Series 7: 18.1.2 Securities Exchange Act Of 1934

18.1.2  Securities Exchange Act of 1934

The Securities Act of 1933 regulates how securities are registered, issued, and distributed to the public for the first time. This is called the primary market. In contrast, the Securities Exchange Act of 1934 regulates broker-dealers and how existing securities are resold in the secondary market.

To meet its objectives, the Exchange Act defines a broad set of guidelines to govern securities trading. It also created a new agency, the SEC, to administer and enforce them. Within the scope of these guidelines, the Act permits the market to regulate itself. Five major pieces of information about the Exchange Act of 1934 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., New York Stock Exchange)—under the conditio