Securities Exchange Act Of 1934

If you’re going to exchange securities, like trade stocks and bonds among yourselves, then there have to be rules, right? Yeah, you’d think. Well, there didn’t used to be. And then Aunt 1934 came along and set the table.

The key element that the ‘34 Act created was the SEC itself. It was a wise creation, because it recognized that, whatever the world looked like in 1934, it was highly likely that, 50 years later, it would look a whole lot different. And while horses and buggies went away, that wasn’t the case for stocks and bonds.

Keep in mind that another Act had been created a year earlier, cleverly named The Securities Act of 1933. That Act focused on primary shares. That is, original shares, like the kind sold in an IPO. The 1934 Act was all about shares trading after the initial set, called secondary shares. This new law made the New York Stock Exchange a big deal with big powers, and made insider trading illegal, thus paving the way for many exciting Wall Street movies.