This Act created the SEC, giving it authority to regulate many players in the securities industry, such as stock exchanges (e.g., the New York Stock Exchange and National Association of Securities Dealers), clearing agencies, brokerage firms, and transfer agents. The Act requires these market players to register with the SEC, which involves the filing of regularly-updated disclosure reports. It prohibits the trading of securities on unregistered exchanges. Also, self-regulatory organizations (such as the National Association of Securities Dealers) are required to set up rules under which they can ensure that investors are adequately protected while conducting transactions with members of the self-regulatory organizations. The Act also included these provisions:
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Required firms with more than $10 million in assets, and whose securities are held by greater than 500 investors, to file both annual reports and a variety of other supplemental reports. The Act also applies to anyone who wishes to acquire more than five percent of a company’s securities by tender offer or direct purchase to disclose information to the SEC (this provision was added through a 1970 amendment to the Act).
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Specified the types of information included in proxy solicitations that are used to obtain shareholder votes regarding the election of directors and other corporate matters.
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Gave the Federal Reserve System’s Board of Governors the power to determine the allowable credit limits that could be used to purchase securities through margin trading.
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Required broker-dealers to obtain the written permission of investors before lending any securities carried on the investor’s account.
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Prohibits insider trading activities. A 1984 amendment prohibited the officers and directors of a company from short selling the securities issued by their companies. They are also required to report the amount of securities they hold in their companies, and any changes in those holdings, as long as the amount held is more than ten percent of the total of registered securities.
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Prohibits market manipulation through such means as giving a false impression of high levels of trading activity in a stock, issuing false information about possible changes in a stock’s price, price fixing, and making false statements in regard to a security.