The Securities Exchange Act of 1934

Right after the Securities Act of 1933 was passed, legislators and regulators recognized the need to also regulate those who sell securities to the public for a living, not just the securities themselves. It turns out that securities don’t have as great a tendency as people do to act unethically. Under this act, broker-dealers and agents or representatives acting on their behalf are required to register with regulators.

To meet its objectives, the Securities Exchange Act of 1934 (also referred to as the Exchange Act or the 1934 Act) defines a broad set of guidelines to govern securities trading. Five major pieces of information about the Exchange Act are important to remember:

• • It contains important trading laws—including laws on insider trading.
• • It gave the Federal Reserve Board the power to regulate margin requirements.
• • It created the Securities and Exchange Commission (SEC) to be the body primarily responsible for the creation and enforcement of securities laws.
• • It allows securities exchanges to regulate themselves (e.g., Ne