In the 1920’s, the stock prices kept increasing and rose to a peak in August 1929. Stock prices increased more than four times, which led investors to believe that the stock market would keep booming. So, they continued to borrow money from banks and put it in to the stock market. Finally, the stock market crashed in 1929. After the crash of the stock market, tons of investors could not pay back money they borrowed from banks previously. Indirectly, this caused lots of banks to declare bankruptcy. This was also considered as the signal of the start of the Great Depression, which negatively influenced almost all western industrialized countries for next ten years. The main reason for the crash of the market could be blamed on the increasing
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The main purpose of the Act was not only to avoid the existence of fraudulent securities in the market, but also to ensure all investors could obtain transparency and accurate information from the issuing company. The act could efficiently prevent the crash happened in 1929, due to there is plenty of information to help investors make more logical decisions. Before the act was officially enacted, securities were primarily regulated by state laws, commonly refereed to blue sky laws. Since each state had different laws, it led to chaos in the whole security markets and provides an obstacle to investors to get helpful information. The Securities Act, which included almost every feature of blue sky laws, provided more focus on protection of …show more content…
The main function of the SEC is to audit information of issuers through a complicated registration process, before they sell securities to the market. During registration, the issuer has to submit information that will form the basis of the prospectus and additional information that does not go into the prospectus, but is accessible and necessary to the public. The registration process could protect investors in two ways. First, issuers cannot offer to sell securities without disclosing information about the company, and developing and delivering a prospectus that the SEC has reviewed. In addition, issuers are liable for any material misstatements or omissions in the prospectus or registration statement, providing a way to enforce truth in disclosure. If issuers refuse to provide additional information the SEC requires during the registration, SEC has authority to prohibit issuing this security. The Act also gave the SEC full authority to issue regulations, establish filing procedures, set official accounting standards, conduct investigations and cooperate with state securities regulators (Securities, 2008). One year later, the Securities Exchange Act of 1934 was enacted and gave SEC broader power to let them regulate the market. Meanwhile, after the first federal laws
The main purpose of the Act was not only to avoid the existence of fraudulent securities in the market, but also to ensure all investors could obtain transparency and accurate information from the issuing company. The act could efficiently prevent the crash happened in 1929, due to there is plenty of information to help investors make more logical decisions. Before the act was officially enacted, securities were primarily regulated by state laws, commonly refereed to blue sky laws. Since each state had different laws, it led to chaos in the whole security markets and provides an obstacle to investors to get helpful information. The Securities Act, which included almost every feature of blue sky laws, provided more focus on protection of …show more content…
The main function of the SEC is to audit information of issuers through a complicated registration process, before they sell securities to the market. During registration, the issuer has to submit information that will form the basis of the prospectus and additional information that does not go into the prospectus, but is accessible and necessary to the public. The registration process could protect investors in two ways. First, issuers cannot offer to sell securities without disclosing information about the company, and developing and delivering a prospectus that the SEC has reviewed. In addition, issuers are liable for any material misstatements or omissions in the prospectus or registration statement, providing a way to enforce truth in disclosure. If issuers refuse to provide additional information the SEC requires during the registration, SEC has authority to prohibit issuing this security. The Act also gave the SEC full authority to issue regulations, establish filing procedures, set official accounting standards, conduct investigations and cooperate with state securities regulators (Securities, 2008). One year later, the Securities Exchange Act of 1934 was enacted and gave SEC broader power to let them regulate the market. Meanwhile, after the first federal laws