Securities Exchange Act of 1934

The Securities Exchange Act of 1934 governs secondary market trading: everything that happens after a security is sold to the public. It is the companion to the Securities Act of 1933, which covers the primary market and the registration of new issues. A common exam shorthand is that 1933 regulates issuance and 1934 regulates trading — "the paper act" and "the people act."

Its most consequential provision created the Securities and Exchange Commission and gave it authority to enforce federal securities law. The Act requires exchanges, broker-dealers, transfer agents, and clearing agencies to register with the SEC, and it requires public companies to file ongoing disclosure reports — annual 10-Ks, quarterly 10-Qs, and current 8-Ks for material events — along with proxy rules governing shareholder votes.

The Act also carries the antifraud and market-conduct rules that dominate day-to-day compliance. Section 10(b) and Rule 10b-5 prohibit fraud and manipulation in connection with the purchase or sale of any security, the basis for insider trading enforcement. Other provisions require insiders and large shareholders to report their holdings and trades, restrict market manipulation such as matched orders and painting the tape, and authorize the Federal Reserve to set margin requirements under Regulation T.

Every FINRA exam touches this law. The SIE and Series 7 test the 1933-versus-1934 split, the creation of the SEC, and self-regulatory organization registration, while the Series 10 goes into supervisory detail on the Act's reporting, antifraud, and market-conduct requirements.