The Securities Exchange Act of 1934 created the SEC and established ongoing disclosure requirements for publicly traded companies and rules governing secondary market trading.
Key provisions:
- SEC creation — the Securities and Exchange Commission was established to enforce federal securities laws.
- Broker-dealer registration — all B/Ds trading in the U.S. must register with the SEC.
- Periodic reporting — public companies must file 10-K (annual), 10-Q (quarterly), and 8-K (current events) reports.
- Insider trading prohibitions — Section 10(b) and Rule 10b-5 prohibit fraud and manipulation.
- Proxy rules — governs shareholder voting and corporate governance disclosures.
- Short-swing profit rule (Section 16) — corporate insiders (>10% shareholders, officers, directors) must return profits from buy-sell within 6 months.
- Margin regulations — granted the Fed authority to set margin requirements (Reg T).
- SRO authority — authorizes FINRA, MSRB, and exchanges to self-regulate.
Reporting thresholds: Companies with ≥$10M in assets and ≥2,000 shareholders (or ≥500 non-accredited investors) must register under the 1934 Act.
> Exam tip: The 1934 Act = secondary market + broker-dealers + SEC. The 1933 Act = primary market + new issues. Rule 10b-5 (anti-fraud) under the 1934 Act is heavily tested on the Series 7 and Series 65.