating securities markets, protecting investors, and maintaining fairness in the marketplace. The Act also created rules to ensure that publicly traded companies disclose information about their operations so that investors can make informed decisions. Additionally, it put limits on insider trading and other practices aimed at manipulating stock prices.At its core, the Securities Exchange Act was intended to create greater transparency in the financial industry by setting up comprehensive regulations governing stock exchanges. These regulations were designed to protect both individual investors as well as large institutions from fraud or manipulation in securities markets. The SEC has become an important watchdog over Wall Street since its founding, and its enforcement powers have helped keep fraudulent practices out of public markets. In addition to establishing oversight of stock exchanges, the Securities Exchange Act expanded disclosure requirements for publicly traded companies as well as mandated corporate reporting standards for accounting purposes. This ensured that investors had access to accurate financial data when making investment decisions. Moreover, due diligence requirements were added for broker-dealers involved with penny stocks, ensuring these investments could not be used for fraudulent activities such as pump-and-dump schemes targeting small investors. The passage of the Security Exchange Act signaled a shift away from an era where individuals had little protection against negligent or deceptive behavior by corporations into one where there are now stringent legal safeguards surrounding market activity . As a result , consumers can have more confidence when investing in publically held companies knowing they cannot be taken advantage off because they now have recourse through law if something goes wrong . Ultimately , this landmark legislation provided much needed regulation over US capital markets , promoting stability while simultaneously increasing investor protections .