Final answer:
The purpose of the Securities and Exchange Commission (SEC), which was established by the Federal Securities Act, is to regulate stock market activity. it aims to protect investors, ensure fair and efficient markets, and facilitate capital formation. the SEC regulates the securities industry to prevent fraudulent practices and requires financial transparency for publicly traded companies.
Step-by-step explanation:
What is the purpose of the Securities and Exchange Commission (SEC), which was created by the Federal Securities Act? The correct answer is to regulate stock market activity. The SEC was established to oversee Wall Street, enforce federal securities laws, and regulate the securities industry, the nation's stock and options exchanges, and other activities and organizations, including the electronic securities markets in the United States. It works to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Among its many functions are the discouragement of fraudulent and manipulative practices in the markets, ensuring that investors have access to basic financial information about publicly traded securities, and protecting investors who interact with these financial instruments.
The creation of the SEC was part of a larger governmental effort to restore confidence in the financial system during the Great Depression. The Federal Securities Act established legal standards for disclosure and subsequent legislation led to the formation of the SEC as the regulatory body responsible for enforcing those standards. With its mandate to prevent practices like 'pooling,' insider trading, and unrestricted margin borrowing, the SEC aimed to eliminate the sharp practices that had contributed to the stock market crash of 1929 and prevent such financial disasters in the future.