This video discusses how the Securities Act of 1933 and the Securities Exchange Act of 1934 affected financial accounting in the United States. These acts created the Securities and Exchange Commission (SEC) and require publicly-traded companies to be registered with the SEC. Publicly-traded companies must file an annual report (the 10-K), a quarterly report (the 10-Q), and a report whenever there is a material event (the 8-K) such as a bankruptcy, change of ownership, etc. This significantly increased the regulation for public companies in the U.S. and increased protections for investors.

After the stock market crash of 1929 and the onset of the Great Depression, the United States Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934 to restore investors’ confidence in the market.  The Securities and Exchange Commission (SEC) was created to regulate publicly-traded companies, which were required to register with the SEC and file extensive disclosures.  Publicly-traded companies must file an annual report (the 10-K), a quarterly report (the 10-Q), and a report whenever there is a material event (the 8-K) such as a bankruptcy, change of ownership, etc.  The 10-K must include financial statements that are audited by an independent third party.

Think of the SEC as Santa Claus.  In a world without Santa Claus, kids (companies) can be quite naughty.  They are more likely to behave if they know that Santa has the power to bring legal action and de-list them from a stock exchange.

Prior to the Securities Act of 1933 and Securities Exchange Act of 1934, companies in the United States were largely unregulated.  Regulation was done at the state level, so there was considerable variation from state to state.  Companies generally weren’t required to issue financial statements and investors had little way of verifying information issued by the firm.

You can learn more about the SEC’s role by visiting www.sec.gov  Or you can just take my word for it that the SEC is really cool.