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Regulating Competition in Stock Markets: Antitrust Measures to Promote Fairness and Transparency through Investor Protection and Crisis Prevention by Michael Wang, Viktoria Dalko, Lawrence Klein

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Foreword

Franklin Allen

The Great Crash of 1929 was followed by the Great Depression and the failure of many banks. Given the terrible impact of the Great Depression on the economy, there was a widespread and strong desire to understand the causes of the calamity. In 1932 the Senate Committee on Banking and Currency set up an inquiry that became known as the Pecora Investigation to look into the causes of the Great Crash. The investigation uncovered a wide range of abuses in the banking and securities industries. This led to the passage of three major pieces of legislation to curb these abuses. The first was the Glass-Steagall Act of 1933 to separate commercial and investment banking. The second was the Securities Act of 1933 to regulate securities issues. The third, the Securities Exchange Act of 1934, set up the Securities and Exchange Commission (SEC) to regulate the securities industry.

These acts were followed over time by five other acts administered by the SEC that completed the framework of securities legislation in the United States. These were the Public Utility Holding Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Securities Investor Protection Act of 1970.

As mentioned, the Securities Act of 1933 was concerned with distributions of securities. It specified what information companies must provide when issuing securities in the public markets. It requires prospectuses with a significant ...

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