General Overview
What is the Securities Exchange Act of 1934?
A U.S. law that regulates the trading of securities in secondary markets.
What is the role of the Securities and Exchange Commission (SEC)?
The SEC enforces securities laws, monitors stock exchanges, and protects investors.
What are securities, according to the Act?
Securities include stocks, bonds, options, and other financial instruments that represent ownership or investment.
How did the Act change the way stocks are traded?
It introduced stricter rules, increased oversight, and made trading more transparent.
What happens if a company violates the Act?
The SEC can fine the company, delist its stock, or take legal action.
When was the Securities Exchange Act of 1934 passed?
It was passed on June 6, 1934.
How does the Act help prevent fraud in the stock market?
It requires companies to provide accurate financial information and prohibits deceptive practices.
What is Rule 10b-5, and why is it important?
It is an SEC rule that prohibits fraud and deception in the purchase or sale of securities.
How does the Act help prevent market manipulation?
It prohibits actions like spreading false information to influence stock prices.
What penalties exist for insider trading under this Act?
Fines, prison time (up to 20 years), and repayment of illegal profits.
Why was the Securities Exchange Act of 1934 created?
To prevent fraud, manipulation, and unfair trading practices in the stock market
What is insider trading, and how does the Act regulate it?
Insider trading is buying or selling stocks based on confidential company information. The Act makes it illegal.
How does the Act regulate stock exchanges?
It requires stock exchanges to register with the SEC and follow fair trading rules.
What are proxy rules, and why are they important?
Proxy rules regulate how shareholders vote in company decisions, ensuring fairness.
How does the SEC investigate potential violations?
It conducts audits, subpoenas records, and interviews witnesses.
What major event led to the creation of this Act?
The Stock Market Crash of 1929, which led to the Great Depression.
Who must register with the SEC under this Act?
Public companies, stock exchanges, brokers, and dealers.
What is the purpose of reporting requirements for companies?
To ensure transparency and provide investors with reliable financial information.
What is the difference between the Securities Act of 1933 and the Securities Exchange Act of 1934?
The 1933 Act regulates the initial sale of securities, while the 1934 Act regulates trading after securities are issued.
What is a cease-and-desist order, and when does the SEC use it?
It is an order to stop illegal activities immediately, used when violations occur.
Which government agency was created by this Act?
The Securities and Exchange Commission (SEC).
How does the Act affect public companies?
It requires them to disclose financial statements and other important business information.
How does the Act protect investors?
By preventing fraud, requiring transparency, and regulating securities markets.
How does the Act regulate broker-dealers?
It requires them to register with the SEC and follow ethical trading practices.
Can individuals sue under the Securities Exchange Act of 1934?
Yes, investors can file lawsuits if they suffer losses due to fraud or violations.