15 U.S.C. § 78b — Necessity for regulation

submitted 92 years ago by ch. 404 to r/title-15-COMMERCE-AND-TRADE · 509 words · no verdicts yet

in plain englishAI-generated · not legal advice

Congress found that stock market transactions affect the whole country, not just individual states. Manipulated or wildly swinging security prices can hurt credit, taxes, bank loans, and the economy. This 'necessity' finding is why Congress passed this Act to regulate securities markets.

This section is Congress's explanation for why federal securities regulation is necessary. It says securities transactions on exchanges and over-the-counter markets carry a national public interest, which is why regulating them is needed — to protect interstate commerce, the national credit, federal taxing power, the banking and Federal Reserve systems, and to keep markets fair and honest. Congress based this on four findings: (1) These transactions happen in huge volume nationwide, mostly starting outside the state where the exchange sits, or using the mail and interstate commerce; they're a major part of interstate commerce itself; they mostly involve securities of companies engaged in interstate commerce; and they involve credit that directly affects trade, industry, and transportation across state lines, and the national credit generally. (2) The prices set in these markets get spread and quoted across the whole country and abroad. Those prices become the basis for pricing securities generally, for figuring taxes owed to the federal and state governments, and for valuing collateral behind bank loans. (3) These prices are often vulnerable to manipulation, and spreading manipulated prices fuels excessive speculation — causing sudden, unreasonable price swings that: alternately over-expand and over-shrink the credit available for interstate trade and industry; make it hard to fairly value securities (and so fairly calculate taxes on them); and prevent fair valuation of loan collateral, disrupting the national banking and Federal Reserve systems. (4) National emergencies — mass unemployment, disrupted trade and industry — get triggered, made worse, and dragged out by this manipulation and speculation, burdening interstate commerce, hurting the general welfare, and costing the federal government heavily to try to fix, which strains the national credit.

the actual law source: uscode.house.gov ↗public domain

For the reasons hereinafter enumerated, transactions in securities as commonly conducted upon securities exchanges and over-the-counter markets are effected with a national public interest which makes it necessary to provide for regulation and control of such transactions and of practices and matters related thereto, including transactions by officers, directors, and principal security holders, to require appropriate reports, to remove impediments to and perfect the mechanisms of a national market system for securities and a national system for the clearance and settlement of securities transactions and the safeguarding of securities and funds related thereto, and to impose requirements necessary to make such regulation and control reasonably complete and effective, in order to protect interstate commerce, the national credit, the Federal taxing power, to protect and make more effective the national banking system and Federal Reserve System, and to insure the maintenance of fair and honest markets in such transactions:

(1)

Such transactions (a) are carried on in large volume by the public generally and in large part originate outside the States in which the exchanges and over-the-counter markets are located and/or are effected by means of the mails and instrumentalities of interstate commerce; (b) constitute an important part of the current of interstate commerce; (c) involve in large part the securities of issuers engaged in interstate commerce; (d) involve the use of credit, directly affect the financing of trade, industry, and transportation in interstate commerce, and directly affect and influence the volume of interstate commerce; and affect the national credit.

(2)

The prices established and offered in such transactions are generally disseminated and quoted throughout the United States and foreign countries and constitute a basis for determining and establishing the prices at which securities are bought and sold, the amount of certain taxes owing to the United States and to the several States by owners, buyers, and sellers of securities, and the value of collateral for bank loans.

(3)

Frequently the prices of securities on such exchanges and markets are susceptible to manipulation and control, and the dissemination of such prices gives rise to excessive speculation, resulting in sudden and unreasonable fluctuations in the prices of securities which (a) cause alternately unreasonable expansion and unreasonable contraction of the volume of credit available for trade, transportation, and industry in interstate commerce, (b) hinder the proper appraisal of the value of securities and thus prevent a fair calculation of taxes owing to the United States and to the several States by owners, buyers, and sellers of securities, and (c) prevent the fair valuation of collateral for bank loans and/or obstruct the effective operation of the national banking system and Federal Reserve System.

(4)

National emergencies, which produce widespread unemployment and the dislocation of trade, transportation, and industry, and which burden interstate commerce and adversely affect the general welfare, are precipitated, intensified, and prolonged by manipulation and sudden and unreasonable fluctuations of security prices and by excessive speculation on such exchanges and markets, and to meet such emergencies the Federal Government is put to such great expense as to burden the national credit.

Source credit: (June 6, 1934, ch. 404, title I, § 2, 48 Stat. 881; Pub. L. 94–29, § 2, June 4, 1975, 89 Stat. 97; Pub. L. 111–203, title IX, § 985(b)(1), July 21, 2010, 124 Stat. 1933.)

history & why it existsrecord from the source credit

1934Enacted · Act of June 6, 1934, ch. 404 · 48 Stat. 881
1975Amended · Pub. L. 94-29 · 89 Stat. 97
2010Amended · Pub. L. 111-203 · 124 Stat. 1933

A history note hasn’t been published yet. The record shows enactment by ch. 404 on 1934-06-06.

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