Securities Act of 1933 Establishes Federal Securities Regulation

President Franklin D. Roosevelt signs the Securities Act of 1933 into law on May 27, 1933, establishing the first major federal regulation of securities markets and requiring that investors receive financial and material information about securities offered for public sale. Often called the “truth in securities” law, the Act requires all sales of securities to be registered with the government through submission of a prospectus disclosing all material facts, unless specifically exempted. Roosevelt states the law aims to correct “wrongdoings that led to the exploitation of the public” and “bring back public confidence” in securities markets after the 1929 crash and Great Depression. The financial community opposes the act, adhering to laissez-faire principles, with commentators warning it would slow economic recovery and capital formation through a potential “capital strike” where financiers would refuse entrepreneurial activity. The Act is based on a disclosure philosophy requiring issuers to fully disclose material information reasonable shareholders need for investment decisions, prohibiting deceit, misrepresentations, and fraud in securities sales. The bill undergoes four revisions after Roosevelt requests former Federal Trade Commission Chairman Huston Thompson to draft it, with the Commerce Committee initially rejecting the first draft. Despite fierce opposition from the financial industry, the Act passes both the House and Senate without a record vote due to macroeconomic distress creating an unfavorable political context for reform opponents. The Act becomes a worldwide model for securities regulation, though it will later be weakened through deregulation efforts including the 1995 Private Securities Litigation Reform Act’s “safe harbor” provisions that limit investor lawsuits, demonstrating how New Deal regulatory victories created protections that corporate interests would spend decades systematically dismantling.