Series 65: 8.2. The Securities Exchange Act Of 1934

Taken from our Series 65 Online Guide

8.2. 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 issuing of securities. It turns out that securities don’t have as great a tendency as people do to act unethically. The Securities Exchange Act of 1934 regulates broker-dealers and how existing securities are resold in the secondary market.

To meet this objective, the Securities Exchange Act of 1934 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—the Fed currently allows broker-dealers to lend customers up to 50% of the purchase price of a security.

• It created the Securities and Exchange Commission (SEC)—this body is primarily responsible for the creation and enforcement of securities laws.

• It allows securities exchanges to regulate themselves (e.

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