Final answer:
The Securities Exchange Act of 1934 established the Securities and Exchange Commission (SEC) to regulate and supervise the sales of securities, maintain order in stock exchanges, and protect investors by enforcing rules against manipulative practices in the financial markets.
Step-by-step explanation:
The Securities Exchange Act of 1934 was created to regulate and supervise the sale of securities and the brokers, dealers, and bankers who sell them. This act played a crucial role in overseeing the operations of stock exchanges, ensuring that companies who desire to trade stocks to raise capital adhere to certain standards and pay a fee to trade. Furthermore, the Securities Exchange Act of 1934 established the Securities and Exchange Commission (SEC), which is responsible for regulating the investment industry, setting rules to prevent another financial catastrophe like the 1929 stock market crash, and bringing an end to manipulative practices such as pooling and insider trading to restore confidence in the stock exchange. The SEC does not run the exchanges but ensures they operate within the regulations set to protect investors and the integrity of the markets.
The Act was a part of a suite of reforms introduced during President Franklin D. Roosevelt's administration to tackle the financial instability following the Great Depression. Among other measures to secure financial systems, the Glass-Steagall Banking Act was introduced, and the Federal Deposit Insurance Corporation (FDIC) was established to insure personal bank deposits. Subsequent legislations, like the Sarbanes-Oxley Act of 2002, continued to build upon the foundation laid by the Securities Exchange Act of 1934, aiming to increase investor confidence in the transparency and accuracy of corporate financial statements and protect them from accounting frauds witnessed in scandals involving corporations such as Enron and WorldCom.