What are the Blue Sky laws?
These state laws were meant to protect investors from worthless securities issued by unscrupulous companies and pumped by promoters. They are basic disclosure laws that require a company to provide a prospectus in which the promoters …
Why are blue sky laws important?
These state laws were meant to protect investors from worthless securities issued by unscrupulous companies and pumped by promoters. They are basic disclosure laws that require a company to provide a prospectus in which the promoters (sellers/issuers) state how much interest they are getting and why (the Blue Sky Laws are still in effect today).
What was the SEC?
The SEC. The Securities Exchange Act was signed on June 6th, 1934, and created the Securities and Exchange Commission (SEC). It was President Roosevelt’s response to the original problem with the Blue Sky Laws, which he saw as a lack of enforcement.
What was the purpose of the Securities Act?
The Securities Act was intended to create a stronger version of the state Blue Sky Laws at the federal level. With the economy wasting away and people calling for blood, the government beefed up the original act the following year with the Securities Exchange Act of 1934 .
Why was investing a national sport?
Investing was quickly becoming the national sport, as all classes of people began to enjoy higher disposable incomes and finding new places to put their money. In theory, these new investors were protected by the Blue Sky Laws (first enacted in Kansas in 1911). These state laws were meant to protect investors from worthless securities issued by …
Why was the Glass-Steagall Act created?
The Glass-Steagall Act was established to keep banks from tying themselves up in the stock market and prevent them from hanging themselves in the case of a crash. The Securities Act was intended to create a stronger version of the state Blue Sky Laws at the federal level.
What was the economy like in the 1920s?
Even the validity of the in-state disclosures wasn’t thoroughly checked by the state regulators. By the 1920s, the economy was "roaring" along , and people were desperate to get their hands on anything to do with the stock market. Many investors were using a new tool, margin, to multiply their returns.
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