The financial services reform legislation, which the Senate passed, 60-39, on Thursday, July 15, is the latest in a century-spanning series of efforts to revamp financial and securities activities through regulation. Here is a timeline of various past legislative milestones:
1911: Kansas becomes first state to enact law requiring registration of securities and brokers. Similar laws are adopted by most other states over the next two decades. They are known as “blue sky” laws, as they aim to combat what were referred to in one early case as “speculative schemes which have no more basis than so many feet of blue sky.”
1929: Uniform Sale of Securities Act seeks to harmonize securities regulations across states. Only five states adopt it, however, and it is abandoned in 1943.
1933: During FDR’s first 100 days in office, the Securities Act of 1933 becomes the first general federal law regulating securities issuance. It requires certain issuers to file registration statements with the Federal Trade Commission. Also, Banking Act, commonly known after its sponsors as Glass-Steagall, creates a separation between investment banks and deposit-taking institutions.
1934: Under the Securities Exchange Act of 1934, the Securities and Exchange Commission is created. The new agency has a statutory mandate to regulate stock exchanges and prohibit manipulative trading practices.
1938: Maloney Act provides for a national organization of brokers and dealers to create and enforce disciplinary rules. Consequently, the National Association of Securities Dealers is created in 1940, and the SEC has power to review its decisions.
1940: Investment Company Act and Investment Advisers Act require investment companies and advisors (then typically spelled “advisers”) to register with the SEC. The legislation contains a fiduciary standard for advisors but exempts brokers as long as their advice is “incidental” to their brokerage services and not given special compensation.
1956: New effort to harmonize state rules results in Uniform Securities Act, which is adopted (albeit with variations) by most states. There will be later revisions in 1985 and 2002.
1964: Amendments to 1934 securities law extend reporting requirements to firms above a certain size that are traded over-the-counter rather than on an exchange.