Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkEasy
A broker-dealer firm is developing its internal policies to ensure compliance with federal securities laws. Which of the following acts primarily addresses the regulation of secondary market trading and the establishment of the Securities and Exchange Commission (SEC)?
- ASarbanes-Oxley Act of 2002
- BSecurities Act of 1933
- CSecurities Exchange Act of 1934
- DInvestment Company Act of 1940
Show answer & explanationAnswer & explanation
Correct answer: C. Securities Exchange Act of 1934
The Securities Exchange Act of 1934 is the foundational law for regulating the secondary market, including exchanges, broker-dealers, and the establishment of the SEC. It aims to ensure fair and orderly markets and protect investors.
Why the other options are wrong
- A. This act addressed corporate governance and accounting scandals, not the fundamental regulation of secondary markets.
- B. This act primarily regulates the primary market and new issues of securities.
- D. This act regulates investment companies, such as mutual funds.
Securities Exchange Act of 1934
Federal legislation that primarily regulates the secondary market (trading of existing securities), establishes the SEC, and governs broker-dealers and exchanges.
- Regulates secondary market
- Established the SEC
- Governs broker-dealers and exchanges
- Addresses insider trading and market manipulation
Memory trick: Each Act has its own 'Exchange' of focus.