Why was the Securitites and Exchange Commission created? Why was it necessary?

Answer 1

The SEC was established by the United States Congress in 1934 as an independent, non-partisan, quasi-judicial regulatory agency following years of depression caused by over production of goods, the introduction of consumer credit, and the Great Crash of 1929. The main reason for the creation of the SEC was to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting.

Prior to the enactment of the federal securities laws and the creation of the SEC, there existed so-called Blue Sky Laws, which were enacted and enforced at the state level. However, these laws were generally found lacking; the Investment Bankers Association told its members as early as 1915 that they could "ignore" Blue Sky Laws by making securities offerings across state lines through the mail. After holding hearings on abuses on interstate frauds (commonly known as the Pecora Commission), Congress passed the Securities Act of 1933 (15 U.S.C. § 77a) which regulates interstate sales of securities (original issues) at the federal level. The subsequent Securities Exchange Act of 1934 (15 U.S.C. § 78d) regulates sales of securities in the secondary market. Section 4 of the 1934 Act created the U.S. Securities and Exchange Commission to enforce the federal securities laws. Both laws are considered part of Franklin Roosevelt's "New Deal" raft of legislation.

Answer 2

The simple explanation is for people like you and me to trade and exchange stocks