This Day in Legal History: June 6
On this day in legal history
, President Franklin D. Roosevelt signed the Securities Exchange Act of 1934
into law. Part of his New Deal legislation to regulate the markets, the Act founded the Securities and Exchange Commission
and put curbs on indiscriminate or criminal trading by brokers. The Act specifically controls secondary trading, in which the actual distributor of the securities may not be involved, and also the day to day activity of the exchange floors themselves.
The Act replaced a web of state legislation, dubbed the Blue Sky Laws, which were widely abused by Wall Street and did not protect against fraud occurring across state lines. Although many brokers initially bemoaned the Act for turning the status quo upside down, the 1934 Act itself did not radically restrict their freedom, and they appreciated the appointment of business friendly Jospeh Kennedy as the first head of the SEC.