Securities Exchange Act of 1934 Essay

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The Securities Exchange Act of 1934 was created to provide governance of securities transactions on the secondary market (after issue) and regulate the exchanges and broker-dealers in order to protect the investing public. All companies listed on stock exchanges must follow the requirements set forth in the Securities Exchange Act of 1934. Primary requirements include registration of any securities listed on stock exchanges, disclosure, proxy solicitations and margin and audit requirements. From this act the Securities Exchange Commission (SEC) was created. The SEC's responsibility is to enforce securities laws. Legislation in the United States that regulated broker-dealers and secondary trades on American stock exchanges. This Act also created the Securities and Exchange Commission to help it accomplish its goals. The act prohibited certain trades that would unfairly or dangerously manipulate prices. For example, the Act forbids churning, in which an investor makes both buy and sell orders through different brokers to create the impression of increased interest in the security and to raise the price. It was one of the most important regulatory laws that came out of the New Deal. Landmark legislation that established the SEC and that gives it authority over proxy solicitation and registration of organized exchanges. In addition, the Act sets disclosure requirements for securities in the secondary market, regulates insider trading, and gives the Federal Reserve authority over credit purchases of securities. When established, the Act reflected an effort to extend and overcome shortcomings of the Securities Act of 1933. These two pieces of legislation are the basis of securities regulation in the twentieth century. Companies use the public markets to create capital. Initial public offerings (IPOs) enable companies to raise funds by selling shares of ownership to

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