We first summarize what each of the laws covers to provide an overview of the pattern of legislation. We then develop some of the more important provisions in greater detail. The early major acts were enacted beginning in 1933. There is a reason for the timing. The stock market crash of 1929 was followed by continued depressed markets for several years. Because so many investors lost money, both houses of Congress conducted lengthy hearings to find the causes and the culprits. The hearings were marked by sensationalism and wide publicity. The securities acts of 1933 and 1934 were the direct outgrowth of the congressional hearings.

The Securities Act of 1933 regulates the sale of securities to the public. It provides for the registration of public offerings of securities to establish a record of representations. All participants involved in preparing the registration statements are subject to legal liability for any mis-statement of facts or omissions of vital information.

The Securities Exchange Act of 1934 established the Securities and Exchange Commission (SEC) to administer the securities laws and to regulate practices in the purchase and sale of securities.

The purpose of the Public Utility Holding Company Act of 1935 was to correct abuses in the financing and operation of electric and gas public utility holding company systems and to bring about simplification of the corporate structures and physical integration of the operating properties. The SEC\u2019s responsibilities under the act of 1935 were substantially completed by the 1950s.

The Trust Indenture Act of 1939 applies to public issues of debt securities with a value of $5 million or more. Debt issues represent a form of promissory note associated with a long document setting out the terms of a complex contract and referred to as the indenture. The 1939 act sets forth the responsibilities of the indenture trustee (often a commercial bank) and specifies requirements to be included in the indenture (bond contract) for the protection of the bond purchasers. In September 1987, the SEC recommended to Congress a number of amendments to establish new conflict-of-interest standards for indenture trustees and to recognize new developments in financing techniques.

The Investment Company Act of 1940 regulates publicly owned companies engaged in the business of investing and trading in securities. Investment companies are subject to rules formulated and enforced by the SEC. The act of 1940 was amended in 1970 to place additional controls on management compensation and sales charges.

The Securities Investor Protection Act of 1970 established the Securities Investor Protection Corporation, (SIPCO). This corporation is empowered to supervise the liquidation of bankrupt securities firms and to arrange for payments to their customers.

The Securities Act Amendments of 1975 were passed after 4 years of research and investigation into the changing nature of securities markets. The study recommended the abolition of fixed minimum brokerage commissions. It called for increased automation of trading by utilizing data processing technology to link markets. The SEC was mandated to work with the securities industry to develop an effective national market system to achieve the goal of nationwide competition in securities trading with centralized reporting of price quotations and transactions. It proposed a central order routing system to find the best available price.

In 1978, the SEC began to streamline the securities registration process. Large, well- known corporations were permitted to abbreviate registration statements and to disclose information by reference to other documents that already had been made public. Before these changes, the registration process often required at least several weeks. After the 1978 changes, a registration statement could be approved in as little as 2 days.

In March 1982, Rule 415 provided for shelf registration. Large corporations can register the full amount of debt or equity they plan to sell over a 2-year period. After the initial registration has been completed, the firm can sell up to the specified amount of debt or equity without further delay. The firm can choose the time when the funds are needed or when market conditions appear favorable. Shelf registration has been actively used in the sale of bonds, with as much as 60% of debt sales utilizing shelf registration. Less than 10% of the total issuance of equities has employed shelf registration.

In 1995, the Private Securities Litigation Reform Act (PSLRA) was enacted by Congress. This law placed restrictions on the filing of securities fraud class action suits. It sought to discourage the filing of frivolous claims. In late 1998, the Securities Litigation Uniform Standards Act (SLUSA) was signed into law. It had been found that some class action plaintiffs had been circumventing the PSLRA by filing suits in state courts. SLUSA establishes a uniform national standard to be applied to securities class actions and makes clear such suits will be the exclusive jurisdiction of the federal courts. SLUSA forces all class action plaintiffs alleging securities fraud to provide greater detail on the basis for their claims. It enables defendant companies to delay the expenses of discovery of evidence until the complaint has withstood a motion to dismiss. The 1998 act seeks to protect companies against unfounded securities fraud class actions. This reduces the

In the wake of the recent allegations of fraud, insider trading, and questionable accounting practices by large companies such as Adeiphia, Enron, Global Crossing, ImClone, Qwest, and Tyco, President Bush signed into law on July 31, 2002, the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act is expected to have a huge impact on corporate governance, financial disclosures, auditing standards, analyst reports, insider trading, and so forth. Observers view the Act as the most comprehensive reform of securities laws since the 1933 and 1934 Acts. The Act contains eleven titles:

Below is a brief summary of some of the Titles. Title I establishes a five member Public Company Accounting Oversight Board to oversee audits, establish standards, and monitor registered public accounting firms. Title II requires auditor independence by prohibiting auditors from performing certain non-audit services contemporaneous with an audit, requires auditor rotation, and requires that auditors report detailed material to the audit committee. Title III strengthens corporate responsibility by requiring each member of the audit committee to be an independent member of the board, requires the CEO and CFO to certify financial reports, requires the CEO and CFO to forfeit bonus and compensation if an accounting restatement is due to non-compliance of the firm, and requires that attorneys appearing before the SEC to report violations of securities by a firm or its management. Title IV provides for greater financial disclosures such as requiring financial reports to reflect all material adjustments and off- balance sheet items, prohibits loans to executives, requires insiders to disclose insider trans actions within 2 business days of the transaction, and requires that at least one member of the audit committee be a financial expert. Title V attempts to separate analyst conflicts of interest by restricting the ability of investment bankers to pre-approve research reports, restricts employers from firing analysts for having written negative reports, and requires analysts to disclose any potential conflicts such as having owned stock in the company covered. Titles VIII, IX, and XI provide stringent penalties for corporate and financial fraud and other white-collar crimes by corporations and management.