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History Of SEC

The history of SEC and the foundation of this agency can be traced in an era that was ripe for reform. There was tiny support for federal regulation of the securities market before the Great Crash of 1929. This was particularly true during the post-World War I raise of securities activity. During this time, proposals that the federal government require financial disclosure and prevent the fraudulent sale of stock were never seriously pursued. Even most of the investors of that time have little thought about the systemic risk that arose from widespread abuse of margin financing and unreliable information about the securities in which they were investing.

SEC history reveals that, during 1920s a large number of small shareholders took benefit of post-war economic condition and set out to make money in the stock market. The origin of SEC also reveals that in October 1929 the stock market was crashed and collapsed and this lead public confidence in the markets dropped sharply. Large and small investors, as well as the banks who had loaned to them, lost large amount of money in the ensuing Great Depression. There was a consensus that for the economy to recover, the public's faith in the capital markets needed to be restored. Congress held hearings to identify the problems and search for solutions.

The hearing held by the Congress is a great turning point in the history of Securities and Exchange Commission. Based on this hearing, Congress passed the Securities Act of 1933. This law, along with the Securities Exchange Act of 1934, led to the foundation of SEC. This agency was basically made to restore investor confidence in the capital markets by offering investors and the markets with more reliable information and clear rules of honest dealing. According to these laws, companies publicly providing securities for investment dollars must tell the public the truth about their businesses, the securities they are selling, and the risks involved in investing. Moreover, those who sell and trade securities like brokers, dealers, and exchanges must treat investors fairly and honestly, putting investors' interests first.

Considering the securities industry needs a seriously coordinated effort, in 1934 Congress founded the Securities and Exchange Commission. The primary aim of this agency is to develop stability in the markets and to safeguard investors. And Joseph P. Kennedy, was the first Chairman of the SEC.